WAEC 2016 MAY/JUNE 100% CORRECT FINANCIAL ACCOUNTING (ESSAY ) ,ESSAY,THEORY (Essay),PAPER 1,ESSAY,THEORY(Obj),QUESTIONS AND ANSWERS – FOR ESSAY,THEORY AND OBJ
General journal is the accounting version of our
personal journals. It doesn’t record everything that
happens to the business, of course, but it does record
every financial transaction that takes place (sometimes
alone, sometimes as a group of similar transactions). Like
our personal journal entries, it notes the date, the
accounts involved, and the amounts of money, as well as
providing a brief description of what happened.
-Correction of errors
-Transfer between accounts
-Purchase of fixed assets on credit
-Recording of disposal of fixed asset
-Cash to suppliers
-Error of original entry
-Error of omission
-Error of commission
-Error of principle
-Complete reversal of entry
Depreciation is the measure of the wearing out, consumption or other loss of value of a fixed asset whether arising from use, effluxion of time or obsolescence through technology and market changes
(i) Physical deterioration
(iii) The time factor
(iv) Economic factor
(i) Straight line: This allows an equal amount to be charged as depreciation for each year of expected use of the asset. The basic formulae is
Cost- Estimated residual value/ number of years of expected use.
(i)it is simple to calculate
(ii)It is time oriented
(i)Assumption of equal or constant revenue per year is unrealistic
(ii)Might lead to a misleading picture of the financial statement
Reducing balance: Under this method, the depreciation charged per annum is determined by applying a fixed rate of depreciation on the net book value of the asset at the beginning of each year.
Disadvantage of reducing balance:
Difficulty in calculating the rate of depreciation
(4ciii) Revaluation: By this method, the asset is revalue each year, any difference will be charged as depreciation to the profit and loss account. The value of the asset at the beginning and end of the year must be known.
( 8 )
gross profit %= g.p/sales * 100= 96000/240000 * 100 = 40%
net profit %= n.p/sales * 1000= 80000/240000 * 100=3.33%
return on capital employed= 8000/142000 * 100= 5.6%
current ratio= CA: CL
Acid test ratio= CA-stock:CL
Rate of stock turn=
cost of goods sold/average stock
working capital= CA-CL
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