Financial Accounting Obj
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WAEC Financial Accounting Questions and Answers 2021
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WAEC Financial Accounting Essay Answers 2021(Expo)
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company’s ratio over a full economic cycle. This will help the analyst
understand and estimate a company’s performance in changing economic
conditions, such as a recession.
3. The company’s past performance – This is a very common analysis.
It is similar to a time-series analysis, which looks mostly for trends
1cii) Limitations to Accounting ratios/Financial ratios
There are some important limitations of financial ratios that analysts should be conscious of:
i)Many large firms operate different divisions in different
industries. For these companies, it is difficult to find a meaningful
set of industry-average ratios.
ii)Inflation may have badly distorted a company’s balance sheet. In
this case, profits will also be affected. Thus a ratio analysis of one
company over time or a comparative analysis of companies of different
ages must be interpreted with judgment
2a. Working capital is the amount of a company’s current assets minus the amount of its current liabilities.
2b. Capital employed, also known as funds employed, is the total
amount of capital used for the acquisition of profits. It is the value
of all the assets employed in a business and can be calculated by adding
fixed assets to working capital or subtracting current liabilities from
2c. A fixed asset is an item with a useful life greater than one
reporting period, and which exceeds an entity’s minimum capitalization
2d. A current asset is cash and any other company asset that will be
turning to cash within one year from the date shown in the heading of
the company’s balance sheet. (If a company has an operating cycle that
is longer than one year, an asset that will turn to cash within the
length of its operating cycle is considered to be a current asset.)
WAEC 2021 Financial Accounting Question And Answers SECTION C:
2e. The rate of stock turnover is a measure of the number of times inventory is sold or used in a time period such as a year.
The equation for inventory turnover equals the cost of goods sold or net sales divided by the average inventory.
3a. The accrual concept in accounting means that expenses and
revenues are recorded in the period they occur, whether or not cash is
3b. The business entity concept states that the transactions
associated with a business must be separately recorded from those of its
owners or other businesses.
Doing so requires the use of separate accounting records for the
organization that completely exclude the assets and liabilities of any
other entity or the owner.
3c. Dual Aspect Concept, also known as Duality Principle, is a
fundamental convention of accounting that necessitates the recognition
of all aspects of an accounting transaction.
3d. PERIODICITY CONCEPT is the concept that each accounting period
has an economic activity associated with it, and that the activity can
be measured, accounted for, and reported upon.
3e. The going concern principle is the assumption that an entity will
remain in business for the foreseeable future. Conversely, this means
the entity will not be forced to halt operations and liquidate its
assets in the near term at what may be very low fire-sale prices.
A company is a legal entity made up of an association of persons, be
they natural, legal, or a mixture of both, for carrying on a commercial
or industrial enterprise.
4bi) An ordinary share represents equity ownership in a company
proportionally with all other ordinary shareholders, according to their
percentage ownership in the company. All other shares of a company’s
stock are, by
definition , preferred shares
4b(ii)Preference shares, more commonly referred to as preferred
stock, are shares of a company’s stock with dividends that are paid out
to shareholders before common stock dividends are issued. If the company
enters bankruptcy, the shareholders with preferred stock are entitled
to be paid from company assets first.
4b(iii) A debenture is a type of debt instrument that is not secured by physical assets or collateral.
Debentures are backed only by the general creditworthiness and
reputation of the issuer. Both corporations and governments frequently
issue this type of bond to secure capital.
4b(iv) The authorised capital of a company (sometimes referred to as
the authorised share capital, registered capital or nominal capital,
particularly in the United States) is the maximum amount of share
capital that the company is authorised by its constitutional documents
to issue (allocate) to shareholders.