Financial Accounting WASSCE (PC 2ND), 2022

Section A: Theory of Financial Accounting

 

 

 

Question 4:

 

List and Explain the items of balance sheet

 

 

 

 


Observation

 

 

Majority of the candidates that attempted Question 4 on items of balance sheet averagely well. However, the significant weakness of candidates to this question was their mix-up of current asset with current liabilities.

Some of the suggested responses were:


4(a)     

  1. Fixed Assets:
  • These are long term resources owned by a business;
  • They are capable of yielding economic benefits now and in the future;
  • These are resources that may be used by a business for more than one year;
  • These resources are not meant for resale.

Examples of Fixed Assets include:

  • Land;
  • Building;
  • Premises;
  • Plant;
  • Machinery;
  • Office equipment;
  • Motor vehicle;
  • Furniture;
  • Fittings;
  • Fixtures;
  • Goodwill;
  • Patent.

 

  1. Current Assets:
  • These are resources of the business held for a period of one year;
  • They can change form or can easily be converted to cash;
  • They are used for the day-to day running of the business.

Examples of Current Assets include:

  • Stock or inventory;
  • Debtor or account receivables;
  • Expenses prepaid or prepayment;
  • Cash at bank;
  • Cash in hand;
  • Income owed.

 

  1. Capital:
  • These are resources introduced by the owners of a business;
  • They may be in the form of cash and or asset.
  • These represents the amount of claim an owner has on the resources of the business.         

Examples of Capital include:

  • Shares;
  • Loan capital or Debentures;
  • Cash;
  • Property;
  • Plant;
  • Equipment;
  • Working capital.

 

  1. Intangible Assets:
  • These are non-monetary assets;
  • They can neither be seen nor touched or they have no physical form.

Examples of Intangible Assets include:

  • Trade mark;
  • Patent;
  • Royalties;
  • Goodwill;
  • Copyright;
  • Preliminary expenses;
  • Software licenses;
  • Franchises;
  • Intellectual property.

 

  1. Current Liabilities:
  • These are financial obligations of the business;
  • They are expected to be honoured within a period of one year.

Examples of Current Liabilities include:

  • Trade creditors or account payables;
  • Bank overdraft;
  • Expenses accrued
  • Income prepaid;
  • Unearned revenue;
  • Customer deposit;
  • Current portion of long-term loans.