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Wednesday 22th May 2024 FINANCIAL ACCT
(Objective & Essay)9:30am – 12:00pm
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FINANCIAL ACCOUNTING- Obj: examrunz.com.ng
F/acct OBJ
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31-40: DCBBDDADAA
41-50: CCDABDBBCD
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FINANCIAL ACCOUNTING- Theory
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1(a)(i) General journal
(ii) Purchases journal
(iii) General journal or bank journal
(iv) Sales returns journal
(b)(i) Purchases journal
(ii) Cash payments journal
(iii) Returns outwards journal
(iv) Discount received journal
(v) Petty cash journal
(c)(i) Sales ledger: Records credit sales, customer accounts, and related transactions.
(ii) Purchases ledger: Records credit purchases, supplier accounts, and related transactions.
(iii) General ledger: Records all other transactions not included in the sales or purchases ledger, including assets, liabilities, capital, income, and expenses.
(2a)
(i) Depreciation: The allocation of the cost of fixed assets over their useful lives.
(ii) Accruals: Recognizing expenses that have been incurred but not yet paid, or revenues that have been earned but not yet received.
(iii) Prepayments: Recognizing expenses that have been paid in advance, or revenues that have been received in advance.
(iv) Bad debts: Writing off debts that are considered uncollectible.
(v) Provision for doubtful debts: Creating a reserve to cover potential future bad debts.
(vi) Stock valuation: Adjusting the value of inventory to reflect its cost or market value, whichever is lower.
(2b)
(i) Nature: Capital expenditure is incurred for acquiring or improving fixed assets, which provide long-term benefits to the business. Revenue expenditure is incurred for the day-to-day operations of the business and is typically short-term in nature.
(ii) Treatment: Capital expenditure is usually capitalized and recorded on the balance sheet as an asset, while revenue expenditure is expensed in the period it is incurred and recorded on the income statement.
(iii) Impact on profitability: Capital expenditure does not directly affect the profit of the period in which it is incurred but is spread over multiple accounting periods through depreciation. Revenue expenditure directly impacts the profitability of the period in which it is incurred by reducing the net income.
(3a) Ose operate with Single Entry System of bookeeping. This system is typically used by small businesses or sole proprietors who do not keep proper books of account. In the single entry system, only one side of each transaction (either debit or credit) is recorded, which contrasts with the double entry system where every transaction affects at least two accounts.
(3b)
ADVANTAGES:
(PICK ANY THREE)
(i)The single entry system is easy to understand and use, making it accessible to those without formal accounting knowledge. It involves fewer records and less complex procedures.
(ii)Implementing and maintaining a single entry system is inexpensive. It does not require advanced accounting software or professional accountants, which can be costly for small businesses.
(iii)This system takes less time to manage compared to the double entry system. Business owners can spend more time focusing on their core operations rather than on detailed bookkeeping.
(iv)The single entry system requires minimal paperwork and fewer records. This reduces the administrative burden on the business owner.
(v)The system offers flexibility as it does not follow strict accounting rules and procedures. This can be advantageous for small businesses with straightforward transactions.
DISADVANTAGES:
(PICK ANY THREE)
(i)The single entry system can lead to incomplete and inaccurate financial records. Since it does not track both sides of transactions, there is a higher risk of errors and omissions
(ii)Due to the lack of checks and balances inherent in the double entry system, the single entry system is more susceptible to fraud and errors. It is difficult to detect discrepancies and irregularities.
(iii)The limited financial information provided by the single entry system makes it difficult for business owners to make informed decisions. Critical financial metrics and insights are often missing.
(iv)Financial institutions typically require detailed and accurate financial records when assessing loan applications. The single entry system’s lack of comprehensive financial data can make it difficult for businesses to obtain financing or attract investors.
(4a)
(PICK THREE)
(i) Equity refers to ownership in a company, while shareholders are individuals or entities that own shares of a company's stock.
(ii) Equity represents the residual interest in the assets of a company after deducting liabilities, while shareholders hold a portion of that equity through owning shares.
(iii) Equity holders have voting rights in the company, while shareholders may or may not have voting rights depending on the type of shares they hold.
(iv) Equity holders are entitled to dividends if declared by the company, whereas shareholders receive dividends based on the type of shares they hold and the company's dividend policy.
(v) Equity represents ownership in the entire company, whereas shareholders hold ownership in specific portions of the company based on the number of shares they own.
(4b)
(i) Cumulative preference shares: These shares guarantee that any dividends not paid in previous years due to insufficient profits are accumulated and paid out in later years before any dividends are paid to common shareholders. They ensure that shareholders receive their dividends even in lean years.
(ii) Redeemable preference shares: These shares come with a predetermined date or event upon which the issuing company can repurchase them, usually at a specified price. This provides the company with the flexibility to buy back shares at a later date, reducing its outstanding equity.
(iii) Participating preference shares: These shares give their holders the right to receive dividends in addition to a fixed dividend rate. If the company's profits exceed a certain level, participating preference shareholders are entitled to receive a share of the surplus profits along with common shareholders, which means they participate in the company's profits beyond their fixed dividend rate.
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