JAMB UTME - Principles of Accounts - 1997

At the end of a financial period, the trading profit and loss account of a company showed a profit of ₦120,000. It was however discovered that revenue of ₦12,000 was recorded as expenses while expenses of ₦4,000 had been recorded as revenue. What should be the correct profit for the period?

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To find the correct profit for the period, we need to make the necessary adjustments to the profit figure shown in the trading profit and loss account. Since revenue of ₦12,000 was wrongly recorded as expenses, we need to add back that amount to the profit figure. Also, expenses of ₦4,000 were wrongly recorded as revenue, so we need to deduct that amount from the profit figure. Therefore, the correct profit for the period can be calculated as follows: Trading profit and loss account profit: ₦120,000 Add back revenue wrongly recorded as expenses: ₦12,000 Deduct expenses wrongly recorded as revenue: ₦4,000 Correct profit for the period: ₦128,000 Therefore, the correct answer is: ₦128,000

In preparing accounting records, the owner of a business and the business are treated as

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In preparing accounting records, the owner of a business and the business are treated as separate legal entities. This means that the business is considered as a separate entity from the owner for accounting purposes. The financial transactions of the business are recorded separately from the personal transactions of the owner. The business is required to keep its own set of accounting records and financial statements, such as a balance sheet and income statement, to report its financial performance and position. This is important for legal, tax, and financial reporting purposes. It also helps to provide clarity and transparency in the financial affairs of the business, and enables the owner to make informed business decisions based on accurate and reliable financial information.

Adamu, Babaji and Chukwu are in partnership and they share profit and losses on ratio 3:2:1. Their respective capitals are ₦20 000, ₦15 000 and ₦5 000 on which on which they are entitle to interest at 5% per annum. The profit for the year before charging interest on capital amounted to ₦5 500.Calculate the profit for Adamu?

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The most important reason for studying accounting is that

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The most important reason for studying accounting is that the information provided by accounting is useful in making decisions. Accounting is a systematic and comprehensive process of identifying, recording, classifying, and summarizing financial transactions to provide useful information to decision-makers. This information is used by individuals, organizations, and governments to make informed decisions about various aspects of their operations, including financial, investment, and managerial decisions. Therefore, studying accounting provides individuals with the knowledge and skills needed to understand financial information, analyze it, and make informed decisions based on it.

An income and expenditure account is a summary of

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The difference between a trading account and a manufacturing account is that while the manufacturing account

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The correct option is "is concerned with the cost of production, the trading account is not". A trading account is an account that shows the gross profit or gross loss of a business over a specific period, usually a year. It includes the cost of goods sold, i.e., the cost of the goods that were sold during that period. On the other hand, a manufacturing account is an account that is used in manufacturing businesses to calculate the cost of producing goods. It takes into account the cost of raw materials, labor, and overheads used in manufacturing the goods. The manufacturing account is concerned with the cost of production, which includes direct costs (i.e., raw materials and labor) and indirect costs (i.e., overheads). Therefore, the main difference between a trading account and a manufacturing account is that while the trading account is concerned with the cost of goods involved in buying and selling activities, the manufacturing account is concerned with the cost of production involved in manufacturing goods.

The Current account above had some errors in the arrangement of the accounts for Musa, Kalu and Lawal.

The Correct closing balance for Musa's current account is

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To find the correct closing balance for Musa's current account, we need to add up all his credits and subtract all his debits. From the table, Musa had a credit of ₦25,000, a debit of ₦11,400, and a credit of ₦3,000. Adding the credits and subtracting the debits gives us: ₦25,000 + ₦3,000 - ₦11,400 = ₦16,600 credit Therefore, the correct answer is ₦16,600 credit.

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What is the balance of the bank account shown above?

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The balance of the bank account can be determined by computing the sum of all the transactions on the credit side and subtracting the sum of all the transactions on the debit side. On the credit side, the total amount is ₦89,500, while on the debit side, the total amount is ₦30,090. To determine the balance, we subtract the total debits from the total credits: ₦89,500 - ₦30,090 = ₦59,410 Therefore, the balance of the bank account shown above is ₦59,410 debit.

The process of allocating the cost of an intangible assets over its useful life is known as

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Given: N

Direct material - 10 000

Direct labour - 5000

Direct expenses - 2000

Factory overhead - 4000

What is the prime cost?

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The prime cost is the sum of direct material, direct labour, and direct expenses. Therefore, the prime cost is 10,000 + 5,000 + 2,000 = ₦17,000. Hence, the correct answer is.

Alabede (NIG) limited issued 50 000 ordinary shares of ₦1 each at a market value of ₦2.50 each. the share premium is?

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The records of wages due but not yet paid is an example of an adjustment for

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The records of wages due but not yet paid is an example of an adjustment for recognizing accrued expenses. Accrued expenses are expenses that have been incurred but not yet paid for or recorded in the accounting system. In this case, the wages due but not yet paid represent an expense that has been earned by the employees but not yet paid out by the company. As a result, it needs to be recognized as an accrued expense in the accounting system by making an adjustment to the appropriate account.

The effect of the payment of liability is that it

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The effect of the payment of liability is that it decreases liabilities and decreases assets. When a liability is paid, it means that the company has reduced its obligation to pay back its debts or outstanding expenses. As a result, the liability account is decreased. The payment is usually made using an asset such as cash, which also decreases the amount of assets the company has. Therefore, paying a liability has the effect of decreasing both the liabilities and assets of a company.

A dividend of 10% in a company on 500 000 ordinary shares of ₦1 nominal value has been declared, How much will a shareholder receive if he has 200 shares?

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A dividend of 10% means that for each share owned, the shareholder will receive 10% of the nominal value of that share. In this case, the nominal value of each share is ₦1. Therefore, for each share owned, the shareholder will receive ₦0.10 (which is 10% of ₦1). If a shareholder has 200 shares, then the total amount of dividend that he will receive is: 200 shares x ₦0.10 per share = ₦20 Therefore, the correct answer is: ₦20.

Given: capital ₦13,000; office machinery, ₦9,000; creditors ₦900, stock of goods ₦1,550; debtors, ₦275; cash at bank, ₦5,075 and loan from Jumbo, ₦2,000. What is the balance sheet total?

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If goods are invoiced to the branch at cost and the invoice par value is ₦2 000 with 5%discount rate, can remitted to the head office is

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If the goods are invoiced to the branch at cost, then the par value of the invoice is the cost price of the goods which is ₦2,000. The discount rate is 5%, which means the branch will get a discount of 5% on the cost price. The discount is calculated by multiplying the cost price by the discount rate: Discount = ₦2,000 x 5% = ₦100 Therefore, the branch will pay ₦2,000 - ₦100 = ₦1,900 to the head office. Hence, the remitted amount to the head office is ₦1,900.

Given:

Capital at the beginning...............₦20 000

Drawings...............................₦3 000

Capital................................₦30 000

New capital introduced.................₦8 000What is the profit for the period?

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To find the profit for the period, we need to calculate the increase in capital. The increase in capital is equal to the new capital introduced plus the profit for the period minus any drawings. Increase in capital = New capital + Profit - Drawings We are given: Capital at the beginning = ₦20,000 Drawings = ₦3,000 Capital = ₦30,000 New capital introduced = ₦8,000 We can use these values to find the profit: Profit = Increase in capital - New capital introduced + Drawings We know that the increase in capital is the difference between the ending capital and the beginning capital: Increase in capital = Capital - Capital at the beginning Increase in capital = ₦30,000 - ₦20,000 Increase in capital = ₦10,000 Now we can substitute the values into the profit formula: Profit = Increase in capital - New capital introduced + Drawings Profit = ₦10,000 - ₦8,000 + ₦3,000 Profit = ₦5,000 Therefore, the profit for the period is ₦5,000. The answer is.

Books of original entry are used for

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Share premium can be used to?

I. write off discount on shares

Ii. give loans to directors

Iii.pay dividends

Iv. pay company's formation expenses.

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Emeka Manufacturing Company (Extract) Manufacturing Account.

Direct material.....................₦5 000

Direct labour.......................₦4 500

Direct expenses.....................₦3 000

Factory overhead....................₦2 500

Selling distribution................₦1 500Calculating the production cost?

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which of the following conditions best represents the net effect of discount allowed on credit sales on the accounts of the business?

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The net effect of discount allowed on credit sales on the accounts of a business is a decrease in the value of the closing balance of the sales ledger control account. This is because discount allowed reduces the amount of money the customers owe the business and hence the overall value of accounts receivable in the sales ledger control account decreases. The other options are incorrect because discount allowed on credit sales does not affect net profit, increase the value of sales, or decrease the value of purchases in the trading account.

On partnership dissolution, if a partner's capital account has a debit balance and the partnr is insolvent, the deficiency will, in accordance with the decision of the case of Garner v Murray, be

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Which of the following stock valuation methods is suitable under inflationary conditions?

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Faruk and Osawe are in partnership sharing profits and losses in the ratio of 3:7. Faruk is to receive a salary of ₦9 000. In one accounting period, the business recorded a loss of ₦1 500 (before deduction of Faruk's salary). The appropriate distribution of the net loss would be?

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A company has 5% debentures worth ₦500 000 ordinary share capital ₦2 000 000, and preference shares ₦1500 000. if the company made a profit of ₦1 000 000, the debenture interest would amount to

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Debentures are a form of long-term borrowing where the company issues bonds to investors and pays them interest at a fixed rate. In this case, the company has ₦500,000 worth of 5% debentures. This means that the company will pay ₦500,000 x 5% = ₦25,000 in interest to debenture holders. Note that the profit made by the company is not relevant to the calculation of debenture interest. The company has a legal obligation to pay interest on its debentures regardless of whether it makes a profit or not. Therefore, the correct answer is ₦25,000.

The instrument that are generated when firms enter into business transactions with others are called

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The instruments that are generated when firms enter into business transactions with others are called source documents. These documents serve as evidence of the transaction and provide information on the type, amount, and date of the transaction. Examples of source documents include invoices, receipts, purchase orders, and delivery notes. These documents are important for record-keeping and accounting purposes as they provide the basis for entries in the company's books of accounts.

When the sum of money appears on the credit side of the cash book, but not on the debit side of the bank statement, the sum is regarded as

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When the sum of money appears on the credit side of the cash book, but not on the debit side of the bank statement, the sum is regarded as an "unpresented cheque". This means that a cheque was issued by the business but has not yet been presented for payment at the bank. The amount of the cheque is recorded in the cash book as a credit entry when it is issued, but it will not appear on the bank statement until it is presented and paid by the bank. Therefore, the amount of the unpresented cheque needs to be deducted from the balance in the bank statement to arrive at the correct balance in the bank account.

In the absence of a sales day book or sales account the credit for sales can be computed from

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Which of the following are advantages of departmental accounts?

I. The department making the highest profit can be easily determined

II. The capital of the business can be calculated easily

III. Easy knowledge of the sources of funding

IV. Encouragement of healthy rivalry among the various departments

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The correct option is (I and IV only). Departmental accounts have several advantages, including the ability to determine the department with the highest profit, which encourages healthy competition among departments. This is the advantage referred to in option I. However, departmental accounts do not make it easier to calculate the capital of the business (option II), as this information is not related to individual departments. Additionally, while departmental accounts can provide information on the sources of funding for individual departments, they do not make it easier to obtain knowledge of funding sources for the entire business (option III). Therefore, options II and III are incorrect. Option IV is also correct because the use of departmental accounts encourages healthy competition among the various departments of a business, which can ultimately result in increased profitability for the business as a whole.

The total of the creditors at the beginning of the year was ₦4,600 and at the end of the year ₦5,250. During the year, ₦26,500 was paid to suppliers and ₦130 was received in discounts from these suppliers. The purchases for the year would be

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Given:

Net profit-----------------------₦25,000

Cost of sale---------------------₦25,000

Sales----------------------------₦85,000

Determine the total expenses.

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The acid test ratio in the company is

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On the 30/5/93 Tolu & Co. paid 2 years rent of ₦50,000 which was debited to the rent account.

The adjustment needed as at 31st December 1993 is?

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The understatement of closing value of work-in-process would have the effect of?

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In analyzing incomplete records, which of the following should be investigated?

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In analyzing incomplete records, the nature of trading activities and the basis on which goods are sold should be investigated. This is because the information related to trading activities is critical in determining the revenue and expenses of a business. Incomplete records refer to accounting records that are not complete or have not been maintained according to accepted accounting standards. In such cases, it may not be possible to rely on the general ledger, purchases day book, sales day book, or asset register together with the depreciation schedule. Therefore, investigating the nature of trading activities and the basis on which goods are sold is crucial to estimating the income and expenses of the business.

Creditors use Accounting information for the purpose of

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Creditors use accounting information for assessing a company's liquidity. Liquidity is a company's ability to meet its short-term financial obligations as they come due. Creditors are interested in assessing a company's liquidity as it helps them determine the likelihood of the company being able to pay back the money they owe. By analyzing financial statements, creditors can determine a company's liquidity ratios such as the current ratio, quick ratio, and cash ratio. These ratios give an indication of a company's ability to meet its short-term financial obligations.

Public sector accounting is based on

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On the 30/5/93 Tolu & Co. paid 2 years rent of ₦50,000 which was debited to the rent account.

At 31/12/93, what portion of that amount was prepaid?

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The end result of governmental accounting procedure is to

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An examination of the cash book on 3rd August 1993 showed a different balance from the bank statement of 31st July, 1993 which read ₦722. Uncredited cheques were Bimpe ₦40; Wale ₦60 while unpresented cheques were; Usman ₦20, Kalu ₦32 and Musa ₦70. What is the cash book balance after the reconciliation?

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Erroneous rearrangement of financial figures such as writing ₦624 as ₦264 is called

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The correct answer is "transposition." Transposition is the act of mistakenly reversing the order of two digits when recording a financial figure. In the given example, writing ₦624 as ₦264 is an example of transposition because the digits 2 and 6 have been swapped. This can result in significant errors in financial records, which is why it is important to double-check figures and reconcile accounts regularly.

The receipt of cash from a customer who bought goods with ₦800 list price, 25% trade discount and 2/10, n/30 terms would, if paid within the discount period, amount to

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The trade discount is given to the customer for purchasing the goods. In this case, the trade discount is 25%, which means the customer will only pay 75% of the list price. Therefore, the customer will pay 75/100 x ₦800 = ₦600 for the goods. The terms 2/10, n/30 mean that if the customer pays within 10 days, they will receive a 2% discount. The net amount due within 30 days, without the discount, is ₦600. If the customer pays within the discount period, they will pay 98% of ₦600, which is equal to 0.98 x ₦600 = ₦588. Therefore, the correct answer is ₦588.

The Current account above had some errors in the arrangement of the accounts for Musa, Kalu and Lawal.

The correct closing balance for Lawal's current account is

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Which of the following demonstrates the imprest system?

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The option that demonstrates the imprest system is "Float → expenses paid → cash from bank → float". The imprest system is a method of controlling cash payments that ensures that a fixed amount of money is always available for making small, regular payments, such as petty cash expenses. In this system, a fixed amount of money (known as the float) is initially withdrawn from the bank and placed in a petty cash box. This float is used to pay for small expenses as and when they arise, and receipts are collected to account for the money spent. When the float runs low, the petty cash custodian requests a top-up from the bank, and the exact amount of money spent is reimbursed. This reimbursement should bring the petty cash balance back up to the original float amount. Option "Float → expenses paid → cash from bank → float" follows this pattern, where the float is initially taken out, expenses are paid from the float, and when the float runs low, the petty cash custodian requests a top-up from the bank. The money spent is then reimbursed, and the float is restored to its original amount. This is the process used in the imprest system.

The document that is used to acknowledge the acceptance of the return of goods by the seller from the buyer is known as

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The document that is used to acknowledge the acceptance of the return of goods by the seller from the buyer is known as a credit note. A credit note is a written document that indicates a reduction in the amount payable by the buyer to the seller. It is issued by the seller to the buyer to notify them of the acceptance of the return of goods or the cancellation of a sale. The credit note serves as a record of the transaction and is used to adjust the accounts of the seller and the buyer. The credit note shows the amount of the credit, the reason for the credit, and the date it was issued.

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The term 'posting' in Accounting refers to

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Additional information:

Subscription relating to the accounting year 1993 in the income and expenditure account is

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The principle use of control accounts is to

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The principle use of control accounts is to localize errors within the ledger. A control account is a summary account in the general ledger that contains aggregated amounts from related subsidiary ledgers or individual accounts. The use of control accounts allows for easy detection of errors or discrepancies that may arise in the subsidiary ledgers or individual accounts, as the totals in the subsidiary ledgers or individual accounts are compared to the corresponding totals in the control account. Any differences in the totals can be traced and investigated to identify and correct errors or discrepancies. By localizing errors within the ledger, control accounts help ensure the accuracy of financial information and prevent misstatements in financial reports.