2019/2020 NOVDEC FINANCIAL ACCOUNTING ESSAY AND OBJECTIVES

THE FASTEST AND TRUSTED LINK IN GHANA

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ANSWERS

1a)

(i) Direct Allocation:

Overheads are directly allocated to various

departments on the basis of expenses for each

department respectively. Examples are: overtime

premium of workers engaged in a particular

department, power (when separate meters are

available), jobbing repairs etc.

(ii) Direct Labour/Machine Hours:

Under this basis, the overhead expenses are

distributed to various departments in the ratio of

total number of labour or machine hours worked

in each department. Majority of general

overhead items are apportioned on this basis.

(iii) Value of Materials Passing

through Cost Centres:

This basis is adopted for expenses associated

with material such as material handling

expenses.

(iv) Direct Wages:

According to this basis, expenses are distributed

amongst the departments in the ratio of direct

wages bills of the various departments. This

method is used only for those items of expenses

which are booked with the amounts of wages,

e.g., workers’ insurance, their contribution to

provident fund, workers’ compensation etc.

(v) Number of Workers:

The total number of workers working in each

department is taken as a basis for apportioning

overhead expenses amongst departments.

Where the expenditure depends more on the

number of employees than on wages bill or

number of labour hours, this method is used.

This method is used for the apportionment of

certain expenses as welfare and recreation

expenses, medical expenses, time keeping,

supervision etc.

1b)

(a) Individual result of each department can be

known which helps to compare the performances

among all the departments, i.e., the trading

results can be compared.

(b) Departmental accounts help to understand or

locate the success, failure, rates of profit, etc.

(c) It helps the management to make proper

plan of action, policies in order to increase profit

after analysing the results of operation of various

departments.

(d) Departmental accounting helps us to

understand which department should be

expanded further or which one should be closed

down as per the results of the operation.

(e) If also helps to encourage a healthy

competitive spirit among the various departments

which, ultimately, helps to increase profits of the

firm as a whole.

(3a)

Single entry accounting  system records each accounting transaction with a single entry to the accounting records, rather than the vastly more widespread double entry system. The single entry system is centered on the results of a business that are reported in the income statement

(3b)

(i)improper knowledge: The mechanism of keeping incomplete records is due to improper knowledge of accounting principles.

(ii) Inexpensive:

This method is less expensive as compared to keeping records as per double entry system.

(iii)Time Saving:

This method is time saving in the sense that only a few records are maintained under such system.

(iv) Convenient:

This method is very convenient in the sense that no rules and principles are to be followed.

(v) Highly Flexible:

This mechanism is not based on any set rules, principles and accounting standards, as such it can be modified and changed as per the need and availability of time.

(vi) Convenient:

This method is very convenient in the sense that no rules and principles are to be followed

(4ai)

partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests.

(4aii)

partnership deed is a document that outlines in detail the rights and responsibilities of all parties to a business operation. In other words It has the force of law and is designed to guide the partners in the conduct of the business.

(4b)

(i)The name of the firm

(ii)Name and details of all partners

(iii)Date of commencement of business

(iv)Duration of the firm’s existence

(v)Capital contributed by each partner

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