waecE-LEARNING
Financial Accounting May/June 2014  
Questions: 1 2 3 4 5 6 7 8 9 Main
General Comments
Weakness/Remedies
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question 3
Theory of Financial Accounting

Describe three features of each of the following financial statements:

          (a)      Receipts and Payment Account;
(b)     Income and Expenditure Account;
(c)      Trading Account;

  1. Profit and Loss Account;
Appropriation Account of a Partnership
___________________________________________________________________________________________________
observation

Majority of the candidates that attempted this question did not understand the features and the performance was poor.  The expected answers include:

          Features:

  • Receipt and Payment Account–

-    It is a real account;
-    It is a prime book;
-    It is a summary of cash and cheque transactions of a club;
-    It has opening and closing balances;
-    It records both capital and revenue transactions;
-    Its closing balance is transferred into the balance sheet;
-    Its records are supported by source documents;
-    It is used by “Not-for Profit Making” organizations.
         
          (b)     Income and Expenditure Account -

  • It is a nominal account;
  • It is prepared in the form of profit and loss accounts;
  • It records revenue receipts and revenue expenditure;
  • It allows adjustments for prepayments and accruals;
  • Its closing balance represents surplus or deficit;
  • It is used by not-for-profit making organizations.

 

(c)      Trading Account -

  • It is a nominal account;
  • It is prepared by trading entities;
  • It is used to determine cost of goods available for sale;
  • It is used to determine cost of goods sold;
  • It is used to ascertain gross profit or gross loss.

 

(d )    Profit and Loss Account

  • It is a nominal account;
  • It is prepared by trading entities;
  • It is used to ascertain net profit or net loss;
  • It allows adjustments for accruals and prepayments.

 

( e)     Appropriation Account of a Partnership

  • It is a nominal account;
  • It is an account in which the profit/loss for the partners is distributed;
  • It shows the net profit/loss brought down for the period;
  • It shows interest on partners’ drawings;
  • It shows partners’ salaries for the period;
  • It shows partners’ commission;
  • It shows interest on partners’ capital.


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