JAMB UTME - Principles of Accounts - 2020

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In the preparation of financial accounts, the owners of the business and the business itself are treated as separate legal entities. This means that the business and its owners are considered as two distinct entities with their own assets, liabilities, income, and expenses. The business is responsible for its own debts and obligations and the owners are responsible for their own personal debts and obligations, separate from the business. The financial accounts of the business, therefore, reflect the financial transactions and performance of the business, separate from the financial affairs of the owners. This separation of the business and its owners is important for several reasons. Firstly, it provides transparency and accountability, as the financial accounts of the business clearly show its financial performance and position. Secondly, it makes it easier to understand the financial health of the business, which is useful for making informed business decisions and for attracting investment. So, to summarize, in the preparation of financial accounts, the owners of the business and the business itself are treated as separate legal entities, with their own assets, liabilities, income, and expenses, and are accounted for separately in the financial accounts of the business.

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The accounting method that reports incomes when earned and expenses when incurred is called Accrual Accounting. Accrual accounting is a method of accounting where revenue and expenses are recognized as soon as they are earned or incurred, regardless of when the cash is received or paid. This method provides a more accurate picture of a company's financial performance by showing its financial activities in the period in which they occurred, rather than just the cash inflows and outflows. For example, if a company provides a service in January but does not receive payment until February, the revenue from that service would be recognized in January under the accrual method of accounting. In simple terms, Accrual accounting provides a broader view of a company's financial status by considering both its expected future cash inflows and outflows.

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The term you're referring to is "Call in arrears." When a company issues shares, it may require shareholders to pay additional amounts (known as "calls") in order to increase their capital. These calls are typically due on a specified date. If a shareholder does not pay the required amount by the due date, the outstanding amount is referred to as a "call in arrears." This means that the shareholder has fallen behind in their payments and owes the company money.

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An instrument which allows public officers to increase expenditure within a year is called a supplementary budget. A supplementary budget is a budget that is added to the original budget for a fiscal year. It is used to accommodate unforeseen expenses or to allocate additional funds for priority projects. The supplementary budget process allows public officers to increase the amount of money available for spending during the current fiscal year. This helps ensure that public funds are used effectively and efficiently to meet the changing needs of the government and its citizens.

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Calls in advance are treated in the balance sheet as a current liability. A current liability is a debt that is due to be paid within one year. Calls in advance are a type of liability in which a company has received payment for goods or services that have not yet been provided. Since the company is obligated to deliver the goods or services in the near future, the calls in advance are considered a current liability. In contrast, fixed liabilities are long-term debts that are due to be paid over a period of time longer than one year. Fixed assets, on the other hand, are long-term tangible assets such as property or equipment that are used in a company's operations and have a useful life of more than one year. Current assets are assets that are expected to be converted into cash within one year and include items such as cash, accounts receivable, and inventory.

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Accounting information is used by investors and creditors to make informed decisions about a company, such as predicting its future financial performance. This information helps them determine the future cash flows of the company and its ability to repay its debts. It also provides insight into the company's financial health, including its assets, liabilities, and overall profitability. By analyzing this information, investors and creditors can make informed decisions about whether to invest in or lend money to the company. However, it does not provide information about future tax payments or potential merger candidates, nor is it used to determine appropriate remunerations for the company's staff.

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The following transaction will be recorded as: Dr Rent A/c; Cr Bank A/c The double entry principle states that for every financial transaction, there must be a corresponding debit (Dr) and credit (Cr) entry in the accounting records. In this case, the payment of rent by Mr. Roi would be recorded as a debit to the Rent account, representing an increase in the company's obligation to pay rent. This debit entry is offset by a credit to the Bank account, representing a decrease in the company's cash balance. This double entry ensures that the accounting records accurately reflect both the increase in the company's obligation to pay rent and the decrease in its available cash.

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If you have a specific market value for each unit of goods produced and you know the total number of units produced, you can calculate the total market value by multiplying the market value per unit by the total number of units.

Let's assume the market value per unit is N30.60 and the total number of units produced is 1,000.

Market value = Market value per unit × Total number of units Market value = N30.60/unit × 1,000 units Market value = N30,600

And so, the correct answer would be option B. N30,600.

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Petty cash book is a record of small and routine transactions made by an organization using cash. These transactions are usually for small amounts of money, such as office supplies, parking fees, and other miscellaneous expenses. The petty cash book records transactions on both the credit and debit sides, meaning that it records both the inflow and outflow of cash. This helps to accurately track the organization's petty cash balance and ensure that it is being used efficiently. The petty cash book should be balanced at the end of each day or week to ensure that the amount of cash on hand matches the recorded transactions.

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The accounting entries for goods stolen in a branch will be to debit the branch stock account and credit the branch adjustment account. When goods are stolen from a branch, the value of the inventory decreases, which means that the branch stock account should be debited. At the same time, the loss from the theft should be recorded as an adjustment in the branch's financial records. This is done by crediting the branch adjustment account. Debiting the branch stock account and crediting the branch adjustment account reflects the decrease in inventory and the loss due to theft in the branch's financial records. This information can then be used to reconcile the inventory and ensure that the branch's financial statements accurately reflect the current state of its assets and liabilities.

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Source documents are the original records that support the transactions recorded in an accounting system. They provide evidence of the transactions and serve as the starting point for the accounting process. In the options given above, the sales invoice and cash book are considered source documents. A sales invoice is a document that is issued by a seller to a buyer, indicating the products or services sold, their prices, and the terms of payment. The cash book is a record of all cash receipts and payments, including sales and purchases. These documents provide evidence of the transactions and serve as the basis for the entry of transactions in the journal and ledger. On the other hand, a debit note is a document used to request a correction to an error made in a previously recorded transaction, while a journal and ledgers are records used to summarize and classify transactions recorded in source documents. They are not considered source documents because they are derived from the information in the source documents.

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The accounting ratio that considers only quick assets to determine the short-term safety margin of a firm is the Acid Test Ratio. Acid Test Ratio is a measure of a company's ability to meet its short-term obligations with its most liquid assets. It is calculated by dividing the sum of quick assets (such as cash, marketable securities, and accounts receivable) by the company's current liabilities. A high Acid Test Ratio indicates that a company has enough liquid assets to pay off its short-term debts, while a low ratio may indicate that a company may have difficulty meeting its short-term obligations.

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The two legally recognized professional accounting bodies in Nigeria are the Institute of Chartered Accountants of Nigeria (ICAN) and the Association of National Accountants of Nigeria (ANAN). ICAN is a professional organization for chartered accountants in Nigeria. Members of ICAN are trained to provide accounting, auditing, tax, and financial management services. ANAN is a professional body for national accountants in Nigeria. ANAN's members are trained in cost and management accounting, as well as financial management. Both ICAN and ANAN are recognized by the Nigerian government as the leading professional bodies for accountants in the country, and their members are held to high standards of ethical and professional behavior.

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A debenture that is issued at par above the nominal value is said to be issued at a premium. This means that the price at which the debenture is issued is higher than its face value or nominal value. For example, if a debenture has a nominal value of $100 and is issued at $105, it is said to be issued at a premium of $5. This is because the investor is willing to pay more for the debenture in order to receive a higher rate of return. Simply put, a premium means that the price paid for the debenture is higher than its face value.

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The goodwill on purchase is N30,000. Goodwill is an intangible asset that represents the value of a business beyond its tangible assets, such as property, inventory, and equipment. It can be calculated by subtracting the value of a business's assets from the amount paid to acquire it. In this case, the purchase consideration was N120,000 and the value of the assets was N70,000 (N60,000 for fixed assets and N10,000 for cash). Subtracting the value of the assets from the purchase consideration gives us the goodwill amount: N120,000 - N70,000 = N50,000 However, the cash of N10,000 was not taken over and an additional N20,000 was paid into the bank, so we need to subtract these amounts from the goodwill: N50,000 - N10,000 - N20,000 = N30,000 So, the goodwill on purchase is N30,000.

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To determine the yearly depreciation expense for the machine, we need to calculate the amount of depreciation each year using the straight-line method. This method assumes that the machine will depreciate evenly over the five-year period. The total amount of depreciation over the five years would be N56,000 - N1,000 = N55,000. Therefore, the yearly depreciation expense would be N55,000 ÷ 5 years = N11,000 per year. So the rate of yearly depreciation expense would be N11,000 ÷ N56,000 = 0.1964, which is approximately 20% of the original cost.

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The Accountant-General is a signatory to the federal government account. The Accountant-General is responsible for managing the government's financial resources and ensuring that all government transactions are properly recorded and accounted for. As such, the Accountant-General is authorized to sign on behalf of the government to access and manage government funds held in the federal government account. On the other hand, the Auditor-General is responsible for auditing the government's financial statements and ensuring that they are accurate and comply with financial reporting standards. The Governor of the Central Bank is responsible for managing the country's monetary policy and ensuring stability in the financial system, but is not directly involved in government finance. The President is the head of state and is not involved in the day-to-day management of the government's finances.

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The single entry system of accounting is a basic method of record-keeping where each transaction is recorded only once, either as a debit or a credit in a single account. The main advantage of the single entry system is its simplicity in terms of operation. This system is often used by small businesses or individuals who do not have a large number of transactions to record and who do not need to produce detailed financial statements. The single entry system is easier to use and understand than the double entry system, which requires two entries for each transaction and is more suitable for larger businesses. However, the single entry system does not provide the same level of accuracy and completeness as the double entry system, and it can result in incomplete or incorrect records. In summary, the single entry system is best suited for small businesses and individuals who value simplicity in operation over accuracy and completeness in record-keeping.

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When a bill is negotiated to a bank, it is said to be discounted. Discounting refers to the process of a bank buying a bill of exchange (such as a check or promissory note) from the holder before its due date and paying them less than the face value of the bill. In this process, the bank becomes the new holder of the bill and is entitled to receive the full face value of the bill from the borrower when it becomes due. For example, if a company has a $1,000 bill due in 60 days, a bank may offer to buy the bill for $980 today. The company can then use the $980 to cover its immediate expenses and the bank will wait for 60 days to receive the full $1,000 from the borrower when the bill is due. In simple terms, discounting is a way for companies to obtain cash before their bills are due, and for banks to earn a profit by charging a fee (the difference between the face value of the bill and the amount they paid to buy it).

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Financial accounting was first developed. Financial accounting is the branch of accounting that deals with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. The primary purpose of financial accounting is to provide information that is useful in making business and economic decisions. Financial accounting is considered the oldest branch of accounting, as its origins can be traced back to medieval Italy and the development of double-entry bookkeeping in the 1400s. Over time, as businesses and economies grew more complex, other branches of accounting, such as cost accounting and management accounting, developed to address specific needs.

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