waecE-LEARNING
Financial Accounting1,NOV/DEC 2013  
Questions: 1 2 3 4 5 6 7 8 9 Main
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question 3
Theory of Financial Accounting

(a)        (i)         What is prime cost?
            (ii)        Explain the components of prime cost.
(b)        List six uses of control account.

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observation

Majority of the candidates attempted this questions and performed well in question 3(b)   only.

(a)        (i)   -           Prime Cost is the sum of all costs that are directly related to production.

  •       Prime cost is cost that is traceable to each unit of material    produced.
  •       Prime cost is the sum of direct material cost, direct labour cost and direct expenses.

                        (ii)        The components of prime cost are:

                        -           Direct materials cost: It is the cost of materials used up in production/manufacturing.
           
                        -           Direct labour cost: It is the wages paid to persons working directly in the production/manufacturing process.

                        -           Direct expenses:  These are expenses incurred directly for the purpose of production/manufacturing.

            (b)        Uses of Control Accounts

                        -           It is used to detect missing figures;
                        -           It is used to prepare interim final accounts;
                        -           It facilitates easy identification of errors;
                        -           It serves as a form of internal control;
                        -           It enables the ascertainment of trade debtors and trade creditors’ amounts;
                        -           It helps to prevent fraud;
                        -           It helps to group similar accounts;
                        -           It is used to provide timely information to customers;
                        -           It enables the ascertainment of credit sales and credit purchases.

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