Waec Model Questions Vol1 2020 Financial Accounting Question 1

Practice essay / theory question 1 from the 2020 Waec Model Questions Vol1 Financial Accounting examination. This question covers Accounting Concepts, Qualitative Characteristics, Accrual vs Cash Basis, Accounting Equation .

Waec Model Questions Vol1 2020 Financial Accounting Essay / Theory
Topics: Accounting Concepts Qualitative Characteristics Accrual vs Cash Basis Accounting Equation
Question 1 WAEC_MODEL_QUESTIONS_VOL1 • 2020 • FINANCIAL_ACCOUNTING • essay

ABC Trading Ltd. is a small trading business that prepares its financial statements at the end of each financial year. The owners are considering whether to adopt a cash basis or an accrual basis of accounting, and they are also reviewing the qualitative characteristics that users of financial statements expect.

Question Parts

( a )
Explain the fundamental difference between the cash basis and the accrual basis of accounting, and state which basis is required by the Companies and Allied Matters Act (CAMA) for companies.
( b )
Identify and briefly discuss two qualitative characteristics of accounting information that are most relevant for the owners when evaluating the performance of the business.
( c )
The business purchased inventory on credit for ₦150,000 on 15 March and paid cash for utilities of ₦20,000 on 20 March. Using the accrual basis, show how each transaction affects the accounting equation (Assets = Liabilities + Owner’s Equity). Present your answer in a tabular format.

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About This Question

This is Waec Model Questions Vol1 2020 Financial Accounting Question 1. It is one of the essay questions from the 2020 Waec Model Questions Vol1 Financial Accounting examination.

The question covers Accounting Concepts, Qualitative Characteristics, Accrual vs Cash Basis, Accounting Equation .

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