WAEC Financial Accounting 2016 Past Questions & Explanations

External users are people outside the business entity (organization) who use accounting information. Examples of external users are suppliers, banks, customers, investors, potential investors, and tax authorities.

Dual Aspect Concept, also known as Duality Principle, is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transaction. Dual aspect concept is the underlying basis for double entry accounting system.

The purpose of the balance sheet is to reveal the financial status of a business as of a specific point in time. The statement shows what an entity owns (assets) and how much it owes (liabilities), as well as the amount invested in the business (equity).

Error of Complete Reversal Entry – As the name implies, this means that the debit and credit entry recorded for a particular transaction are reversed. The transactions are incorrect but because the amount is the same or equal at both sides, the trial balance still balanced.

To answer this question, note that whatever comes into the business is recorded on the debit side, and whatever goes out is recorded on the credit side. 

''Nwoye buys stock and pays by cheque''. The entries in the books of Nwoye is, debit Purchases and Credit bank. what this accounting entry means is that, money had gone out of the business by virtue of the cheque that was issued to a seller by nwoye for the purchase of stocks (goods) for resale and in return, goods were given to Nwoye (goods have come into the business after payment was made by cheque). Always remember the principle of double entry which states that, for every credit entry, they must be a corresponding debit entry vice versa. 

NOTE: in accounting, purchases are goods that are bought for the purpose of reselling.

An overdraft is a deficit in a bank account caused by drawing more money than the account holds.

The bank will deduct the deficit balance from the new deposit as thus; GH¢ 400,000 - GH¢ 190,000 = GH¢ 210,000

A bank reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions. The ending balance of your version of the cash records is known as the book balance, while the bank's version is called the bank balance.

An imprest is a fund used by a business for small items of expenditure and restored to a fixed amount periodically.

A reimbursement is a repayment for money you've already spent.

• The petty cashier imprest is a fixed amount of GH¢6,000

• At the end of the month GH¢2,000 left

• The imprest will be reimbursted with GH¢4,000

D67,368 is correct because the 12$\frac{1}{2}$% trade discount is first deducted from the invoice value of D96,240 to obtain D84,210. Since payment was made within the credit period, a further 20% cash discount is deducted, leaving D67,368 as the amount payable.

Purchase are goods or stocks bought for the purpose of reselling.

Gross profit – is the excess of net sales over the cost of goods sold. This invariably means that, the excess of cost of goods sold over net sales is a gross loss. 

The purpose of the balance sheet is to reveal the financial status of a business as of a specific point in time. The statement shows what an entity owns (assets) and how much it owes (liabilities), as well as the amount invested in the business (equity).

impersonal account; any account other than a personal account, being classified as either a real account, in which property is recorded, or a nominal account, in which income, expenses and capital are recorded.

Credit purchases are calculated using the Creditors Control Account. The opening creditors and credit purchases form the total amount owed to suppliers, while cash paid, discount received, and closing creditors account for how the debt was settled. Applying the creditors control account formula gives D132,200 as the value of credit purchases. Therefore, based on the information provided, Option D is the correct answer.

Credit purchases are determined by preparing a Creditors Control Account. The opening balance of creditors and credit purchases represent amounts owed to suppliers, while cash paid, discounts received, and closing creditors account for how the debt was settled during the year. Using the control account equation, the credit purchases are calculated as D132,200. Therefore, Option D is the correct answer.

Gross profit is given as 33$\frac{1}{3}$% of cost, which is equivalent to one-third of the cost price. Therefore, the selling price represents $\frac{4}{3}$​ of the cost price. Dividing the selling price of GH¢36,240 by $\frac{4}{3}$​ gives a cost price of GH¢27,180. Therefore, Option C is the correct answer.

Tangible assets are physical in nature that can be either long-term or short-termassets. Intangible assets are long-term assets that are not physical, but rather, intellectual property. Both tangible and intangible assets are recorded on the balance sheet.

error of commission; a mistake that consists of doing something wrong, such as including a wrong amount, or including an amount in the wrong place. Example; If we debit or credit an account, other than the correct account, but with the correct amount, the total debits and credits in the ledger will remain equal and hence the trial balance will not disclose the error.

Carriage refers to the cost of transporting goods into a business from a supplier, as well as the cost of transporting goods from a business to its customers. Carriage outwards is the shipping and handling costs incurred by a company that is shipping goods to a customer.

Current liabilities are amounts due to be paid to creditors within twelve months. 

The following are common examples of current liabilities:

• Accounts payable. These are the trade payables due to suppliers, usually as evidenced by supplier invoices.

• Sales taxes payable. 

• Payroll taxes payable.

• Income taxes payable.

• Interest payable.

• Bank account overdrafts.

• Accrued expenses. 

• Customer deposits.