Waec 2018 FinancialAccounting Obj And Theory Answers




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1a)
- It can result in a business exhausting the budget, leading to spending more than
what is coming in.

- Businesses may need to file for bankruptcy or shut their doors if they fail to keep adequate records from the
beginning.  

-It can result in problems with suppliers, payroll, utilities, and other vital components to a running successful business.


1 b )
i ) Relevance means an account information to make a difference in decision making
ii) Comparability means an account information can be used to compare different entities
iii ) Consistency : information is consistently presented from year to year
iv ) Reliability means an account information is verifiable , factual , and neutral


2a DIRECT MATERIALS COST* : This is the expenditure incurred on raw materials which can be traced to a particular production units..  E.g orange in fantasy making. 

*DIRECT LABOUR COST* : This refers to the wages of employees who are directly engaged in the production process as e.g wages of machine operator.

*FACTORY OVERHEAD*
These relates to the expenditure incurred in running the factory which cannot be traced to a particular production units..



2 ai)
Direct materials consist of all of the materials that become an integral part of the finished product . Direct materials should include the actual cost of the materials, as well as freight in, import duties , purchasing costs , receiving costs , storage costs and other directly attributable costs of acquiring the materials.
Example - Orange in fanta making

2 aii )
Direct labor consists of all of the personnel costs required to manufacture the finished product . Direct labor should include wages, payroll taxes , and benefits associated with personnel who are integral to manufacturing the finished product .
Example - Wage of machine operator

2 aiii)
Factory overhead consists of all of the other costs required to manufacture the finished product that do not fit into the direct material or direct labor elements. They consist mainly of indirect material , indirect labor , depreciation , utilities , rent , repairs and maintenance and insurance .
Example - Indirect wages.

2 b )
i ) RAW MATERIALS
These are the materials or goods purchased by the manufacturer . Manufacturing process is applied on the raw material to produce desired finished goods.
ii) WORK - IN- PROGRESS ( WIP ) These are the partly processed raw materials lying on the
production floor .
iii ) FINISHED GOODS
These are the final products after manufacturing process
on raw materials. They are sold in the market . There are two kinds of manufacturing industries .
NO9


3A
Where a big business with diverse trading activities is conducted under the same roof the same is usually divided into several departments and each department deals with a particular kind of goods or service. For example, a textile merchant may trade in cotton, woolen and jute fabrics. The overall performance for this type of business depends, however, on departmental efficiency.

3B
(i) Compare the results among the different departments together with the previous results thereof,

(ii) Formulate policy in order to extend or to develop the enterprise in the proper line; and

Or


(3b)..
Pick just 2(two)

(A)

Departmental accounts help to understand or locate the success, failure, rates of profit, etc.

(B) It helps the management to make proper plan of action, policies in order to increase profit after analysing the results of operation of various departments.

(C) Departmental accounting helps us to understand which department should be expanded further or which one should be closed down as per the results of the operation.

(D) If also helps to encourage a healthy competitive spirit among the various departments which, ultimately, helps to increase profits of the firm as a whole.

(E) For additions or alterations of various departments, departmental accounts helps a lot as it supplies the necessary information.


4a
- employees
- banks
- government
- creditors
- analyst
- owners


4b).

*Quick ratio*
Quick ratio is calculated as follows:


Formula:::::



Quick ratio = (current assets – inventories) / current liabilities,

             *or*

Quick ratio = (cash and equivalents marketable securities accounts receivable) / current liabilities

Uses::::

1.)It calculates the proportion of a company's current assets to itscurrent liabilities.

2.) The quick ratio is used to determine a company's ability to meet short-term obligations with liquid assets that can be easily converted into cash.




II). *Net Profit Margin.*
 Formula:::;

The profit margin formula is:

π / R

Where π (the symbol pi is commonly used for profit) = R - C

R (Revenue) = Price * X (number of units)

C (Costs) = F V*X

Where F = Fixed cost (such as cost for a building)

and V = Variable cost (such as the cost to produce each product) 

and X= number of units.




    Uses:::: 

1.)it is use to compare the success of large companies versus small ones..

By Niyee flames

III) *Total Asset Turnover*

Formula::::
Total asset turnover=       Net sales revenue/ average total assets.

"Sales" is the value of "Net Sales" or "Sales" from the company's income statement

"Average Total Assets" is the average of the values of "Total assets" from the company's balance sheet in the beginning and the end of the fiscal period. It is calculated by adding up the assets at the beginning of the period and the assets at the end of the period, then dividing that number by two. 



Uses::::
1.) It helps to measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.

IV). *Creditors payment period in days*
 Formula:::::

 Formula for Creditors Payment Period in days.

Creditors Payment Period (Ind days)= Trade creditors / credit purchases Number in days).






Uses::::
1.) It gives information about payment habits and also whether a business is taking full advantage of trade credit available. In other words if we do not pay too soon.



6 a )
Tabulate
Cash book Adjustment
Bal bld N 48,500
interest on investment N 2500
credit transfer N 3000
54,000
Left Table
Bank Charges N 1000
Dishonured cheques N 2000
bal cld N 51,000
54,000
Total Bal bld N 51,000

6 b )
Tabulate
Bank Reconcilation statement at 31/ 12/ 2016
balance as per adjusted cash book N N 51,000
add unpresented cheques 8850
add back wrong credit 3500
12,350 / 63,350
less uncredited cheques ( 8450)
balance as per bank statement N 54,900


7 a )
Statement Of affairs as at 1 | 1 | 06
Tabulate
Right Table
Capital ( Opening ) N 30,000
Creditors N 1 ,000
Insurance N 2 ,000
N 33,000
Left Table
Land And Building N 15,000
Motor Vechicle N 6 ,000
Stock N 4 ,000
Cash N 6 ,000
Debtors N 2 ,000
N 33,000

7 b )
Trading Profit and loss account for the year ended 31st december 2016
Tabulate
Right Table
opening stock N 4000
purchases N 11,500
15,500
Closing Stock ( 2 ,000 )
Cost of goods sold 13500
gross profit cld 17500
31,000
salaries N 5000
rent and rates N 4000
insurance N 5000
dep on motor vechicle N 2000
net profit N 1500
17500
Left Table
Sales N 31,000
31,000
gross profit b | d N 17,500
N 17,500

7 c )
Balance Sheet as at 31| 12| 2006
Tabulate
Right Tabule
Capital N 30,000
add net profit N 1500
N 31,500
current liability
creditor N 500
insurance Owning N 6000
N 38,000
Table Left
Fixed Assests
Land and Building N 15,000
motor vehicle N 4000
19,000
current assets
stock N 2000
debtors N 3000
Cash N 14,000
N 38,000
==========================


(9)
Obihan trading profit and loss account

SALES =  1,200,000
Less return inward =              
 15,000
= 1,185,000

Less cost of sales
Opening stock = 3000,000
Add purchase 1,050,000
Less return outward = 18,600

Net purchase=1,031,400
Cost of goods available. =1,331,400
Less closing stock=360,000
Cost of goods sold=971,400
GROSS PROFIT=213600


LESS OPERATIVE EXPENSIVE
Rates (18,000 1,500) = 16,500
Rates ( 18,000 660) = 3,660
Salaries (90,000 15,000) = 105,000
Bad Debits = 600
Insurance = 93,000
Depreciation: Furniture 9,000
Machineries  = 18,000
Provision for bad debit = 540
NET LOSS 246,300
                     32,700


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