WAEC Accounting 2024
Questions & Answers

Students might mistakenly select market share evaluation or tax calculations, but banks analyze financial statements specifically to assess the creditworthiness of a customer when determining loan eligibility. Common mistake: confusing the analytical goals of financial institutions with those of market competitors or tax authorities.

Creditors, cash-in-hand, or debtors might look correct to students who fail to distinguish between ledger types, but nominal accounts representing operational expenses, like general expenses, are recorded in the profit and loss account, whereas creditors and debtors belong on the balance sheet. Common mistake: mixing up balance sheet accounts with nominal profit and loss items.

Historical cost or consistency might be chosen by students confusing general accounting principles, but the concept requiring transactions to be expressed using a common monetary denominator is the money measurement concept. Common mistake: confusing the common monetary denominator rule with asset valuation rules like historical cost.

Accumulated depreciation or estimated useful life might be mistakenly picked by students misinterpreting formula variables, but in the straight-line depreciation formula (X - Y)/Z, the letter X represents the original cost of the asset from which the scrap value is subtracted. Common mistake: confusing the initial asset cost variable with accumulated depreciation or useful life.

A student might incorrectly choose options like cost of the asset or rate of depreciation, assuming the entire initial investment or percentage is the division factor. The letter Z represents the estimated useful life of the asset. To find this solution, the denominator spreads cost over the expected service period of the asset. Common mistake: Confusing the denominator useful life with the asset's original cost or its percentage rate.

One might mistakenly select prime cost because direct factory labor is typically grouped there, or administrative overheads due to general operational expenses. Machine operators' wages are indirect production costs, which fall under factory overheads, whereas prime cost consists of direct materials and direct labor. Common mistake: Failing to distinguish between direct production costs and indirect factory overhead expenses.

A student could mistakenly choose an alternative figure by incorrectly combining the stock adjustments or applying the wrong markup fraction. To arrive at the correct value of purchases, first find the cost of goods sold from the given markup, and then rearrange the inventory formula by adding closing stock and subtracting opening stock. Common mistake: Forgetting to factor in both opening and closing inventory correctly when calculating purchases.

A student might mistakenly calculate the cost of goods sold using a wrong percentage multiplier or misapplying the markup formula. Since a markup on cost means sales equal cost multiplied by four-thirds, the cost is calculated by taking the sales value multiplied by three-quarters, yielding the correct figure. Common mistake: Multiplying sales by the markup fraction directly instead of converting it to the cost fraction first.

A student might mistakenly select another option by guessing or performing an incorrect subtraction from total purchases or stock values. The gross profit is determined by subtracting the cost of goods sold from sales, which gives the same result as multiplying the markup fraction by the cost of goods sold. Common mistake: Confusing gross profit with net profit or applying the markup percentage to sales instead of cost.

A student might mistakenly select an option involving liabilities or stock changes, assuming any transaction alters everything on the balance sheet. Receiving cash from a debtor causes cash, an asset, to increase, while the debtor balance, also an asset, decreases, leaving capital, liabilities, and stock unaffected. Common mistake: Assuming that a decrease in a debtor also reduces total assets overall.

A student might mistakenly choose the board of directors or management because they control day-to-day operations. According to the entity concept, ownership is separated from the business, meaning owner transactions like drawings and capital are kept entirely distinct from corporate assets. Common mistake: Treating the business owner and the business entity as the same legal and financial person.

A student might mistakenly pick closing stock or depreciation charged for the year, which are typical year-end adjustments made after the initial drafting. An item recorded in the trial balance is accrued expenses because all ledger balances before adjustments are listed here, while items like closing stock and depreciation are adjusted post-trial balance. Common mistake: Assuming year-end adjustments appear on the unadjusted trial balance.

A student could mistakenly choose ordinary shares or cumulative preference shares, which are widely traded and available to the general public. Deferred shares receive dividends last and are often issued as founders' shares for control, making them available only to the promoters of a company. Common mistake: Confusing founders' deferred shares with standard voting ordinary shares.

A student might mistakenly select a long-term liability or capital expenditure, confusing short-term obligations with long-term investments. Expenses incurred but not yet paid are classified as current liabilities because they represent short-term obligations due within a year. Common mistake: Treating unpaid short-term expenses as long-term debt.

A student might mistakenly choose an income and expenditure account or an appropriation account, associating all production terms with final profit statements. Work-in-progress is an item in the manufacturing account because it transfers semi-finished goods cost directly to the trading account. Common mistake: Placing manufacturing inventory items directly into profit or loss statements.

A student might mistakenly select profit or a reserve, assuming capital always grows or remains positive over time. In an incomplete record, if the closing capital is less than the opening capital assuming no drawings, it indicates a loss. Common mistake: Forgetting that a decline in capital represents a net business loss.

A student might mistakenly select the credit side of the sales ledger control account by confusing the roles of buyer and seller. Bayo is the seller, so issuing a credit note means recording it on the credit side of the sales ledger control account, which successfully reduces debtors. Common mistake: Mixing up whether a credit note increases or decreases the sales ledger control balance.

A student might mistakenly choose the sales ledger control account or the credit side of the purchases ledger control, mixing up the buyer's perspective with the seller's. Ayo is the buyer returning goods, so the credit note requires a debit on the purchases ledger control account to reduce creditors. Common mistake: Recording returns on the wrong control account side for a buyer.

A student might mistakenly choose the accrual concept or dual aspect concept, confusing general timing with the specific measurement of profit. The matching concept underlines the comparison of expenditure for a period with the revenue of the same period to ensure accurate profit measurement. Common mistake: Confusing general accruals with the strict matching of specific period revenues and expenses.

A student might mistakenly select items purchased for long-term use or fictitious assets, confusing non-current items with short-term resources. An item is classified as a current asset if it is expected to be realized within the balance sheet date or operating cycle. Common mistake: Assuming long-term investments qualify as current assets.