November 15, 2023 WAEC GCE FINANCIAL ACCOUNT Answers

FINANCIAL ACCOUNT*
(1) (a) Two transactions that would result in an increase in stock are:
– Purchase of inventory or goods for resale.
– Transfer of inventory or goods from a different location or department within the business.

(b) The term “goohill” is not a recognized accounting or business term. It may be a misspelling or a term specific to a certain industry or region, but without further context, it is not possible to provide an accurate explanation.

(c) Source documents for the following items:
– Water charges paid: Water bill or invoice from the water utility company.
– Credit sales: Sales invoice or sales receipt.
– Credit purchases: Purchase invoice or purchase receipt.
– Wages: Payroll records or wage slips.
– Cash payment: Cash receipt or payment voucher.
– Electricity owed: Electricity bill or invoice from the electricity utility company.
– Returns by customers: Credit note or return slip issued to the customer.
– Returns to suppliers: Debit note or return slip issued to the supplier.
– Cheque deposit: Bank deposit slip or bank statement.
– Dishonored cheque: Cheque return memo or bank statement indicating the dishonored cheque.

(2) (a) Manufacturing account is an account in the financial books of a manufacturing company that records all the direct costs incurred during the production of goods. It includes the cost of raw materials, direct labor, and other manufacturing expenses.

(b) The three elements of prime cost are:
– Direct materials: The cost of the raw materials used in the production process.
– Direct labor: The cost of the wages and salaries paid to the workers directly involved in the production process.
– Direct expenses: Other direct costs incurred specifically for the production, such as electricity, fuel, or subcontractor costs.

(c) Explanation of terms related to manufacturing account:
(i) Prime cost: Prime cost refers to the total direct costs incurred in the production of goods, including direct materials, direct labor, and direct expenses.
(ii) Factory overheads: Factory overheads are indirect costs incurred in the manufacturing process, such as factory rent, utilities, and equipment depreciation.
(iii) Work-in-progress: Work-in-progress refers to partially completed goods that are in the process of being manufactured but are not yet finished.
(iv) Finished goods: Finished goods are the final products that have completed the manufacturing process and are ready for sale to customers.
(v) Market value of goods produced: Market value of goods produced refers to the estimated selling price of the finished goods in the market. It is calculated based on current market conditions and demand.
[11/15, 10:19 AM] Joseph: (3a)
Bad debt refers to money that is owed to a company or individual but is unlikely to be paid back. It’s basically a debt that becomes uncollectible.

(3b)
(i) When the debtor declares bankruptcy and has no assets to repay the debt.
(ii) When the debtor is untraceable or cannot be contacted.
(iii) When the debt is too small to pursue legally or the cost of recovery outweighs the debt.
(iv) When the debtor has passed away and there are no assets to settle the debt.
(v) When the debtor refuses to pay and there is no legal recourse available.

(3c)
(i) Bad debts are specific debts that have been identified as uncollectible, while provision for doubtful debts is an estimated amount set aside to cover potential bad debts.
(ii) Bad debts are written off when they are deemed uncollectible, while provision for doubtful debts remains as a reserve on the balance sheet.
(iii) Bad debts directly impact the profit and loss statement, reducing the company’s net income, while provision for doubtful debts affects the balance sheet by reducing the accounts receivable balance.
(iv) Bad debts are recognized after attempts to collect the debt have been made, while provision for doubtful debts is recognized as a precautionary measure before any specific debts are identified as uncollectible.

 

*FINANCIAL ACCOUNT*

(1) (a) Two transactions that would result in an increase in stock are:

– Purchase of inventory or goods for resale.

– Transfer of inventory or goods from a different location or department within the business.

 

(b) The term “goohill” is not a recognized accounting or business term. It may be a misspelling or a term specific to a certain industry or region, but without further context, it is not possible to provide an accurate explanation.

 

(c) Source documents for the following items:

– Water charges paid: Water bill or invoice from the water utility company.

– Credit sales: Sales invoice or sales receipt.

– Credit purchases: Purchase invoice or purchase receipt.

– Wages: Payroll records or wage slips.

– Cash payment: Cash receipt or payment voucher.

– Electricity owed: Electricity bill or invoice from the electricity utility company.

– Returns by customers: Credit note or return slip issued to the customer.

– Returns to suppliers: Debit note or return slip issued to the supplier.

– Cheque deposit: Bank deposit slip or bank statement.

– Dishonored cheque: Cheque return memo or bank statement indicating the dishonored cheque.

 

(2) (a) Manufacturing account is an account in the financial books of a manufacturing company that records all the direct costs incurred during the production of goods. It includes the cost of raw materials, direct labor, and other manufacturing expenses.

 

(b) The three elements of prime cost are:

– Direct materials: The cost of the raw materials used in the production process.

– Direct labor: The cost of the wages and salaries paid to the workers directly involved in the production process.

– Direct expenses: Other direct costs incurred specifically for the production, such as electricity, fuel, or subcontractor costs.

 

(c) Explanation of terms related to manufacturing account:

(i) Prime cost: Prime cost refers to the total direct costs incurred in the production of goods, including direct materials, direct labor, and direct expenses.

(ii) Factory overheads: Factory overheads are indirect costs incurred in the manufacturing process, such as factory rent, utilities, and equipment depreciation.

(iii) Work-in-progress: Work-in-progress refers to partially completed goods that are in the process of being manufactured but are not yet finished.

(iv) Finished goods: Finished goods are the final products that have completed the manufacturing process and are ready for sale to customers.

(v) Market value of goods produced: Market value of goods produced refers to the estimated selling price of the finished goods in the market. It is calculated based on current market conditions and demand.

 

2a) A manufacturing account is a financial statement that shows the costs incurred and the revenues generated during the manufacturing process of a company. It includes the costs of direct materials, direct labor, and manufacturing overheads, as well as the opening and closing inventories of work in progress and finished goods. The manufacturing account helps in calculating the cost of goods manufactured and provides valuable information for management decision-making and cost control.

 

 

2b)

1. Direct Materials: The cost of raw materials and components that directly go into the production of a product.

 

2. Direct Labor: The cost of labor directly involved in the manufacturing process, such as wages and benefits for assembly line workers.

 

3. Direct Expenses: Other direct costs associated with the manufacturing process, such as fuel or power used in production, which can be directly attributed to the cost of production.

 

2c

i. The prime cost refers to the total cost of direct materials, direct labor, and direct expenses that are directly involved in the production of a product. It does not include indirect costs such as overhead, administrative expenses, or selling costs. Calculating the prime cost is essential for understanding the direct costs associated with manufacturing a product and is a key component in determining the overall cost of production.

ii. Factory overheads, also known as manufacturing overheads, are the indirect costs associated with the production process that cannot be easily traced to specific units of production. These costs include expenses such as factory rent, utilities, depreciation on factory equipment, indirect labor, and other related costs. Factory overheads are essential for the operation of the production facility but are not directly attributable to a specific product. These costs are typically allocated to the products based on a predetermined allocation method, such as machine hours or direct labor hours. Understanding and managing factory overheads is crucial for accurately determining the total cost of production and pricing of goods.

 

 

 

(3a)

Bad debt refers to money that is owed to a company or individual but is unlikely to be paid back. It’s basically a debt that becomes uncollectible.

 

(3b)

(i) When the debtor declares bankruptcy and has no assets to repay the d

(4a)

CHOOSE THREE

 

– Limited liability for shareholders, which means that their personal assets are protected from company debts

 

– Perpetual existence, meaning the company can continue to operate even if the shareholders or directors change

 

– Separate legal entity, meaning the company is treated as a separate entity from its owners and directors

 

– Ability to raise capital through the sale of shares

 

– Ability to transfer ownership through the sale of shares

 

– Access to a wide range of tax incentives and benefits.

 

4b)

– Companies are separate legal entities, whereas partnerships are not.

 

– Companies have limited liability, whereas partners in a partnership have unlimited liability.

 

– Companies can raise capital by issuing shares, whereas partnerships cannot.

 

– Companies can sell shares to the public, whereas partnerships cannot.

 

– Companies are subject to more regulation than partnerships.

 

– Companies have a more complex structure than partnerships.

 

(C)

CHOOSE THREE

 

– The right to vote on company matters, such as the election of directors and the approval of major decisions.

 

– The right to receive information about the company’s financial performance and operations.

 

– The right to receive financial statements and other company reports.

 

– The right to attend and participate in shareholder meetings.

 

– The right to sell or transfer shares.

 

– The right to receive a portion of the company’s assets if it is liquidated.

2a
A manufacturing account is a financial statement that shows the costs involved in the production of goods by a manufacturer. It includes direct materials, direct labor, and manufacturing overheads. This account helps in determining the total cost of goods produced during a specific period.

2b
Certainly! Prime cost includes:

1. **Direct Materials:** The cost of raw materials directly used in the production process.
2. **Direct Labor:** The cost of labor directly involved in the manufacturing process.
3. **Direct Expenses:** Other direct costs specifically tied to the production process, like utilities used directly in manufacturing.

2c
*PRIME COST*
Prime cost refers to the direct costs incurred in the production of goods. It encompasses the expenses directly associated with the manufacturing process, such as raw materials, direct labor, and any other direct expenses essential for production. Calculating prime cost is vital in understanding the fundamental expenses involved in manufacturing a product.

*FACTORY OVERHEADS*

Factory overheads, also known as manufacturing overheads or factory burden, are indirect costs incurred during the production process that cannot be directly attributed to specific units of production. These costs include expenses like rent for the factory building, utilities, depreciation on machinery, factory supervision, maintenance, and other indirect expenses necessary for the production process but not directly tied to a particular product or unit.

*WORK-IN-PROGRESS*
Work in progress (WIP) refers to partially completed goods that are still in the production process and have not yet reached the stage of finished products. It represents the value of materials, labor, and overheads that have been applied to the incomplete units of production. Essentially, it’s the inventory of products that are undergoing the manufacturing process and have not yet been completed.

*FINISHED GOODS*
Finished goods refer to products that have completed the manufacturing process and are ready for sale to customers. These goods have passed through all stages of production, including raw material acquisition, processing, assembly, and quality control. They are in a state where they meet the required standards and are awaiting distribution or delivery to customers or retailers.

*MARKET VALUE OF GOODS PRODUCED*
The market value of goods produced refers to the total value of finished goods based on their selling prices in the current market. It represents the worth of the products manufactured by a company, taking into account the prevailing market conditions and demand. Calculating the market value of goods produced helps in assessing the economic value and performance of the company’s production activities.

 

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