2019 Waec Book keeping Answers May/June

1a)
A trading account can be any investment account containing securities, cash or other holdings. Most commonly, trading account refers to a day trader’s primary account. … The assets held in a trading account are separated from others that may be part of a long-term buy and hold strategy.

(1b)
(i) Purchase
(ii) Sales
(iii) carriage inward
(iv) Carriage outward
(v) Expenses
(vi) Gross profit
(vii) Net profit
(viii) Opening stock

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2a) What is Discount ? Meaning
In simple terms, Discount is an allowance or
concession in price. Discount is given so that the buyer is induced (lured) to place an order and later to make payment in time.
Discount can be also referred to as a deduction in price. The seller deducts the discount from the gross or total price, and the buyer is supposed to pay the net amount.

2bi
A trade discount is a routine reduction from the regular,
established price of a product. The use of trade
discounts allows a company to vary the final price
based on each customer’s volume or status.

2bii (1)Cash discount is an allowance or concession given by the seller to the buyer. 
(2) This discount is offered to encourage the buyer for quick payment or settlement.
(3) It is allowed for immediate payment of cash or payment within a short period.
(4) The cash discount is normally shown in the quotation and invoice . It is deductible from the total price and the buyer is requested to pay only to the net amount.

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(4a)
Depreciation refers to two aspects of the same concept: The decrease in value of assets The allocation of the cost of assets to periods in which the assets are used. Depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion.

4b) a) To Calculate the True Profits:
Depreciation is an expense and becomes an important element of the cost of production. Though it is not visible like other expenses and never paid to the outside party yet it is desirable to charge depreciation on fixed assets as these are used for earning purposes; so their depreciation must be deducted out of the income earned from their use in order to calculate true profit net or loss.

b) To show true Financial Position:
Financial position can be studied from the balance sheet and for the preparation of balance sheet fixed assets are required to be shown at their true value. If assets are shown in the balance sheet without any charge made for their use or depreciation, then their value must have been overstated in the balance sheet and will not reflect the true financial position of he business. 

(4ci)
Fixed Instalment
fixed installment method of depreciation the amount of depreciation each year is fixed and equal. At the end of each year, a fixed amount is removed from the book value of the asset concerned and charged to profit and loss account (or income statement ).

This is the oldest and most commonly used method of depreciation. Here a fixed amount of depreciation is charged every year during the lifetime of the machine. There at the end of its useful life, the value of the asset will be zero. This is also known as straight-line method or original cost method.

(4cii)
Dimishing Balance
Diminishing balance depreciation method is one of the three
depreciation methods that mention in IAS 16. This kind of
depreciation method is said to be high charged at the first period, and then subsequently reduce.
This is because the charging rate is applying to the Net Book Value of Assets and the Net Book Value of Assets is reduce from time to time after charging depreciation.

SECTION B

(8a)
Journal entry 

Sales account 
Dr 49,000

Suspense of account being error of principle and now corrected 
Cr 49,000

Lammidu’s Account 
Dr 76,200

Suspense account being error of parties omission now corrected 
Cr 76,200

Discount allowed 
Dr 57,000

Discount received 
Dr 57,000

Suspense account being error of principle of complete 
Cr 114,000

Return inward account 
Dr 30,000

Suspense account under cast in return inward now corrected 
Cr 30,000

(8b)
difference in trial balance recorded 
Dr 269,200
Total =269,200
Credit side 
Sales 49,000
Lammidu’s AK 76,200
Discount allowed 57,000
Discount received 57,000
Return inward 30,000
Total =269,200

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