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2020 WAEC GCE 1ST SERIES FINANCIAL ACCOUNTING OBJ & THEORY QUESTIONS AND ANSWERS

*(Number 1)*

 

 

(1a)

Depreciation can be defined as a reduction in the economic service potentials of an asset as a result of wears,tears,usage and passage of time. It is also refer as the parmanent and continuous decrease in the quality,quantity and value of an asset.

 

(1b)

Revaluation depreciation method, the asset is valued at the end of each financial period and this revalued amount is compared with the value in the beginning of the period. The reduction in the value is recorded as depreciation for that year. WHILE Straight line depreciation is a common method of depreciation where the value of a fixed asset is reduced gradually over its useful life. It is used to gradually reduce the carrying amount of a fixed asset over its useful life

 

 

 

(1c)

*(Choose Any Three)*

(i)Wear and Tear

(ii)Obsolescence

(iii)Passage of time

(iv)Depletion

 

EXPLANATION:

*(Choose Any Three)*

(i)Wear and Tear: An asset may depreciate as a result of constant usage. Physical factors like erosion,dampness,rust and decay can cause an asset to reduce in value

 

(ii)Obsolescence: An asset can become obsolete due to changes in technology . When this occur,it is due to replacement. A very good example is the steam engine train which was replaced by diesel engine train

 

(iii)passage of time: Depreciation occurs in some assets with the effusion of time eg Leaseholds,patents and copyrights

 

(iv)Depletion:Some natural resource like gold ,oil or tin deposits become worthless when the deposits have been depleted. They are called wasting assets. The more they are extracted,the less the reserve.

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(3a)

Double entry bookkeeping:- is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account.

 

(3b)

-Internal-

(i)Owners and Stockholders

(ii)Directors

 

-External-

(i)Creditors

(ii)Investors

(iii)Government

 

(3c)

(i)prepayment:- is the sum paid for goods or services before their receipt or invoiced due date. In other words, a company has ordered and paid for goods or services but has not received anything yet.

 

(ii)accrued expense is an accounting term that refers to an expense that is recognized on the books before it has been paid; the expense is recorded in the accounting period in which it is incurred.

 

(iii)bad debt:-is a monetary amount owed to a creditor that is unlikely to be paid and, or which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency.

 

(iv)provision for doubtful debts:- is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is identical to the allowance for doubtful accounts.

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(4a)

 

A statement of account is a detailed report of the contents of an account. An example is a statement sent to a customer, showing billings to and payments from the customer during a specific time period, resulting in an ending balance.

 

(4b)

 

i. The single entry system is unsystematic and unscientific system of recording financial transactions.

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ii. Single entry system is not based on the principles of debit and credit. It fails to provide the arithmetical accuracy of the books of accounts.

 

(4C)

 

1. Sales ledger

2. Purchase ledger

3. Day book

4. Assets and liabilities account

5. Nominal accounts.

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(5)

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