WAEC Accounting 2015 Past Questions & Answers

A trial balance is a statement prepared at the end of an accounting period, listing all the accounts from the general ledger and their closing balances. Its main purpose is to check if the total of all debit balances equals the total of all credit balances, confirming the arithmetical accuracy of the books. Therefore, it is correctly described as a list of balances.

Common mistake: Students often mistakenly choose option C, confusing the trial balance with the Statement of Financial Position (Balance Sheet), which is the final account that actually reveals the financial position of a business.

For accounting information to be useful to its users, it must possess certain qualities or features. These qualities include timeliness, accuracy, completeness, relevance, and understandability. While the cost of preparing the information is a practical constraint for a business, 'affordability' is not considered a fundamental qualitative characteristic of the information itself.

Common mistake: Students may confuse the practical cost of producing financial reports with the actual qualities of the information itself, wrongly thinking that cost is a defining feature.

To find the profit or loss from incomplete records, we compare the capital at the end of the period with the capital at the beginning. We start with the closing capital, add back any money the owner took out for personal use (drawings), and then subtract the capital the business started with (opening capital). The final figure represents the profit earned or loss made during that period, assuming no new capital was introduced.

Common mistake: Students often mistakenly subtract drawings from closing capital because they know drawings reduce capital, but they forget that to find the profit, drawings must be added back to the final capital figure.

A purchase invoice is a source document that provides evidence of a credit purchase. In the accounting process, transactions are first recorded in books of original entry (also called subsidiary books or journals). The specific book of original entry for recording credit purchases of goods is the purchase journal, making it the first place a purchase invoice is entered.

Common mistake: Students often mistakenly choose the purchases account, forgetting that transactions are first recorded in a journal (the book of original entry) before being posted to the ledger account.

According to the principles of double entry, when an asset is acquired, the asset account increases. An increase in an asset is always recorded with a debit entry. If cash is used to pay for the asset, the cash account (which is also an asset) decreases, and a decrease in an asset is recorded with a credit entry. Therefore, the correct entry is to debit the Asset Account and credit the Cash Account.

Common mistake: Students may mistakenly choose option B by reversing the entries, forgetting that you debit the account that receives value (the new asset) and credit the account that gives value (cash).

When a business returns goods it previously bought from a supplier, this is called 'returns outwards' or 'purchases returns'. This transaction acts like an income or a reduction in the purchases expense. According to the rules of double entry, all incomes and gains are credited. Therefore, the Returns Outwards account is credited to record the value of the goods returned.

Common mistake: Students often confuse 'returns outwards' with 'returns inwards' (goods returned by a customer) and may incorrectly debit the account, forgetting that it reduces an expense and is therefore credited.

Real accounts are accounts of assets and properties owned by a business. Plant is a long-term physical asset, so its account is classified as a real account. In contrast, Salaries is an expense (nominal account), Creditors is a liability to a person (personal account), and the Trading account is used to calculate profit (nominal account).

Common mistake: Students often mistakenly choose Creditors account, confusing a liability owed to a person (personal account) with a physical asset owned by the business (real account).

According to the double entry principle, for every transaction, one account is debited and another is credited. When goods are sold on credit, the customer becomes a Debtor (an asset), and assets are increased with a debit entry. Sales is an income to the business, and income accounts are increased with a credit entry, so the Sales Account is credited.

Common mistake: Students often mistakenly choose option C by reversing the entries, forgetting that an increase in assets (Debtors) is a debit and an increase in income (Sales) is a credit.

Books of original entry, also called day books, are the first place where business transactions are recorded from source documents. The Sales Journal and Return Inwards Journal are examples of these. While the Cash Book is a special book of original entry, the term 'Cash Account' refers to the ledger account itself, which is part of the ledger and not a book of original entry.

Common mistake: A common mistake is to confuse the 'Cash Account' with the 'Cash Book' (which is a book of original entry) and therefore fail to identify it as the correct answer.

According to the double-entry principle, for every transaction, there must be a debit entry and a corresponding credit entry. When the business sells its plant and machinery, the asset is going out, so the Plant and Machinery Account is credited to reduce its value. Since the sale is on credit to Wilson, Wilson becomes a debtor who owes the business money, so his personal account is debited.

Common mistake: Students often mistakenly choose option C, crediting the Sales Account, because they forget that the Sales Account is only used for the sale of goods meant for resale, not for the disposal of non-current assets.