Financial Accounting WASSCE (PC), 2018

Section A: Theory of Financial Accounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 2

  1. Explain with examples, the following component of cost in a Manufacturing Account:

            (i)         Direct material cost;
(ii)        Direct labour cost;
(iii)       Factory overhead.

(b)        Describe the three types of stocks in a manufacturing concern.

     

Observation

Some of the candidates attempted this question on not-for-profit making organization and performed poorly.  However, few candidates were able to present their points correctly. Some of the suggested responses were:

  1. Sources of income for a not-for-profit making organization:
  1. Subscriptions;
  2. Entrance fees/membership fees;
  3. Life membership fees;
  4. Income from commercial activities (e.g. bar operations, rent of grounds, sale of publications, investment income);
  5. Proceeds from social activities (games, dance, bazaars, funfairs etc);
  6. Donations/gifts/grants;
  7. Disposal of assets;
  8. Interest on bank deposits;
  9. Fines/charges on members.
  10. Levies
  11. Differences between Receipts and Payments Account and Income and Expenditure Account.

 

Receipts and Payments Account

Income and Expenditure Account

1. It is a real account.

1. It is a nominal account.

2. It is the equivalent of the cashbook of a profit making organization.

2. It is the equivalent of the profit and loss account of a profit making organization.

3. There may be an opening balance.

3. There is no opening balance.

4. Cash transactions are recorded whether they relate to past, present or future periods.

4. They contain items for the current period making adjustments for accruals and prepayments.

5. It records capital and revenue items.

5. It records revenue items only.

6. It does not record depreciation of fixed assets.

6. It records depreciation of fixed assets.

7. The closing balance may be cash in hand, cash at bank or bank overdraft.

7. The closing balance may be either surplus or deficit.

8. Receipts are debited and payments credited.

8. Expenses are debited and income credited.