JAMB UTME - Principles of Accounts - 2023

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The correct answer is the statement of affairs.
The statement of affairs is a financial statement prepared to determine the trader's capital when complete records are not available. It is used in situations where a business does not keep detailed records of its transactions.
Statement of affairs helps determine the value of assets (what the business owns) and liabilities (what the business owes) at a specific point in time. It shows the overall financial position of the business by listing the assets and liabilities side by side.
By comparing the total value of assets with the total value of liabilities, we can calculate the trader's capital, which represents the difference between the two. It provides an estimate of the business owner's investment or equity in the business.
Since incomplete records lack a detailed record of transactions and financial data, the statement of affairs becomes a helpful tool to assess the trader's capital and provide a snapshot of the business's financial health.

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Interest on drawings = 10%
- Dairo = 10% x 12,0000
= ₦1200
- Segun = 10% x 18,000
= ₦1800

Interest on capital = 5%
- Dairo = 5% x 120,000
= ₦6,000
- Segun = 5% x 60,000
=₦3,000

Salary: segun = ₦10,000

Segun's share of profit = (Net profit + int on drawings) - ( int on capital + segun salary )
= (36000 + 1200 + 1800) - ( 6000 + 3000 + 10000)
= 39000 - 19000
= 20,000

Total ratio = 2+ 3
= 5
Therefore, Segun share of profit = 3 /5 x 20000
= ₦12,000

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A control account is a summary account that represents a group of similar transactions or balances. It is used to simplify the management and analysis of a large number of individual accounts. The advantage of a control account is that it provides a way to monitor and track the overall balance or activity within a group of related accounts. It helps to ensure accuracy and identify any discrepancies or errors. Now, let's analyze the options provided one by one to determine which one is NOT an advantage of a control account: 1. **Difficulty in committing fraud**: This is indeed an advantage of a control account. By consolidating and summarizing the information from multiple accounts, it becomes more difficult for individuals to manipulate or misrepresent the data for fraudulent purposes. 2. **It can be used to detect missing figures**: This is also an advantage of a control account. By comparing the total balance of the control account with the sum of the individual accounts it represents, any missing figures or discrepancies can be easily identified. 3. **Helps to determine profit and loss**: This is another advantage of a control account. By summarizing the transactions related to revenue and expenses, a control account can provide an overview of the profit or loss generated by a particular area or department. 4. **Helps in locating errors**: This is also an advantage of a control account. By comparing the balances of the control account with the detailed records, any errors or discrepancies can be quickly identified and addressed. Based on the analysis of the options, it can be concluded that the **difficulty in committing fraud** is not an advantage of a control account. In fact, it is an advantage because it makes it more difficult for fraud to occur.

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The part of capital issued only at the time of liquidation of the company is called "reserved capital." Reserved capital represents a portion of a company's capital that is set aside for a specific purpose, typically to be used in the event of liquidation. When a company is liquidated, its assets are sold off to pay off any outstanding debts and obligations. Any remaining funds or assets are then distributed to the shareholders. The reserved capital is used as a safeguard to ensure that there are sufficient funds available to cover any unforeseen expenses or liabilities that may arise during the process of winding up the company. Reserved capital is different from other types of capital, such as issued capital, called-up capital, and paid-up capital. Issued capital refers to the total value of shares that a company has offered to the public. Called-up capital is the portion of issued capital that the shareholders are required to pay for. Paid-up capital, on the other hand, is the portion of called-up capital that has been fully paid by the shareholders. In summary, reserved capital is a specific portion of a company's capital that is set aside to cover any unforeseen expenses or liabilities that may arise during the liquidation process. It is only utilized at the time of liquidation and ensures that there are sufficient funds available to pay off any outstanding debts and obligations.

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Receipt voucher are documents used for acknowledgement the receipt of public revenue. They must be issued out anytime revenue is collected by government ministries

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A double entry for a transaction that offsets one amount against another on both sides of the cashbook is called a contra entry.
A contra entry is used when there is a need to record two opposite and equal transactions simultaneously in the books of accounts. In other words, it involves recording an amount on the debit side and an equal amount on the credit side of the cashbook.
The purpose of a contra entry is mainly to highlight the cancellation or offsetting of a previous entry. This type of entry helps to accurately track and reconcile transactions that involve the movement of funds within the same account or between different accounts.
For example, let's say that a company needs to withdraw cash from its bank account to pay off a loan. In this case, a contra entry would be made to reflect both sides of the transaction. The cash withdrawal would be recorded as a debit in the cashbook, representing the decrease in cash, and as a credit in the bank account, representing the decrease in the outstanding loan.
Contra entries are essential for maintaining the accuracy and integrity of financial records. They ensure that all debit and credit transactions are properly recorded, allowing for accurate financial reporting and analysis.

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The correct accounting entry for dissolution expenses is:
Dr: Realization account; Cr: Cash account.
When a partnership is dissolved, there may be expenses incurred during the winding up of the business. These expenses could include legal fees, accounting fees, and other costs related to the dissolution process.
In accounting, we need to record these expenses accurately. The first step is to debit (Dr) the Realization account. The Realization account is used to record all the assets that are sold or converted to cash during the liquidation process. By debiting this account, we reduce the value of the assets being realized.
Next, we credit (Cr) the Cash account. This entry reflects the payment of actual cash for the dissolution expenses. By crediting the Cash account, we increase the amount of cash that is being paid out from the partnership.
Overall, the dissolution expenses are recorded by debiting the Realization account and crediting the Cash account. This ensures that the expenses are properly accounted for and the financial statements accurately reflect the partnership's liquidation process.

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Goodwill = Purchase consideration - value of assets
Total value of assets = 190,000 + 170,000 + 60,000 - (50,000)
= 370,000

Therefore, Goodwill = 400,000 - 370,000
= ₦30,000

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Authorized shares are defined as the maximum number of shares that a company is legally allowed to issue to investors as per its own determinations

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To calculate the amount of preference shares dividends payable at the end of the year, we need to consider the number of preference shares and the dividend rate. In the given information, we know that Larry Limited has 150,000 preference shares of ₦1 each fully paid. The dividend rate for these preference shares is mentioned as 5%. To calculate the total dividend payable for the preference shares, we can multiply the number of preference shares by the dividend rate. 150,000 preference shares x 5% dividend rate = 7,500. Therefore, the amount of preference shares dividends payable at the end of the year is ₦7,500.

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To determine the net profit, we need to calculate the Cost of Goods Sold (COGS) and deduct it from the net sales.
First, let's calculate the COGS: - Start with the stock on January 1st: 2,600 - Add purchases: 4,000 - Add carriage inwards: 500
Total Cost of Goods Available for Sale: 7,100
Next, let's calculate the net sales: - Total Sales: 9,000 - Deduct carriage outwards: 500
Net Sales: 8,500
Now, we can calculate the COGS by dividing the net sales by the total cost of goods available for sale and multiplying by 100: COGS = (COGS / Total Cost of Goods Available for Sale) * Net Sales
COGS = (7,100 / 8,500) * 100 COGS = 83.53%
Finally, we can calculate the net profit by deducting the COGS from the net sales: Net Profit = Net Sales - COGS
Net Profit = 8,500 - (8,500 * 0.8353) Net Profit = 8,500 - 7,098.75 Net Profit = 1,401.25
Therefore, the net profit is #1,401.25.
The correct answer is: #1,400

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The correct answer is profit and loss account.
The Income and Expenditure account is the same thing as the profit and loss account for a sole trader.
The profit and loss account shows all the revenue and expenses incurred by the sole trader during a specific period of time, usually a year. It includes all the sales or income earned by the sole trader, as well as the costs and expenses incurred in running the business.
The revenue or income includes sales from products or services, any interest earned, and other sources of income. The expenses include costs incurred in producing or providing the products or services, wages or salaries of employees, rent, utilities, and other operating expenses.
By subtracting the total expenses from the total revenue, the profit or loss for the sole trader can be calculated. If the revenue is higher than the expenses, it represents a profit, while if the expenses exceed the revenue, it represents a loss.
In summary, the profit and loss account, or the Income and Expenditure account, for a sole trader shows the financial performance of the business by summarizing the revenues and expenses over a specific period. It helps the sole trader assess the profitability of the business and make informed decisions.

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In company accounting, dividend payments are typically effected in the "appropriation" account. The appropriation account is used to record the allocation of profits or income within a company. It is where the company's board of directors decides how to distribute the company's earnings to its shareholders. Dividend payments are a way for a company to distribute its profits to its shareholders. By making dividend payments, the company shares a portion of its earnings with its owners. When a company decides to pay dividends, the amount to be distributed is transferred from the retained earnings account (which is part of the equity section of the balance sheet) to the appropriation account. This transfer signifies that the profits are being allocated for distribution as dividends. By using the appropriation account for dividend payments, the company can clearly track and document the distribution of profits to shareholders. This helps provide transparency and ensure that dividends are properly accounted for in the company's financial records. To summarize, dividend payments in a company are typically recorded in the "appropriation" account, where the allocation of the company's earnings to shareholders is documented.

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The main purpose of a transaction file is to **record the individual transactions** that occur within an organization. It serves as a **detailed record** of all the financial activities and events that take place, including the buying and selling of goods and services, making payments and receiving payments, and any other actions that involve the organization's finances. The transaction file is important because it allows for the **accurate and up-to-date tracking** of changes in assets, liabilities, income, and expenses. Each transaction is recorded with specific details, such as the date, amount, parties involved, and the specific accounts that are affected. By **updating the master files** (which contain information about accounts, customers, products, etc.) based on the transactions recorded in the transaction file, the organization can maintain accurate and reliable information for decision-making and financial reporting purposes. In summary, the main purpose of a transaction file is to **record individual financial transactions** and use that information to **update master files** and provide an accurate and complete picture of an organization's financial activities. It is a crucial tool for effectively managing and understanding an organization's financial position.

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The correct answer is I and IV only.
In a purchase ledger control account, the credit side represents the transactions that increase the amount owed to suppliers. Therefore, the items on the credit side of the purchase ledger control account include:
Cash refunds: When a supplier returns cash to the business for overpaid or returned goods, it is recorded as a credit in the purchase ledger control account. This reduces the amount owed to the supplier.
Purchases: When goods are purchased on credit from a supplier, the value of these purchases is recorded as a credit in the purchase ledger control account. This represents the increase in the amount owed to the supplier.
Debit note issued and dishonored cheques do not directly affect the purchase ledger control account. A debit note is typically used to record an increase in the amount owed to the business by a customer, not the supplier. A dishonored cheque indicates that the payment was not successful, but it does not impact the purchase ledger control account.
Therefore, the correct answer is I and IV only, as cash refunds and purchases are the only items on the credit side of the purchase ledger control account.

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Receipt voucher are document used to acknowledge the receipt of public revenue.

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Goods received from head office
Accounting entries:
Dr: Purchase account
Cr: Head office current account

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The accounting system in which only one aspect of a transaction is recorded is called single entry accounting. In this system, only the cash or assets received or paid are recorded, without recording the corresponding liabilities or expenses. In single entry accounting, each transaction is recorded only once, typically in a single column cash book. This means that there is no systematic tracking of the financial impact of transactions on both sides of the equation (assets = liabilities + equity). It is important to note that single entry accounting is generally considered less comprehensive and reliable compared to double entry accounting. Double entry accounting, on the other hand, is a more complete and accurate system where each transaction is recorded twice—once as a debit and once as a credit. This allows for a better understanding of the financial health of a business and provides a basis for generating accurate financial statements. Overall, single entry accounting is a simpler but less robust approach to recording financial transactions, as it does not provide a complete picture of a company's financial position and performance.

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Prime cost = Cost of raw materials consumed + Manufacturing wages + Royalties
= 15600 + 42000 + 300
= ₦57,900

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Contra entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, it will be recorded on the credit side and vice-versa.

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Current assets are shown in the balance sheet in order of performance as **stock, debtors, bank, and cash**. Stock refers to the inventory or goods a business holds for resale. It is shown first because it represents an essential part of a business's operations. By displaying stock at the top, it emphasizes its importance in the business's overall performance. Debtors are individuals or entities who owe money to the business. They come next because the amounts owed by debtors are expected to be converted into cash within a relatively short period. It is important for the business to accurately track and assess the amounts owed to maintain healthy cash flow. Bank refers to the amount of money held in the business's bank accounts. This includes funds available for immediate use and those that may require a few days to clear. Bank balances are considered highly liquid assets and hold a significant position in the balance sheet. Cash represents physical currency and cash equivalents held by the business. It is displayed last in the order of performance since it is the most liquid asset and readily available for immediate use. Therefore, the correct order of performance for current assets on the balance sheet is stock, debtors, bank, and cash.

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Working capital = Current Assets - Current Liabilites
= (350,000 + 25,000 + 5,500) - ( 116,500 + 7,500)
= 380,500 - 124, 000
= ₦256,500

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A trading account is a financial statement that shows the profit or loss of a business through its trading activities. It includes all the revenues and expenses directly related to the buying and selling of goods. Out of the options provided, the expenses that are charged to the trading account are: 1. Carriage Inwards: Carriage inwards refers to the transportation costs incurred in bringing goods into the business. It can include expenses such as freight charges, import duties, and handling fees. These expenses are directly related to the purchase of goods and are considered a part of the cost of inventory. Hence, carriage inwards is charged to the trading account. 2. Carriage Outwards: Carriage outwards refers to the transportation costs incurred in delivering goods from the business to the customers. It includes expenses such as delivery charges, packaging costs, and shipping fees. Carriage outwards is not directly related to the purchase of goods but is rather an expense incurred in selling them. Therefore, carriage outwards is not charged to the trading account. 3. Rent: Rent refers to the cost of occupying a property for business purposes. Rent is not directly related to the buying and selling of goods, but rather to the use of the premises where the business operates. Hence, rent is not charged to the trading account. 4. Discount Allowed: Discount allowed represents the reduction in the selling price of goods given to customers as an incentive or reward. It is a reduction in revenue and does not directly relate to the cost of inventory or the buying and selling of goods. Therefore, discount allowed is not charged to the trading account. In summary, the expenses that are charged to the trading account are carriage inwards. Rent, discount allowed, and carriage outwards are not charged to the trading account as they are not directly related to the buying and selling of goods.

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The correct answer is **provisional general warrant**. A provisional general warrant is issued by the authority at the beginning of the year to allow for the necessary expenses before the approval of the appropriate bill. It serves as a temporary authorization to spend money until the formal annual general warrant is approved. The purpose of this warrant is to ensure that essential and urgent expenditures can be made in a timely manner, even without the formal approval of the bill. It helps to prevent delays in government operations and ensures that necessary services are not interrupted due to the lack of a finalized budget. The provisional general warrant is not a long-term solution, and it is eventually replaced by the annual general warrant once the bill is approved. The annual general warrant provides a more comprehensive and detailed allocation of funds for the entire fiscal year. In summary, the provisional general warrant allows for necessary expenses at the beginning of the year until the appropriate bill is approved, ensuring the smooth operation of government services.

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Shares can be issued to the public for subscription. A lot of money can be raised to finance the operation of the business through the issue of new shares to members of the public.

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When starting with balanace as per cash book, unpresented cheques, dividend, credit transfers are added while uncredited cheques, bank charges, dishonoured cheuqes, standing order are substracted.

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Depreciation of office machines in manufacturing is charged to the profit and loss account.
Depreciation is a method used to allocate the cost of an asset over its useful life. Office machines, such as computers, printers, and photocopy machines, are considered as fixed assets. These assets gradually lose their value and become less useful over time due to wear and tear or technological advancements.
When manufacturing companies calculate their annual expenses, they include the depreciation of their office machines as an expense in the profit and loss account. The profit and loss account records all the revenues and expenses incurred by a company during a specific period, such as a financial year.
By charging the depreciation of office machines to the profit and loss account, manufacturing companies accurately reflect the decrease in value of these assets over time. This allows them to calculate their net profit or loss for the period more accurately.
It is important to note that while depreciation is charged to the profit and loss account, the accumulated depreciation of office machines is shown as a contra-asset on the balance sheet. The balance sheet provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and shareholders' equity.
In summary, the depreciation of office machines in manufacturing is charged to the profit and loss account, reflecting the decrease in value of these assets over time and accurately calculating the net profit or loss for the period.

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Salaries in arrears are treated in the balance sheet as a **current liability**. A balance sheet is a financial statement that shows a company's financial position at a specific point in time. It consists of three main sections: assets, liabilities, and owners' equity. Salaries in arrears are payments that a company owes to its employees for work that has already been performed but not yet paid. This is usually the result of a timing difference between when the work was done and when the payroll is processed. Since these unpaid salaries are obligations that need to be settled within one year, they are classified as current liabilities. Current liabilities are debts or obligations that must be paid within a year or the normal operating cycle of a business, whichever is longer. By reporting salaries in arrears as a current liability on the balance sheet, it provides information to stakeholders, such as investors and creditors, about the company's short-term financial obligations. It helps to give a more accurate picture of the company's financial health and its ability to meet its current obligations. Therefore, salaries in arrears are considered a current liability on the balance sheet.

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The amount ₦16,387.50 described as "Bank" in the Sales Ledger Control Account represents receipts from all debtors of the business.
In accounting, a Sales Ledger Control Account is used to keep track of the total amount owed by the customers (debtors) of a business. It is a summary account that consolidates all the individual customer accounts.
When a customer makes a payment, it is recorded as a receipt in the Sales Ledger Control Account. This includes payments received from both trade debtors (customers who owe money for credit sales) and cash sales (sales made in cash).
The ₦16,387.50 recorded as "Bank" in the Sales Ledger Control Account includes all the cash received from trade debtors as well as the cash sales made during the month, including any discounts given. Therefore, the correct answer is receipts from all debtors of the business.
It is important to note that the other options provided - receipts from trade debtors only, cash sales for the month including discount, and cash sales for the month excluding discount - are not accurate descriptions of the ₦16,387.50 recorded as "Bank" in the Sales Ledger Control Account.

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Branch accounts are important tools that assist organizations in effectively managing their branch operations. They provide valuable information about the performance and profitability of each branch. However, **the importance of branch accounts does not include allowing fraud and wastage of resources**. Let's look at the other three options: 1. **Assisting the organization to determine the performance of a branch manager**: Branch accounts help evaluate the performance of a branch manager by providing detailed financial information about their branch. This can include sales revenue, expenses, and profit or loss generated by the branch. By analyzing this information, the organization can assess how well the branch manager is managing their resources and achieving targets. 2. **Enabling the organization to determine the branch that is making either profit or loss**: Branch accounts provide clear insights into the profitability or loss incurred by each branch. This information is crucial for decision-making purposes, such as whether to allocate additional resources, close an unprofitable branch, or implement measures to improve the performance of a struggling branch. 3. **Allowing proper control over the branch by the head office**: Branch accounts facilitate effective control and oversight of branch operations by the head office. By maintaining detailed financial records, the head office can monitor the financial performance of each branch, identify any irregularities, and take corrective actions when needed. This control ensures that the overall functioning of the branches is aligned with the organization's objectives and policies. In summary, while branch accounts are instrumental in evaluating branch manager performance, determining profitability, and ensuring control over branch operations, they do not permit fraud or wastage of resources.

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The purchases ledger control account is also known as the creditors control account.
Let me explain it simply for you.
In a business, the purchases ledger records all the transactions related to buying goods or services on credit. It keeps track of the amounts owed to suppliers or vendors. Now, the purchases ledger control account is a summary account that helps in monitoring and controlling these transactions.
Think of it as a big picture view. The purchases ledger control account combines all the individual creditor balances from the purchases ledger. It shows the total amount the business owes to its creditors at any given time.
By using the purchases ledger control account, the business can easily track the total purchases made on credit and manage its outstanding payments to suppliers. It provides a summary of the business's total credit purchases and the total amount owed to creditors.
So, in summary, the purchases ledger control account is the same as the creditors control account because it represents a summary of all the amounts owed to suppliers or vendors.

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When the goods are sold on credit to a buyer, the account receivable account debits, increasing the company's assets as the amount is receivable from the third party. The corresponding credit will be in the sales account, increasing the company's revenue.

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The accounting equation states that:
- Capital( Equity) = Assets - Liabilities
- Assets = Capital (Equity) - Liabilties
- Liabilties = Assets - Capital (Equity)
- Equity(Capital ) = Assets

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The item that does not appear in the trading account is **carriage outward**. The trading account is a financial statement that shows the calculation of gross profit or loss by comparing the value of goods bought (cost of goods sold) with the value of goods sold (sales). Let's break down the other three options: 1. **Carriage inward**: This refers to the transportation cost incurred to bring goods into the business. It is considered as part of the cost of goods sold, as it directly relates to acquiring the goods for sale. 2. **Opening stock**: This represents the value of goods held in the beginning of the accounting period, before any sales or purchases. It is included in the trading account as it helps determine the cost of goods sold. 3. **Sales**: This represents the total revenue generated from selling goods or services. It is a crucial component of the trading account since it represents the value of goods sold during the period. However, **carriage outward** does not belong in the trading account. It refers to the transportation cost incurred when delivering goods to customers. Carriage outward is not directly related to the cost of goods sold or the calculation of gross profit/loss. Therefore, it is not included in the trading account. In summary, the trading account includes carriage inward, opening stock, and sales, while carriage outward is not part of it.

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When cash is paid into the bank, the effect on the transaction is that **the bank balance increases and the cash balance decreases**. Let's break it down step by step: 1. When cash is paid into the bank, we are essentially depositing money into our bank account. This means that the money is moving from our possession (cash balance) to the bank. 2. As the cash balance decreases, our bank balance increases. The bank keeps track of the money we deposit and adds it to our account balance. So, to summarize, when cash is paid into the bank, the bank balance increases because the bank is receiving the money, and the cash balance decreases because we no longer have the cash in our possession.

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One of the advantages of FIFO method is that the stock received first will be issued out first thereby reducing the problem of deterioration or obsolesence and also items are issued in order of receipt therefore, it is realistic.

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In a non-profit organization, the income and expenses are recorded in a specific financial statement called the "income and expenditure account." This account is similar to the profit and loss account in a profit-oriented organization because it serves the same purpose of tracking financial activities and determining the financial position of the organization.
Just like the profit and loss account, the income and expenditure account shows the income and expenses of the non-profit organization over a specific period. It helps to calculate whether the organization has made a surplus (income exceeding expenses) or a deficit (expenses exceeding income).
The income and expenditure account: - Records all the revenues and gains received by the non-profit organization during a particular period, including donations, grants, membership fees, and program revenues. - Itemizes all the expenses and losses incurred by the organization, such as salaries, rent, utilities, insurance, and other operational costs. - Calculates the net surplus or deficit by subtracting the total expenses from the total income. A surplus indicates that the organization has generated more income than it has spent, while a deficit suggests that the expenses have exceeded the income. - Provides valuable insights into the overall financial health and sustainability of the non-profit organization.
Therefore, of the given options, income and expenditure account is the one that shares the same features as the profit and loss account in a non-profit organization.

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The features are:
- include capital and revenue items
- accruals and prepayments are not included
- it is a real account
- only actual receipts and payments are recorded
- balance represent cash in hand

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On the credit side of a profit and loss account, we can find items that generate income or gains for a business. Let's discuss each option and determine whether it belongs on the credit side or not. - **Advertising:** Advertising expenses are costs incurred to promote products or services. These expenses reduce a company's income or profits and are recorded on the debit side of the profit and loss account. Therefore, advertising does not belong on the credit side. - **Dividend received:** Dividends received are income earned by a company from its investments in other companies. Dividend income increases a company's overall income or profits and is recorded on the credit side of the profit and loss account. So, dividends received are found on the credit side. - **Wages and salaries:** Wages and salaries represent the compensation paid to employees for their work. These expenses are considered as costs incurred to generate revenue and are recorded on the debit side of the profit and loss account. Therefore, wages and salaries do not belong on the credit side. - **Bank charges:** Bank charges are fees or costs that a company incurs for various banking services, such as transaction fees, account maintenance fees, etc. These charges reduce a company's income or profits and are recorded on the debit side of the profit and loss account. Therefore, bank charges do not belong on the credit side. In conclusion, out of the given options, only **dividend received** will be found on the credit side of a profit and loss account.

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The circumstances giving rise to the ascertainment of goodwill are:
- admission of a new partner
- change in profit sharing ratio
- death or retirement of a partner
- the business has been purchased
- dissolution of a business