2015 - WAEC Accounting Past Questions and Answers - page 1

A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization's general ledger accounts.

• Relevance: information makes a difference in decision making
• Reliability: information is verifiable, factual, and neutral
• Comparability: information can be used to compare different entities
• Consistency: information is consistently presented from year to year

Your net income or net loss equals your total revenues minus your total expenses for an accounting period. If your revenues are greater than expenses, you have net income. If revenues are less than expenses, you have a net loss. example

Net profit or loss = Revenue - total expenses

Purchases account. The purchases account is a general ledger account in which is recorded the inventory purchases of a business. This account is used to calculate the amount of inventory available for sale in a periodic inventory system.

Purchase journal is used for recording goods bought on credit

Debit the appropriate asset account in a journal entry in your records by the cost of the asset. Credit the cash account in the same journal entry by the amount of cash you used toward the purchase. If you paid all cash, this amount is the same as the asset's cost.

When merchandise purchased for cash are returned to supplier, we need to record two journal entries. In first entry we debit accounts receivable account and credit purchases returns and allowances account (returns outwards would ve credited because goods are going out of the business). This entry is made to recognize the return of merchandise.

Examples of real accounts are:

• Cash.
• Accounts receivable.
• Fixed assets.
• Accounts payable.
• Retained earnings.

Accounting and journal entry for credit sales include 2 accounts, debtor and sales. In case of a journal entry for cash sales, cash account and sales account are used. The person who owes the money is called a “debtor” and the amount owed is a current asset for the company. Since the goods were sold on credit, debtor acount will be debited (increase in the amount of money being owed to the business), and sales account will be credited.

Books of original entry refers to the accounting journals in which business transactions are initially recorded. They include;

1. Sales journal
2. purchase day book
3. returns inwards
4. returns outwards
5. cash book
6. general ledger

The sales and receipts classes of transactions are the typical journal entries, that debit accounts receivable (debtors) and credit sales revenue, and debit cash and credit accounts receivable  in which the amount owed will be paid at a later date.