2013 - WAEC Accounting Past Questions and Answers - page 5

Accounting concepts and conventions are the basic assumptions that underline the preparation of the periodic financial statements of a business.

A secured creditor is generally a bank or other asset-based lender that holds a fixed or floating charge over a business asset or assets. When a business becomes insolvent, sale of the specific asset over which security is held provides repayment for this category of creditor.

 Prime costs are all of the costs that are directly attributed to the production of each product. Prime costs are direct costs, meaning they include the costs of direct materials and direct labor involved in manufacturing an item. Companies use prime costs to price their products.

Examples of Real Accounts. The real accounts are the balance sheet accounts which include the following: Asset accounts (cash, accounts receivable, buildings, etc.)  Stockholders' equity accounts (common stock, retained earnings, etc.)

The net working capital formula is calculated by subtracting the current liabilities from the current assets. Here is what the basic equation looks like. Typical current assets that are included in the networking capital calculation are cash, accounts receivable, inventory, and short-term investments. current assets - current liabilities = working capital

A balance sheet is a financial statement that reports a company's assets, liabilities and shareholders' equity at a specific point in time, and provides a basis for computing rates of return and evaluating its capital structure.

The purpose of the profit and loss account is to: Show whether a business has made a PROFIT or LOSS over a financial year. It describe how the profit or loss arose – e.g. categorizing costs between “cost of sales” and operating costs.