JAMB UTME - Principles of Accounts - 2024

Purchase Ledger Control Account

The item sales ledger #1,200 represents

Bayanin Amsa

In the context of the Purchase Ledger Control Account, the item labeled as "sales ledger" amounting to #1,200 represents a situation where there is an interaction between the purchase ledger and the sales ledger.

Typically, this means that there has been a sales return or an offset transaction where the company might have paid a supplier for goods or services provided, but due to some reason like a return or an agreement, there is a balance due back to the company. This situation typically arises when there are inter-company transactions where the company is both a customer and a supplier to the same business entity.

In simpler terms, the #1,200 in the "sales ledger" represents an amount due from suppliers. This implies that a balance owed by the supplier is accounted for in the purchase ledger, indicating a receivable situation within the purchase ledger context.

Thus, it reflects an amount that is due back to the entity from their suppliers who are also their customers in some capacity.

The following balances were extracted from the books of Adama Ltd on 31st August 2007

The gross profit is

Bayanin Amsa

To calculate the Gross Profit, we need to determine the difference between Sales and Cost of Goods Sold (COGS).

Step 1: Determine Sales

The sales figure is already given as #200,000.

Step 2: Calculate Cost of Goods Sold (COGS)

• Starting Stock on 1st September 2006: #20,000
• Add Purchases: #140,000
• This gives the total goods available for sale: #160,000 (20,000 + 140,000)
• Deduct Closing Stock on 31st August 2007: #10,000

So, COGS = (#160,000 - #10,000) = #150,000

Step 3: Calculate Gross Profit

Gross Profit = Sales - COGS = #200,000 - #150,000 = #50,000

Therefore, the Gross Profit is #50,000.

When manufactured goods are transferred to the trading account at the market price, the difference is credited to the

Bayanin Amsa

When manufactured goods are transferred to the trading account at the market price, the difference between the cost of production and the market price is known as the profit or loss on manufacturing.
To account for this difference, it is credited to the profit and loss account. If the market price is higher than the cost of production, it results in a profit, which is credited to the profit and loss account. Conversely, if the marke price is lower than the cost of production, it results in a loss, which is also credited to the profit and loss
account.

The basic accounting equation is

Bayanin Amsa

Assets + Liabilities = Owner's Equity. This equation is the foundation of double-entry bookkeeping and ensures that a company's financial statements are balanced. Let's break down the equation:
Assets: These are the resources a company owns, such as cash, inventory, property, and equipment. Liabilities: These are the company's debts or financial obligations that need to be repaid.
Owner's Equity (also called Shareholders' Equity): This represents the owners' claim on the company's assets after all liabilities are settled. It's essentially the difference between the company's assets and liabilities.

The following balances was extracted from the books of Oluwalambe Ltd, manufacturer, on 31st December 2007

Cost of goods produced is

Bayanin Amsa

Cost of Goods Produced = Prime Cost + Factory Overhead Cost + Opening Work in Progress - Closing Work in Progress 
Prime Cost: #500,000 (from previous question) Factory Overhead Cost: #63,500 (from previous question) 
Cost of Goods Produced = #500,000 + #63,500 + #32,500 - #37,500 
Cost of Goods Produced = #558,500 

The following balances were extracted from the books of Adama Ltd on 31st August 2007

The current ratio is

Bayanin Amsa

To calculate the current ratio, we need to understand that it is a measure of a company's ability to pay its short-term obligations with its short-term assets. The formula for the current ratio is:

Current Ratio = Current Assets / Current Liabilities

Let's identify the current assets from the given balances:

• Debtors: 50,000
• Bank: 10,000
• Stock (31-08-2007): 10,000

Adding these up:

Total Current Assets = 50,000 + 10,000 + 10,000 = 70,000

Next, we identify the current liabilities:

• Creditors: 35,000

Therefore, Total Current Liabilities are: 35,000

Now, let's calculate the current ratio:

Current Ratio = Total Current Assets / Total Current Liabilities

Current Ratio = 70,000 / 35,000 = 2:1

Therefore, the current ratio is 2:1, which means that for every unit of currency in current liabilities, Adama Ltd has 2 units in current assets to pay those liabilities. This is a healthy liquidity position as a current ratio greater than 1 indicates that the company has more current assets than current liabilities.

Rent accrued at the end of an accounting period is a

Bayanin Amsa

Rent accrued: This refers to the expense incurred for using an asset (property, equipment, etc.) for a period, ever though the rent payment hasn't been made yet.
Current liability: A current liability is a short-term financial obligation that a company expects to settle within one year or the operating cycle (whichever is longer). Rent accrued falls under this category because it's a debt that needs to be paid to the landlord soon.

Ifedapo Local Council has the following details for 2008

The Local Council's revenue for 2008 was

Bayanin Amsa

To determine the Local Council's revenue for 2008, we need to identify and sum up all the revenue-generating items. The revenue for the Ifedapo Local Council includes:

• Fines: #5,000
• Allocation from state government: #20,000
• Tenement rates: #10,000
• Licences: #12,000

Add these amounts together to calculate the total revenue:

Total Revenue = Fines + Allocation from state government + Tenement rates + Licences

Total Revenue = #5,000 + #20,000 + #10,000 + #12,000

Total Revenue = #47,000

Note that amounts related to Hospital beds (#8,000), Ambulance (#13,000), Salaries (#15,000), and Vehicles fueling (#7,000) are not considered part of revenue as they represent expenses or services provided by the council.

Therefore, the Local Council's revenue for 2008 was #47,000.

The following balances were extracted from the books of Onuoha, a trader on 31st December 2005

The gross profit is 

Bayanin Amsa

To determine the gross profit, we need to calculate the difference between the sales and the cost of goods sold (COGS). The formula for gross profit is:

Gross Profit = Sales - Cost of Goods Sold (COGS)

The Cost of Goods Sold (COGS) is calculated as follows:

COGS = Opening Stock + Purchases - Closing Stock

• Opening Stock: #10,000
• Purchases: #70,000
• Closing Stock: #15,000

Calculating the COGS:

COGS = 10,000 + 70,000 - 15,000

COGS = 80,000 - 15,000

COGS = 65,000

Now, calculate the Gross Profit:

Gross Profit = Sales - COGS

Gross Profit = 120,000 - 65,000

Gross Profit = 55,000

Therefore, the gross profit is #55,000.

A partner whose liability does not extend beyond the amount of capital contributed by him is known as

Bayanin Amsa

A partner whose liability does not extend beyond the amount of capital they contributed is known as a limited partner.

In a partnership, there are different types of partners, and each has different roles and responsibilities. A limited partner is an investor within the partnership who contributes capital but does not participate in the day-to-day management or decision-making of the business. The key feature of a limited partner is that their financial liability is restricted to the amount they have invested in the partnership. This means that if the business faces financial losses or legal liabilities, the limited partner risks only losing their investment amount. They are not required to contribute more money beyond what they initially invested.

On the other hand, a general partner, who typically manages the business, has unlimited liability and is personally responsible for all the debts and obligations of the partnership. In contrast, the limited partner enjoys protection against such personal liabilities.

This arrangement is beneficial for individuals who want to invest in a business without the risk of losing more than their original investment, while also not being involved in its operations.

An equipment costing # 9,000 has an estimated residual value of #900, and is depreciated at 10% per annum. What is the depreciation charge for the three using diminishing balance method?

Bayanin Amsa

The diminishing balance method of depreciation, also known as the reducing balance method, calculates depreciation based on the book value (cost minus accumulated depreciation) at the beginning of each year. In this method, both the asset's residual value and the annual depreciation rate are used to determine the depreciation charge.

Let's break down the solution for the first three years to figure out the depreciation charge:

Year 1:
The initial cost is #9,000.

Depreciation for Year 1 = Cost × Depreciation Rate = 9,000 × 10% = #900

Book Value at the end of Year 1 = Initial Cost - Depreciation = 9,000 - 900 = #8,100

Year 2:
Book value at the beginning of Year 2 is #8,100.

Depreciation for Year 2 = Book Value × Depreciation Rate = 8,100 × 10% = #810

Book Value at the end of Year 2 = Book Value - Depreciation = 8,100 - 810 = #7,290

Year 3:
Book value at the beginning of Year 3 is #7,290.

Depreciation for Year 3 = Book Value × Depreciation Rate = 7,290 × 10% = #729

The depreciation charge for the third year using the diminishing balance method is #729.

Purchase Ledger Control Account

The amount #30,000 represents

Bayanin Amsa

The amount of #30,000 represents credit purchases. In accounting, the Purchase Ledger Control Account is used to track what a business owes to its suppliers. This account is part of the liabilities section of the balance sheet since it reflects amounts that need to be paid for goods or services received on credit.

Here's a breakdown of why the amount represents credit purchases:

• The terminology “Purchase Journal” is used in accounting to record transactions related to credit purchases of goods.
• When items are purchased on credit, they are logged as debits to the Purchase Ledger Control Account. Hence, this value indicates the total goods acquired on credit from the suppliers during a specific period.
• This allows a business to track how much is owed to suppliers, as opposed to goods purchased and paid for immediately with cash, which would be logged differently.

This is significant because businesses often purchase items on credit to improve cash flow and benefit from any creditor terms like discounts for early payment. Hence, the #30,000 recorded in the Purchase Ledger Control Account is indicative of the total amount of purchases made on credit during the period.

The following accounts have debit balances except

Bayanin Amsa

In accounting, a debit balance typically refers to an increase in asset or expense accounts. Here’s a breakdown of each account to determine which one does not usually have a debit balance:

• Share Premium: This is part of the equity on the balance sheet. It occurs when shares are issued at a price higher than their nominal value. Since it is an equity account, it typically has a credit balance, which means it is not a debit balance account.
• Rents and Rates: These are usually categorized under expense accounts, which typically have a debit balance, because expenses increase with debits.
• Return Inwards: Also known as Sales Returns, refers to goods returned by customers. It is considered a contra-revenue account, which typically has a debit balance because it is subtracted from sales (a major revenue account with a credit balance).
• Advertising: This is also an expense account, as expenditures made for advertising purposes are considered costs of doing business. Thus, they usually have a debit balance.

Based on the above explanations, the account that does not have a debit balance is typically the Share Premium account.

Which of the following is not required in preparing a statement of affairs?

Bayanin Amsa

A statement of affairs is a financial statement that provides a snapshot of an organization's financial position at specific point in time. It typically includes information about assets, liabilities, and capital.

The return on debenture holding is

Bayanin Amsa

A debenture is a type of long-term debt instrument issued by a company to borrow money from investors. When you hold a debenture, you are effectively lending money to the company, and in return, you expect a regular return. The return received by debenture holders is in the form of interest.

Here's a simple explanation of why it's interest:

• Interest: Debentures are like loans to the company. Just as banks earn interest on loans they provide, debenture holders earn interest on their investment in the debentures. This interest is predetermined and is usually paid at regular intervals, such as semi-annually or annually.
• Fixed Payment: The interest on debentures is usually a fixed percentage of the principal amount, which means it doesn’t change based on the company's profits or losses.
• Priority Payment: Interest on debentures is paid before any dividends are paid to shareholders, making it a relatively secure form of investment in terms of receiving payments.

In contrast:

• Share bonus and dividend: These are returns on equity shares, not debentures. They depend on the company's profits and decisions made by the board of directors.
• Net profit: This term refers to the total profit of a company after all expenses, taxes, and interest have been deducted. It's not directly associated with debenture holders as a form of return.

Therefore, the return on debenture holding is characterized by interest payments. These payments are made regardless of whether the company makes a profit, as long as it is solvent enough to meet its interest obligations.

Who among the following developed the idea of double entry book-keeping?

Bayanin Amsa

The person credited with developing the idea of double entry book-keeping is Francia Luca Pacioli. He was an Italian mathematician and Franciscan friar who lived during the Renaissance period. Pacioli is often referred to as the "Father of Accounting" because he published a comprehensive text on double-entry bookkeeping in 1494. This text was part of his larger work called Summa de arithmetica, geometria, proportioni et proportionalità, which aimed to educate merchants about keeping financial records.

Double entry bookkeeping is a method that involves recording each financial transaction twice: once as a debit in one account and once as a credit in another. This approach helps to ensure the accuracy and completeness of financial records by maintaining a balance between accounts.

Pacioli's contribution was significant because it provided a systematic way for businesses to track their financial transactions, fostering improved financial management and accountability. His work laid the foundation for modern accounting practices, making it a crucial advancement in the field of commerce and economics.

Depriciation is?

Bayanin Amsa

Depreciation refers to the gradual decrease in the value of a fixed asset over time due to factors such as wear an tear, obsolescence, or passage of time. It represents a decrease in the asset's value rather than an increase. As assets are used or become outdated, their value diminishes, which is reflected as depreciation in the financial statements.

The value of raw materials consumed is

Bayanin Amsa

To calculate the value of raw materials consumed, we need to follow these steps:

Step 1: Determine the Opening Stock of Raw Materials. This is the stock at the beginning of the period. According to the information provided, the opening stock of raw materials is #20,000.

Step 2: Add any Purchases made during the year. In this case, raw materials purchased during the year amount to #18,000.

Step 3: Calculate the Closing Stock of Raw Materials. This is the stock at the end of the period, which is #500.

Step 4: Use the formula for the value of raw materials consumed:

Raw Materials Consumed = Opening Stock + Purchases - Closing Stock

Substitute the values:

#20,000 (Opening Stock) + #18,000 (Purchases) - #500 (Closing Stock) = #37,500

Therefore, the value of raw materials consumed is #37,500.

The chief accounting officer of the Federation is

Bayanin Amsa

The Accountant General of the Federation is the head of the Office of the Accountant General of the Federation (OAGF), which is the treasury of the Federal Republic of Nigeria. They are responsible for overseeing the government's receipts and payments, ensuring proper accounting practices, and managing the Federation Account.

Which of the following bodies regulates accounting practices in Nigeria?

Bayanin Amsa

In Nigeria, the body that regulates accounting practices is the Association of National Accountants of Nigeria (ANAN). ANAN is a professional body chartered by Act 76 of 1993 and is responsible for setting standards, guiding, and supervising the practice of accountancy in the country.

Here's why ANAN is important for accounting practices:

• Standard Setting: ANAN is involved in creating accounting standards that practitioners should follow, ensuring that financial reporting is consistent and reliable.
• Professional Guidance: ANAN provides guidelines and resources for accountants to maintain proper ethical standards and professionalism in their work.
• Supervision and Certification: ANAN certifies accountants, which involves ensuring that individuals meet the necessary educational and professional criteria to practice accounting.

By regulating accounting practices, ANAN helps maintain the integrity and accuracy of financial information, which is crucial for businesses, government agencies, and stakeholders.

A method that is beneficial for tax purposes in inflationary times is? 

Bayanin Amsa

This method assumes the last items purchased are the first ones sold. It can result in a higher COGS during periods of inflation, potentially leading to lower reported profits. LIFO can be beneficial for tax purposes in inflationary times.

A public limited liability company can get additional fund through the issue of

Bayanin Amsa

A public limited liability company can get additional funds through the issue of debentures.

Let's break this down in simple terms:

• Debenture: A debenture is like a loan that the company takes from the public. The company issues these debt instruments to raise funds from investors, with a promise to pay back the principal along with interest at specified intervals. Debentures do not give ownership rights to investors, unlike shares, but they are a popular way for companies to raise capital when they need additional funds.
• Cheque: This is a method of payment, not a way of raising funds. It is used to transfer money from one bank account to another.
• Accumulated Fund: This term generally refers to the surplus funds collected over time that are used for specific purposes. It's not a method of generating new funds but rather a reserve from the excess monies accumulated in the past.
• Consolidated Fund: This is typically related to government finances, where it denotes a fund used for the financial management of the public sector, and not a means for a private company to raise funds.

Hence, debentures are a common and effective way for public companies to generate additional funds by attracting investments from the public without diluting ownership. The company gets the capital it needs, while investors earn interest on their investment.

Ifedapo Local Council has the following details for 2008

The council's expenditure was

Bayanin Amsa

Capital expenditure = Hospital beds (8000) + Ambulance (13000) = #21,000
Note that the question is only asking for the value of capital expenditure

In government accounting, money allocated to each head and sub-heads is referred to as  

Bayanin Amsa

In government budgeting, funds are authorized for spending through a voting process. Each government department or agency submits a budget request, which is then debated and approved (or voted on) by the legislature. The approved amounts for each department's programs and activities become the official votes that they can spend from.

When shares are over-subscribed, directors may decide to scale down the number of shareholding by alloting shares at ___

Bayanin Amsa

When shares are over-subscribed, directors may decide to scale down the number of shareholding by allotting shares at pro rata. This means that the available shares are distributed among the applicants in proportion to the number of shares they have applied for.

For example, if a company issues 1,000 shares and the demand is for 1,500 shares, each applicant will receive a percentage of the shares they applied for based on the total available. This method ensures fairness as it maintains the same ratio of allocation relative to each investor's demand.

Allotting at pro rata ensures that all investors get an opportunity to receive a share, albeit a reduced amount than initially requested, in proportion to their original application. This approach helps to manage the allocation efficiently and maintains balance among potential shareholders.

Goods bought on credit are first entered in the

Bayanin Amsa

When goods are bought on credit, they are first recorded in the purchases day book. The purchases day book is a special journal used to record all credit purchases of goods meant for resale. This is crucial because it keeps track of the amounts owed to suppliers and helps manage the accounts payable for a business.

Here's a simple breakdown of why it is the purchases day book:

• The purchases day book contains a record of all transactions involving goods purchased on credit. It helps maintain an organized list of suppliers and the amounts due to them.
• The cash book records cash transactions and is not suitable for credit transactions.
• The journal proper is used for transactions that do not fit into any other specific journal, but regular credit purchases have their own designated day book.
• The sales day book is used for recording sales made on credit, and is not for purchases.

Therefore, by recording the credit purchases in the purchases day book, a business keeps an accurate and organized record of its obligations, facilitating better financial management.

The following are causes of discrepancies between the cash book and the bank statement balances except

Bayanin Amsa

A bank deposit typically wouldn't cause a discrepancy; rather, it would lead to an increase in both the cash book and bank statement balances. Therefore, it is not a cause of discrepancies between the two balances.

The net profit is

Bayanin Amsa

To calculate the net profit, we need to determine the Gross Profit first and then subtract the expenses from it. Follow these steps:

• Opening Stock: #2200
• Add Purchases: #18000
• Less Closing Stock: #1000

COGS = 2200 + 18000 - 1000 = #19,200

• Sales: #27000
• Less COGS: #19200

Gross Profit = 27000 - 19200 = #7,800

• Salaries: #1500
• Rejection in doubtful debts: #500
• Office expenses: #1100
• Other expenses: #1300

Total Expenses = 1500 + 500 + 1100 + 1300 = #4,400

• Net Profit = Gross Profit - Total Expenses
• Net Profit = 7800 - 4400

Net Profit = #3,400

Therefore, the net profit is #3,400.

The following extracts are made from the books of Agama Enterprises.

Method of depreciation used is Diminishing Balance The depreciation charge for year two is

Bayanin Amsa

First, we calculate the depreciation for the first year: Depreciation for year one = Cost x Rate of Depreciation = 120,000 x 40%
= 48,000
Next, we calculate the remaining book value after the first year: Book value after year one = Cost - Depreciation for year one
= 120,000 - 48,000
= 72,000
To calculate the depreciation charge for year two, we apply the rate of depreciation to the remaining book value Depreciation for year two = Remaining book value x Rate of Depreciation
= 72,000 x 40%
= 28,800

A commission of #5000 to a sales manager was debited to debtors account. This is an error of

Bayanin Amsa

This situation is an example of an error of principle. Let me explain:

An error of principle occurs when an entry is recorded in the wrong account but respects the double-entry rule of debit and credit. In this case, a commission, which should have been recorded as an expense and debited to a "Commission Expense" account, was incorrectly debited to the "Debtors Account", which is an asset account.

Because the nature of the accounts is different (expenses vs assets), recording it in the wrong type of account constitutes an error of principle. This type of error doesn't affect the balancing of the trial balance but reflects a misclassification in the financial statements.

Other types of errors like errors of original entry involve wrong amounts recorded, whereas errors of compensation involve two mistakes that offset each other. An error of commission refers to when a correct amount is posted to the wrong account of the correct type, unlike the principle error where the wrong type of account is used.

Ifedapo Local Council has the following details for 2008

The council's expenditure for the year was

Bayanin Amsa

Expenditure:
#15,000 (Salaries) + #7,000 (Vehicles fueling)
= #22,000
Note that the question is only asking for expenditure and not capital or recurrent expenditure

The coming together of two sole trading businesses to form a partnership is

Bayanin Amsa

The coming together of two sole trading businesses to form a partnership is an amalgamation.

To understand why this is an amalgamation, let's delve into the concept:

Amalgamation refers to the merging or blending of two or more entities into one. In the context of business, it specifically means the combination of two or more organizations to form a single new entity that benefits from the pooled resources, combined expertise, and shared goals. In this case, when two sole traders decide to unite their efforts and resources to operate jointly as a partnership, they are undergoing an amalgamation. This process allows them to leverage each other's strengths, share risks, and potentially enjoy greater market influence and operational efficiency.

It's important to note that amalgamation is different from terms like acquisition, which involves one company taking over another, and association, which usually implies a less formal collaboration without forming a new structure or entity.

An equipment costing #9,000 has an estimated residual value of #900, and is depreciated at 10% per annum. Using the straight-line method, what is the depreciation charge for the second year?

Bayanin Amsa

To calculate depreciation using the straight-line method, you can use the formula:
Depreciation Expense = (Cost of Asset - Residual Value) / Useful Life
Given:
Cost of the equipment = 9,000 Residual value = 900
Depreciation rate = 10%
Useful life = 10 years (since the depreciation rate is 10%)
First, calculate the annual depreciation:
Depreciation Expense = (9,000 - 900) / 10
= 8,100 / 10
= 810
Therefore, the depreciation charge for the second year would still be #810.

The following balances were extracted from the books of Adama Ltd on 31st August 2007

Percentage of net profit to sale is 

Bayanin Amsa

To find the percentage of net profit to sales, we need to calculate the net profit first.

Here's how you can find the net profit:

Step 1: Calculate Cost of Goods Sold (COGS)

• Opening Stock (1-09-2006): 20,000
• Purchases: 140,000
• Closing Stock (31-08-2007): 10,000

COGS = Opening Stock + Purchases - Closing Stock

COGS = 20,000 + 140,000 - 10,000 = 150,000

Step 2: Calculate Gross Profit

Gross Profit = Sales - COGS

Gross Profit = 200,000 - 150,000 = 50,000

Step 3: Calculate Net Profit

Net Profit = Gross Profit - Expenses

In this case, the only expense given is General Expenses: 10,000

Net Profit = 50,000 - 10,000 = 40,000

Step 4: Calculate the Percentage of Net Profit to Sales

Percentage of Net Profit to Sales = (Net Profit / Sales) * 100%

Percentage of Net Profit to Sales = (40,000 / 200,000) * 100% = 20%

Therefore, the percentage of net profit to sales is 20%.

The following balances was exgtracted from the books of Oluwalambe Ltd, manufacturer, on 31st December 2007

Factory overhead cost is

Bayanin Amsa

To calculate the Factory Overhead Cost, we need to consider the expenses that are not directly tied to the production process but are essential for running the factory smoothly. These include indirect costs like lighting, heating, depreciation of machinery, and indirect labor. From the data given, we will identify the elements that contribute to the Factory Overhead Cost:

• Indirect Wages: #28,000
• Depreciation on Plants: #32,000
• Factory Rent: #3,500

Other elements in the data such as stock of raw materials, purchase of raw materials, direct wages, and work in progress are part of the cost of production but do not contribute to the Factory Overhead Cost.

Therefore, the total Factory Overhead Cost is calculated by summing up all the overhead costs:

Factory Overhead Cost = Indirect Wages + Depreciation on Plants + Factory Rent

= #28,000 + #32,000 + #3,500

= #63,500

Thus, the Factory Overhead Cost is #63,500.

The reward given to debenture holder is

Bayanin Amsa

Debentures are long-term debt instruments issued by companies to raise funds. Debenture holders are the creditors of the company, and they receive regular interest payments as a reward for lending their money to the company.

Which of the following is a subsidiary book as well as a ledger?

Bayanin Amsa

A cash book serves as both a subsidiary book and a ledger. It is a subsidiary book because it records all cash and bank transactions of a business in a chronological order. It includes details of cash receipts and cash payments, as well as bank deposits and withdrawals. The cash book acts as a primary record for cash and bank transaction before they are posted to the general ledger.

Prime cost consist of direct material and ___ cost

Bayanin Amsa

Prime cost refers to the direct costs associated with producing a good. These are costs that can be easily traced and directly linked to each unit of production. It consists of direct materials, direct labour and direct cost.

Tolu purchased a machine for #6,000 on credit. The effect is to debit.. supplier
and credit the account of the

Bayanin Amsa

When Tolu purchases a machine on credit, the accounting entries reflect the following:
Debit: Machinery (#6,000)
Credit: Supplier (#6,000)
Here's why:
Debit: A debit increases an asset account. In this case, "Machinery" is an asset account that represents the new equipment Tolu acquired.

Credit: A credit increases a liability account. Since Tolu purchases the machine on credit, they now owe money
to the supplier. The "Supplier" account is a liability account that reflects this debt.

The total expenses is

Bayanin Amsa

Total Operating Expenses = #1,500 (Salaries) + #1,100 (Office Expenses) + #1,300 (Other Expenses) Total Operating Expenses = #3,900