WAEC GCE 2018 Financial Accounting (Obj & Essay) Answer - Nov/Dec Expo

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2018 WAEC GCE FINANCIAL ACCOUNT THEORY ANSWER

1a

I) To maintain systematic records

ii) Estimate profit and loss

iii) Facilitating rational decision making.

1b

I)Understandability

This implies the expression, GBwith clarity, of accounting information in such a way that it will be understandable to users - who are generally assumed to have a reasonable knowledge of business and economic activities

ii)Relevance

This implies that, to be useful, accounting information must assist a user to form, confirm or maybe revise a view - usually in the context of making a decision (e.g. should I invest, should I lend money to this business? Should I work for this business?)

iii)Consistency

This implies consistent treatment of similar items and application of accounting policies  =============================

*2a*  Depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion. 

*2B* I) Cost of the Asset

The costs incurred to purchase the asset play a very important role in determining the depreciation value. The cost of the asset is the amount paid to acquire or plus the costs of installing it minus the discounts received by the seller. If the company incurred high costs to purchase it, it is very unlikely to replace the asset very soon.

II)  Estimated Useful Life:

The estimated useful life also has a bearing on the determination of depreciation. If the asset is likely to be useful for many years to come, it is going to be depreciated each year annually at a lower rate than if its lifespan were estimated to be very low. The estimated useful life is computed after analyzing the productive capabilities of previously used, similar types of asset.

iii. Estimated Scrap Value

Scrap value refers to the value estimated to be realized after the expiry of the useful working life of the asset. This is also known as residual value or salvage value. Depreciation should be determined after deducting the estimated scrap value from the cost of asset.

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3)

Goodwill is the benefit and advantage arising from the good mame reputation, position and connection of a business which enable it to earn more profit than normally expected on the capital employed in the business

3b)

(i) Admission of a new partner

(ii) Dissolution of partnership

(iii) Change in profit sharing ratio

3c)

(i) The amount of capital to be contributed by each partner

(ii) No interest on drawing

(iii) No partner is entitled to salary or other remuneration

(iv) Profit and losses to be shared equally

(v) No people may be introduced as A partner without the consent if all existing partner

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