FINANCE

FINANCIAL ACCOUNTING-FREE HIGH SCHOOL/SSCE/WAEC ADAPTED PRACTICE

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SSCE Financial Accounting Adapted Exam Practice Questions

Practice Questions:

Question 1:

a) Define "accounting error." (5 marks)

b) Identify and explain four common types of accounting errors. Discuss how each type can affect the financial statements. (10 marks)

c) Correct the following errors by providing journal entries: (10 marks)

  • An expense of ₦15,000 for office repairs was not recorded .
  • A credit sale of ₦2,000 was completely omitted from the books.
  • An inventory item worth ₦600 was incorrectly debited to the expenses account.

d) Discuss the impact of these errors on the profit declared in the financial statements. (5 marks)

Question 2:

a) Define a Sales Ledger Control Account and explain its purpose in accounting. (5 marks)

b) Discuss three reasons for maintaining control accounts. (6 marks)

c) Highlight two limitations of control accounts in accounting. (4 marks)

d) Prepare a Sales Ledger Control Account for October using the following data: (10 marks)

  • Opening balance: ₦5,000
  • Credit sales: ₦12,000
  • Cash received from debtors: ₦9,000
  • Bad debts written off: ₦1,000
  • Closing balance: ₦7,000

Question 3:

a) What is a Manufacturing Account? Discuss its importance in financial reporting. (5 marks)

b) Define key terminologies used in a manufacturing account, including raw materials, direct labor, and manufacturing overheads. (10 marks)

c) Prepare a Manufacturing Account for the year ended December 31, 2023, using the following information: (10 marks)

  • Opening stock of raw materials: ₦4,000
  • Purchases of raw materials: ₦20,000
  • Direct labor: ₦10,000
  • Manufacturing overheads: ₦5,000
  • Closing stock of raw materials: ₦6,000

d) Explain how to treat manufacturing profit at market value when preparing the trading, profit and loss account, and balance sheet. (5 marks)

Question 4:

a) Define a partnership and explain the different types of partners. (5 marks)

b) Describe the components of a partnership deed and its significance. (6 marks)

c) Prepare an Appropriation Account for a partnership with the following details: (10 marks)

  • Net profit: ₦50,000
  • Partner A's salary: ₦12,000
  • Partner B's salary: ₦10,000
  • Remaining profit to be shared in a ratio of 3:2.

d) Prepare a Current Account and Balance Sheet for the partnership based on the following information: (10 marks)

  • Partner A: Capital ₦30,000, Current Account ₦5,000
  • Partner B: Capital ₦25,000, Current Account ₦2,000

Marking Scheme:

  • (a) Definition of accounting error: 5 marks
  • (b) Explanation of accounting errors: 10 marks
  • (c) Journal entries for corrections: 10 marks
  • (d) Impact on profit declared: 5 marks
  • (a) Definition and purpose of Sales Ledger Control Account: 5 marks
  • (b) Reasons for maintaining control accounts: 6 marks
  • (c) Limitations of control accounts: 4 marks
  • (d) Sales Ledger Control Account preparation: 10 marks
  • (a) Definition and importance of Manufacturing Account: 5 marks
  • (b) Key terminologies in manufacturing accounts: 10 marks
  • (c) Manufacturing Account preparation: 10 marks
  • (d) Treatment of manufacturing profit: 5 marks
  • (a) Definition of partnership and types of partners: 5 marks
  • (b) Components of partnership deed: 6 marks
  • (c) Appropriation Account preparation: 10 marks
  • (d) Current Account and Balance Sheet preparation: 10 marks

Total: 200 marks

Timing: 150 minutes

SSCE Financial Accounting adapted Exam Solutions

Solutions:

Question 1:

a) An accounting error is a mistake made in the recording of financial transactions. These errors can arise from various causes, including mathematical mistakes, incorrect application of accounting principles, or oversight. (5 marks)

b) Four common types of accounting errors include:

  • Errors of Omission: Transactions that are completely left out of the accounting records, affecting both the balance sheet and income statement.
  • Errors of Commission: Incorrect amounts recorded in the right accounts, which can misstate the financial results.
  • Errors of Principle: Violating accounting principles, such as recording a capital expense as a revenue expense.
  • Compensating Errors: Errors that offset one another, where one error is counterbalanced by another error, potentially leaving the financial statements accurate. (10 marks)

c) Journal entries for corrections:

  • 1. Office Repairs Expense:
    Dr Office Repairs Expense ₦15,000
                         Cr Cash/Bank ₦15,000
    (To correct the overstatement of office repairs)
  • 2. Credit Sale:
    Dr Accounts Receivable ₦2,000
                         Cr Sales Revenue ₦2,000
    (To record the omitted credit sale)
  • 3. Inventory Item:
    Dr Inventory ₦600
                         Cr Expenses ₦600
    (To correct the misclassification of inventory)

d) These errors could understate or overstate profits, affecting the overall financial health reported by the business. (5 marks)

Question 2:

a) A Sales Ledger Control Account is a summary account in the general ledger that reflects the total of all accounts receivable transactions. Its purpose is to facilitate the monitoring of credit sales and collections. (5 marks)

b) Reasons for maintaining control accounts include:

  • Improved accuracy in financial reporting.
  • Facilitates reconciliation of individual accounts.
  • Helps in detecting errors and fraud. (6 marks)

c) Limitations of control accounts include:

  • They may not capture all detailed transactions.
  • Errors in the control account may not reflect on individual accounts until identified. (4 marks)

d) Sales Ledger Control Account for October:

                | Date        | Details             | Debit     | Credit     |
                |-------------|---------------------|-----------|------------|
                | Oct 1      | Balance b/f         | 5,000     |            |
                | Oct        | Credit Sales        |           | 12,000     |
                | Oct        | Cash Received        | 9,000     |            |
                | Oct        | Bad Debts           |           | 1,000      |
                | Oct 31     | Balance c/f         |           | 7,000      |
            

Question 3:

a) A Manufacturing Account summarizes the costs incurred in producing goods. It is crucial for determining the gross profit of a manufacturing business. (5 marks)

b) Key terminologies include:

  • Raw Materials: Basic inputs used in production.
  • Direct Labor: Labor costs directly tied to production.
  • Manufacturing Overheads: Indirect costs incurred in production. (10 marks)

c) Manufacturing Account for the year ended December 31, 2023:

                | Particulars               | Amount     |
                |---------------------------|------------|
                | Opening Stock of Raw Materials | 4,000  |
                | Add: Purchases of Raw Materials | 20,000 |
                | Less: Closing Stock of Raw Materials | (6,000) |
                | Direct Labor              | 10,000     |
                | Manufacturing Overheads    | 5,000     |
                | Total Cost of Production   | 33,000     |
            

d) To treat manufacturing profit at market value, adjust the trading account to reflect the fair market value of finished goods instead of historical cost. This may affect the balance sheet presentation and profit and loss account. (5 marks)

Question 4:

a) A partnership is a business structure where two or more individuals share ownership and profits. Types of partners include general partners and limited partners. (5 marks)

b) A partnership deed includes details like the name of the partnership, capital contributions, profit-sharing ratios, and provisions for adding new partners. This document is significant for guiding partnership operations. (6 marks)

c) Appropriation Account for the partnership:

                | Particulars             | Amount     |
                |-------------------------|------------|
                | Net Profit              | 50,000     |
                | Less: Partner A’s Salary | (12,000)   |
                | Less: Partner B’s Salary | (10,000)   |
                | Remaining Profit        | 28,000     |
                | Share (3:2)            | 16,800     | (Partner A)
                |                        | 11,200     | (Partner B)
            

d) Current Account and Balance Sheet:

                | Partner              | Capital    | Current Account |
                |---------------------|------------|------------------|
                | Partner A          | 30,000     | 5,000            |
                | Partner B          | 25,000     | 2,000            |
            

Marking Scheme:

  • (a) Definition of accounting error: 5 marks
  • (b) Explanation of accounting errors: 10 marks
  • (c) Journal entries for corrections: 10 marks
  • (d) Impact on profit declared: 5 marks
  • (a) Definition and purpose of Sales Ledger Control Account: 5 marks
  • (b) Reasons for maintaining control accounts: 6 marks
  • (c) Limitations of control accounts: 4 marks
  • (d) Sales Ledger Control Account preparation: 10 marks
  • (a) Definition and importance of Manufacturing Account: 5 marks
  • (b) Key terminologies in manufacturing accounts: 10 marks
  • (c) Manufacturing Account preparation: 10 marks
  • (d) Treatment of manufacturing profit: 5 marks
  • (a) Definition of partnership and types of partners: 5 marks
  • (b) Components of partnership deed: 6 marks
  • (c) Appropriation Account preparation: 10 marks
  • (d) Current Account and Balance Sheet preparation: 10 marks

Total: 200 marks

Timing: 150 minutes

SSCE Financial Accounting adapted Exam Practice Questions

Practice Questions:

Question 1: Partnership Accounts

a) Define a partnership and explain the key characteristics that differentiate it from other business entities. (5 marks)

b) Outline the components of a partnership deed and discuss its significance in the management of a partnership. (10 marks)

c) Prepare the final accounts for a partnership based on the following information for the year ended December 31, 2023: - Net profit: ₦60,000 - Partner A's salary: ₦15,000 - Partner B's salary: ₦10,000 - Remaining profits to be shared in the ratio of 3:2. (10 marks)

Question 2: Admission of Partners

a) Explain the process of admitting a new partner into an existing partnership. (5 marks)

b) Discuss the impact of admission on existing partners’ capital accounts and profit-sharing ratios. (5 marks)

c) Given the following information, calculate the new profit-sharing ratio when Partner C is admitted: - Existing partners A and B share profits in the ratio of 3:2. - Partner C is admitted for a 20% share of profits. (10 marks)

Question 3: Dissolution of Partnership

a) Describe the reasons why a partnership may be dissolved. (5 marks)

b) Explain the steps involved in the dissolution process, including the settlement of accounts among partners. (10 marks)

c) Prepare a dissolution account for a partnership with the following balances at dissolution: - Assets (cash): ₦10,000 - Liabilities: ₦4,000 - Partner A’s capital: ₦3,000 - Partner B’s capital: ₦3,000. (5 marks)

Question 4: Introduction to Company Accounts

a) What is a limited liability company? Discuss its advantages compared to a partnership. (5 marks)

b) Explain the main types of shares a company can issue and the rights associated with each type. (10 marks)

c) Prepare the final accounts for a limited liability company for the year ended December 31, 2023, using the following data: - Revenue: ₦200,000 - Cost of goods sold: ₦120,000 - Operating expenses: ₦30,000 - Tax: ₦10,000. (10 marks)

Question 5: Issue of Shares and Debentures

a) Differentiate between shares and debentures in the context of a company’s capital structure. (5 marks)

b) Explain the process of issuing shares, including public offers and private placements. (5 marks)

c) Calculate the total value of shares issued if a company issues 50,000 ordinary shares at ₦10 each and 20,000 preference shares at ₦15 each. (10 marks)

d) Discuss the advantages and disadvantages of issuing debentures as a method of raising finance. (5 marks)

Marking Scheme:

  • (a) Definition and characteristics of partnership: 5 marks
  • (b) Components of partnership deed: 10 marks
  • (c) Final accounts preparation: 10 marks
  • (a) Process of admitting a partner: 5 marks
  • (b) Impact on capital accounts and ratios: 5 marks
  • (c) Calculation of new profit-sharing ratio: 10 marks
  • (a) Reasons for dissolution: 5 marks
  • (b) Steps in dissolution process: 10 marks
  • (c) Dissolution account preparation: 5 marks
  • (a) Definition and advantages of limited liability company: 5 marks
  • (b) Types of shares and rights: 10 marks
  • (c) Final accounts preparation: 10 marks
  • (a) Differences between shares and debentures: 5 marks
  • (b) Process of issuing shares: 5 marks
  • (c) Calculation of total share value: 10 marks
  • (d) Advantages and disadvantages of debentures: 5 marks

Total: 200 marks

Timing: 150 minutes

SSCE Financial Accounting Adapted Exam Solutions

Solutions:

Question 1: Partnership Accounts

a) A partnership is a business structure where two or more individuals share ownership and profits. Key characteristics include:

  • Mutual agency: Each partner can act on behalf of the partnership.
  • Shared profits: Profits are divided among partners based on the partnership deed.
  • Limited liability varies: General partners have unlimited liability, while limited partners have liability only up to their capital contribution.

b) Components of a partnership deed include:

  • Name of the partnership and partners.
  • Capital contributions of each partner.
  • Profit-sharing ratios.
  • Procedures for adding or removing partners.
  • Dispute resolution mechanisms.

c) Final accounts preparation:

                | Particulars              | Amount     |
                |--------------------------|------------|
                | Net Profit               | ₦60,000    |
                | Less: Partner A's Salary | (₦15,000)  |
                | Less: Partner B's Salary | (₦10,000)  |
                | Remaining Profit         | ₦35,000    |
                | Share (3:2)             | ₦21,000    | (Partner A)
                |                          | ₦14,000    | (Partner B)
            

Question 2: Admission of Partners

a) The process of admitting a new partner includes:

  • Agreement among existing partners.
  • Updating the partnership deed.
  • Calculating the new profit-sharing ratio.

b) Impact on existing partners’ accounts includes changes to capital contributions and alterations to profit-sharing ratios, which may dilute existing partners’ shares.

c) New profit-sharing ratio calculation:

                | Existing Share           | New Share  |
                |--------------------------|------------|
                | Partner A (3/5)         | 48%        |
                | Partner B (2/5)         | 32%        |
                | Partner C (20%)         | 20%        |
            

Question 3: Dissolution of Partnership

a) Reasons for dissolution may include mutual agreement, death of a partner, or insolvency.

b) Steps in the dissolution process involve:

  • Settling outstanding liabilities.
  • Realizing partnership assets.
  • Distributing remaining assets to partners according to their capital balances.

c) Dissolution account preparation:

                | Particulars              | Amount     |
                |--------------------------|------------|
                | Assets (Cash)           | ₦10,000    |
                | Less: Liabilities        | (₦4,000)   |
                | Partner A's Capital      | (₦3,000)   |
                | Partner B's Capital      | (₦3,000)   |
                | Profit or Loss           | ₦0         |
            

Question 4: Introduction to Company Accounts

a) A limited liability company is a separate legal entity where the liability of shareholders is limited to their capital contribution. Advantages include:

  • Limited liability protects personal assets.
  • Perpetual existence of the company.

b) Main types of shares include:

  • Ordinary Shares: Carry voting rights and dividends vary.
  • Preference Shares: Fixed dividends and priority over ordinary shares in liquidation.

c) Final accounts preparation:

                | Particulars               | Amount     |
                |---------------------------|------------|
                | Revenue                   | ₦200,000   |
                | Less: Cost of Goods Sold  | (₦120,000) |
                | Gross Profit              | ₦80,000    |
                | Less: Operating Expenses   | (₦30,000)  |
                | Profit Before Tax         | ₦50,000    |
                | Less: Tax                 | (₦10,000)  |
                | Net Profit                | ₦40,000    |
            

Question 5: Issue of Shares and Debentures

a) Shares represent ownership in a company, while debentures are debt instruments representing loans made to the company.

b) The process of issuing shares includes:

  • Preparation of prospectus.
  • Public or private offering.
  • Allotment of shares to applicants.

c) Total value of shares issued:

                Ordinary Shares: 50,000 x ₦10 = ₦500,000
                Preference Shares: 20,000 x ₦15 = ₦300,000
                Total Value = ₦500,000 + ₦300,000 = ₦800,000
            

d) Advantages of issuing debentures include fixed interest and tax deductibility, while disadvantages include the obligation to pay interest regardless of profits.

Marking Scheme:

  • (a) Definition and characteristics of partnership: 5 marks
  • (b) Components of partnership deed: 10 marks
  • (c) Final accounts preparation: 10 marks
  • (a) Process of admitting a partner: 5 marks
  • (b) Impact on capital accounts and ratios: 5 marks
  • (c) Calculation of new profit-sharing ratio: 10 marks
  • (a) Reasons for dissolution: 5 marks
  • (b) Steps in dissolution process: 10 marks
  • (c) Dissolution account preparation: 5 marks
  • (a) Definition and advantages of limited liability company: 5 marks
  • (b) Types of shares and rights: 10 marks
  • (c) Final accounts preparation: 10 marks
  • (a) Differences between shares and debentures: 5 marks
  • (b) Process of issuing shares: 5 marks
  • (c) Calculation of total share value: 10 marks
  • (d) Advantages and disadvantages of debentures: 5 marks

Total: 200 marks

Timing: 150 minutes

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