Mallam Gambo bought a freezer for his shop costing ₦10,500. In recording, he debited office expenses account and credited the bank account. What book-keepin...

Assessment: JAMB UTME - Principles of Accounts - 1994 Subject: Financial Accounting

Question 1 Report

Mallam Gambo bought a freezer for his shop costing ₦10,500. In recording, he debited office expenses account and credited the bank account. What book-keeping error has he committed?
Answer Details
The book-keeping error committed by Mallam Gambo is an error of principle. This is because he has debited the wrong account, i.e., office expenses account, instead of the correct account, which is the freezer account. This error violates the basic accounting principle of "matching," which requires that expenses should be matched with the revenues they generate. The purchase of the freezer is a capital expenditure and should be recorded as an asset in the balance sheet, not as an expense in the profit and loss statement. The correct entry should have been to debit the freezer account and credit the bank account.
Read lesson note on Nature And Significance Of Accounting (JAMB)
Read lesson note on Principles Of Double Entry (JAMB)
View Answer

Related Questions

1

Antics Electronic Company recently bought six generators. Which of the following is the correct method of recording this transaction?
2

Assigning revenues to the accounting period in which goods were sold or services rendered and expenses incurred is known as
3

Accounting information is used by investors and creditors of a company to predict
4

The use of the folio in the ledger is for
5

When a business incurs labour cost in installing a fixed asset, the cost is treated as
6

What is the cardinal rule of the double entry system?
7

The accounting convention which states that profit must not be recognized until realized while all losses should be adequately provided for it termed
8

The term “accounting period” is used to refer to the

Download The App On Google Playstore

Everything you need to excel in your exams

Green Bridge CBT Mobile App
Personalized AI Learning Chat Assistant
200,000+ Exam Questions Across IGCSE, JAMB, WAEC & NECO
Over 3,900 Lesson Notes
Offline Support - Learn Anytime, Anywhere
Green Bridge Timetable
Literature Summaries & Potential Questions
Track Your Performance & Progress
In-depth Explanations for Comprehensive Learning