WAEC Financial Accounting 2021 past questions

Checked by the Skolra question team · Last updated 23 October 2026

Ten questions from the 2021 WAEC Financial Accounting paper, with answers and explanations. We hold 48 questions from this paper, and the Skolra app has all of them.

WAEC Financial Accounting 2021 questions and answers

1. 1.

   The type of stock recorded in the trading account of a manufacturing business is

   1. A
      Stock of stationery
   2. B
      Work-in-progress stock
   3. C
      Finished goods stock
      Correct
   4. D
      Raw materials stock
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   Answer: C

   In a manufacturing business, the accounts are prepared in stages. The manufacturing account deals with the cost of production and records raw materials stock and work-in-progress stock, because these belong to the production process.

   The trading account comes after the manufacturing account and is used to find the gross profit on sales. The stock figures that appear in the trading account (opening stock and closing stock) are for finished goods, because these are the goods that are actually bought and sold.

2. 2.

   A limitation of the money measurement concept is that

   1. A
      It ignores the effect of price changes on the value of recorded assets
   2. B
      It excludes qualities such as the skill and morale of staff that cannot be expressed in money
      Correct
   3. C
      It does not permit the depreciation of non-current assets to be recorded
   4. D
      It fails to distinguish between capital expenditure and revenue expenditure
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   Answer: B

   The money measurement concept says accounting only records items that can be expressed in monetary terms. Anything that cannot be given a cash value is left out of the books entirely.

   This is exactly the limitation described by excluding qualities such as the skill and morale of staff: a business may have a highly skilled, motivated workforce, loyal customers, or excellent management, but none of this appears anywhere in the financial statements because it cannot be measured in naira and kobo. That is the true weakness of the concept.

3. 3.

   Goods returned to the supplier is recorded in the accounts as: debit

   1. A
      purchases account and credit the supplier's account
   2. B
      sales returns account and credit the supplier's account
   3. C
      purchases returns account and credit the supplier's account
   4. D
      supplier's account and credit purchases returns account
      Correct
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   Answer: D

   When goods are returned to the supplier (returns outwards), the double entry reduces both the purchases figure and the amount owed to the supplier.

   The correct entry is: debit the Purchases Returns (Returns Outwards) account and credit the supplier's (creditor's) account. Debiting Purchases Returns reduces net purchases in the trading account, while crediting the supplier's account reduces the liability owed to them, since the business no longer owes for the goods sent back.

   Debiting the supplier's account and crediting Purchases Returns reverses the correct sides — that would wrongly increase the amount owed to the supplier instead of reducing it.

4. 4.

   An amount set aside out of profit for a specific purpose is a

   1. A
      Provision
   2. B
      Reserve
      Correct
   3. C
      Contingency fund
   4. D
      Sinking fund
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   Answer: B

   Reserve is an amount set aside out of profit for a specific purpose (or general purpose), such as a general reserve, dividend equalisation reserve, or reserve for expansion. Because it is set aside out of profit, it is a distribution/appropriation, not a charge against profit.

5. 5.

   The concept the enables a business to determine the actual profit or loss for a particular period is

   1. A
      Historical cost concept
   2. B
      Going concern concept
   3. C
      Money measurement concept
   4. D
      Accrual (matching) concept
      Correct
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   Answer: D

   The accrual (matching) concept is correct. It requires that revenue earned in a period is matched with the expenses incurred to earn that revenue, regardless of when cash is actually received or paid. This matching of revenue against related costs within the same period is exactly what allows a business to work out its true profit or loss for that period.

6. 6.

   A business includes 50% mark-up on all its products. This would mean margin of

   1. A
      25%
   2. B
      50%
   3. C
      33⅓%
      Correct
   4. D
      66⅔%
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   Answer: C

   Mark-up is profit expressed as a percentage of cost price, while margin is profit expressed as a percentage of selling price.

   Take cost price = ₦100. A 50% mark-up gives profit of ₦50, so selling price = ₦100 + ₦50 = ₦150.

   Margin = Profit ÷ Selling price × 100 = 50 ÷ 150 × 100 = 33⅓%.

   50% is the mark-up figure itself, not the margin, so it is a trap for candidates who forget the two are based on different denominators. 66⅔% comes from wrongly dividing 100 by 150 in reverse (selling price over profit inverted). 25% would result from mistakenly halving the mark-up rather than converting it properly to a margin.

7. 7.

   Accounting evolved out of the need of businesses for

   1. A
      a means of avoiding company income tax
   2. B
      a reliable record of their financial transactions
      Correct
   3. C
      a way of attracting more customers to the business
   4. D
      a method of advertising goods and services
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   Answer: B

   Accounting began as a response to a practical business problem: owners of businesses, whether small traders or large firms, needed a systematic and reliable record of their financial transactions — sales, purchases, expenses, debts owed and owing — so that they could know their financial position and results at any time.

   So the correct reasoning is that accounting grew out of the need to keep dependable records of what a business earns, spends and owns.

8. 8.

   The original record containing the details of a transaction which serves as a basis for posting is

   1. A
      Source document
      Correct
   2. B
      Ledger account
   3. C
      Day book
   4. D
      Trial balance
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   Answer: A

   Source document is correct. A source document (such as an invoice, receipt, cheque counterfoil or voucher) is the original record created at the time a transaction takes place. It contains the details of the transaction — date, amount, parties involved — and it is from this original evidence that entries are first recorded in the books of original entry (day books/journals) and eventually posted to the ledger accounts.

   The day book is tempting because it is also an early record, but it is not the "original record" itself — it is compiled from source documents, so it is a step removed from the transaction's original evidence.

9. 9.

   Subsidiary books of account are used to record transactions

   1. A
      after the final accounts are prepared
   2. B
      directly in the trial balance
   3. C
      of a similar nature
      Correct
   4. D
      before they are posted to the ledger
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   Answer: C

   Subsidiary books (also called books of original/prime entry) — the Sales Day Book, Purchases Day Book, Returns Inwards/Outwards Books, Cash Book and the Journal Proper — are each set up to collect one particular class of transaction together. For example, every credit sale goes into the Sales Day Book, every credit purchase into the Purchases Day Book, and so on. This is why they are described as recording transactions of a similar nature.

10. 10.

    Recurrent expenditure of a local government include

    1. A
       purchase of grading equipment for rural roads
    2. B
       construction of a new market complex
    3. C
       salaries and wages of staff
       Correct
    4. D
       acquisition of land for a new council secretariat
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    Answer: C

    Recurrent expenditure is spending that is consumed within the accounting period and does not result in the creation of a lasting asset. It recurs regularly, period after period.

    Salaries and wages of staff is a classic recurrent expenditure item: it is paid every pay period and does not create any fixed asset for the local government.

The questions come from past JAMB, WAEC and NECO papers. We use software to help write the answer options and explanations, and every answer is checked twice before it goes on the site. How we check

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