JAMB UTME - Principles of Accounts - 2011

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The process of reconciling cheques between banks is termed cheque clearing. Cheque clearing refers to the process of transferring funds from the bank account of the payer to the bank account of the recipient when a cheque is used as the payment method. This process involves a series of steps that verify the authenticity of the cheque, verify that the account of the payer has sufficient funds to cover the cheque amount, and transfer the funds from the payer's account to the recipient's account. Once the cheque has been cleared, the funds become available for the recipient to use.

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The major point of agreement carried by the partnership deed is the profit and loss sharing ratio of the partners. A partnership deed is a legal document that outlines the terms and conditions of a partnership agreement. It includes various clauses such as the name of the partnership, capital contributions of each partner, the nature of business, the duration of the partnership, the duties and responsibilities of each partner, and most importantly, the profit and loss sharing ratio of the partners. The profit and loss sharing ratio outlines how the profits and losses of the business will be divided among the partners. It is a crucial aspect of the partnership agreement and must be agreed upon by all partners.

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The major objective of departmental accounts is to ascertain the contribution of each department to profit. This involves keeping records of the revenue, expenses and profit of each department separately in order to determine the profitability of each department. By analyzing the departmental accounts, management can identify areas where costs can be reduced and revenues increased, thereby increasing overall profitability of the business.

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The subscription paid in advance is treated as a liability in the balance sheet of a club. This is because the club has an obligation to provide the services that the subscription payment is meant for, and the payment has been made in advance. Therefore, until the services are provided, the subscription payment remains a liability to the club.

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The product cost that does not form part of the product but is incidental to production activities is the indirect cost. These are expenses that are necessary to produce a product but cannot be easily traced to a specific product, such as rent, utilities, and salaries of supervisors. Indirect costs are sometimes referred to as overhead costs and are usually allocated to products based on a predetermined cost allocation method, such as machine hours or labor hours. Direct costs, on the other hand, are costs that can be directly traced to a specific product, such as raw materials and labor.

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To calculate the interest on Keme's drawings, we first need to find Keme's total drawings and capital account balance. Keme's total drawings are ?2,000 and Keme's capital account balance is ?20,000. Then we need to calculate the interest on Keme's drawings, which is calculated at a rate of 10% per annum. The formula for calculating interest on drawings is: Interest on Drawings = Drawings x Rate x Time Since the time period is not given, we assume it to be one year. So, the interest on Keme's drawings would be: Interest on Keme's Drawings = ?2,000 x 10% x 1 = ?200 Therefore, the interest on Keme's drawings is ?200.

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In a not-for-profit organization, the capital is referred to as the "accumulated fund." This is because the aim of such organizations is not to make profits but to achieve a particular social or charitable objective. Therefore, any excess of income over expenses, instead of being distributed as profit to owners or shareholders, is kept and accumulated to support the organization's objectives. This accumulated fund is used to support the organization's activities and to ensure its sustainability over time.

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To calculate the total of the trial balance, we need to add up all the debit balances and credit balances. The debit balances are: Light expenses: ₦400 Purchases: ₦3,000 Debtors: ₦50 Total debit: ₦3,450 The credit balances are: Sales: ₦1,200 Creditors: ₦2,250 Total credit: ₦3,450 Since the total of debit balances equals the total of credit balances, the trial balance is balanced. Therefore, the answer is: ₦3,450.

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On admission of a new partner, the Revaluation account can be used. This account is used to adjust the values of the assets and liabilities of the old partnership to reflect their current market value. This is necessary to ensure that the new partner's capital contribution is properly reflected in the partnership's accounts. The revaluation account is credited for any increase in the value of assets and debited for any decrease, while the respective asset or liability account is debited or credited. By adjusting the values of the assets and liabilities, the partnership's balance sheet will reflect the true economic value of the partnership, taking into account changes in market conditions and the addition of a new partner.

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The cost that is directly traceable to the goods being produced is called prime cost. This includes all the direct costs of production such as raw materials, direct labor, and other direct expenses that are directly related to the production process. Prime cost excludes indirect expenses such as rent, utilities, and other overhead costs that are not directly related to production. By calculating the prime cost, a company can determine the actual cost of producing a unit of its product, which can then be used to set appropriate pricing strategies and maximize profits.

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Not-for-profit-making organizations are formed mainly to improve the welfare of their members or serve a particular cause or community, rather than for the purpose of generating profits. This means that any surplus generated is usually reinvested into the organization's activities or saved for future use, rather than being distributed as profits to owners or shareholders. The main feature of not-for-profit-making organizations, therefore, is that they do not exist for the primary purpose of making a profit, but rather for some other purpose that benefits a specific group or the public as a whole.

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The Minister of Finance is the official who signs general warrant for the release of money from the consolidated revenue fund. The Minister of Finance is the custodian of government's financial resources and is responsible for the overall management and control of the financial affairs of the government. As such, he or she has the authority to authorize the release of funds from the consolidated revenue fund in accordance with the provisions of the Appropriation Act or other relevant laws.

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The principle of double entry system ensures mathematical accuracy in trial balance. This principle states that for every transaction, there are at least two accounts affected: a debit account and a credit account. The debit and credit amounts for each transaction must be equal in value, ensuring that the total debits and total credits always balance. This ensures that errors in recording transactions can be easily detected and corrected by checking the mathematical accuracy of the trial balance, which lists all the debit and credit balances in the ledger accounts.

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A typical example of a real account is a plant account. A real account is a type of account in accounting that deals with assets and liabilities that have a physical existence, such as buildings, equipment, and inventory. A plant account, which represents the cost of a company's machinery and equipment, is an example of a real account because it is a physical asset with a real value. Other examples of real accounts include land, vehicles, buildings, and inventory. In contrast, nominal accounts deal with revenue, expenses, and gains or losses, while personal accounts represent individuals and entities that a business interacts with.

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The fund in which all government receipts are paid is called the consolidated revenue fund. This fund is used to finance the operations of the government, including payment of salaries, subsidies, and other expenses. All revenue collected by the government, such as taxes, fees, fines, and proceeds from the sale of assets, are deposited into this fund. The consolidated revenue fund is managed by the government's treasury department and is subject to audit by the country's supreme audit institution.

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When goods are transferred from the head office to a branch, it is important to record the transaction in the accounting records. The correct entries to record goods transferred to a branch from the head office are to debit the branch stock account and credit the goods sent to branch account. This is because the branch stock account is used to record the stock held by the branch, and the goods sent to branch account is used to record the value of the goods sent to the branch by the head office. By debiting the branch stock account and crediting the goods sent to branch account, we are essentially acknowledging that the branch now holds these goods as part of its stock.

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To find the number of units at hand as of July 30, we need to calculate the total number of units purchased and returned, and then subtract the total number of units sold. Total units purchased = 200 + 200 + 200 = 600 units Total units returned = 80 units Total units sold = 160 + 180 + 120 + 100 = 560 units Therefore, the units at hand as of July 30 can be calculated as follows: Units at hand = Closing stock + Total units purchased - Total units returned - Total units sold Units at hand = 100 + 600 - 80 - 560 Units at hand = 60 Therefore, the answer is 60 units.

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In a trial balance, incomes are credited while liabilities are credited. This is because incomes increase the owner's equity in the business and so are credited, while liabilities are obligations of the business to pay a debt or settle an obligation in the future, hence they are credited. In the double entry system of bookkeeping, every transaction has two aspects - a debit and a credit - so in a trial balance, the total debits should equal the total credits, which ensures that all transactions have been correctly recorded.

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To find the cost of goods sold using the gross profit margin, we need to know the formula which is: Gross profit margin = Gross profit / Sales We have the gross profit margin as 20% and the sales as N10,600. 20% of sales = 20/100 * N10,600 = N2,120 (this is the gross profit) Next, we need to use the formula: Gross profit = Sales - Cost of goods sold We know the sales is N10,600 and we need to find the cost of goods sold. N2,120 = N10,600 - Cost of goods sold Therefore, Cost of goods sold = N10,600 - N2,120 = N8,480 So, the cost of goods sold is ₦8,480. Option B is the correct answer.

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The item on the credit side of the trading account is the "sales". The trading account is a financial statement that shows the gross profit of a business by comparing the revenue generated from sales to the cost of goods sold. The credit side of the trading account shows the income earned by the business, which is primarily derived from sales made during the period. Therefore, sales are credited in the trading account to reflect the revenue earned from the sale of goods or services.

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Control accounting is a technique used to monitor and assess the efficiency of bookkeeping by accountants in recording and reporting all business transactions of an enterprise. It involves setting up control accounts that summarize the balances of all the individual accounts in the ledger and comparing these balances with the actual amounts in the individual accounts. This helps to identify any errors or omissions in the accounting records and allows for prompt corrective action to be taken. Therefore, the correct answer is "monitoring the efficiency of bookkeeping by accountants".

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When goods are transferred from the head office to a branch, two accounts are opened in the head office. The first account is the Goods Sent to Branch Account which records the cost of the goods transferred. The second account is the Branch Stock Account which records the value of the goods remaining in the branch at any given time. Therefore, the correct answer is "Goods sent to branch account and branch stock account."

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The share premium is the amount by which the issue price of a share exceeds its nominal value. In this case, Aboki Holdings Limited issued 120,000 ordinary shares at ₦2.00 each, but the market value of each share was ₦0.055 (5.50k). Therefore, the share premium per share is ₦0.055 - ₦2.00 = -₦1.945 (negative because the market value is less than the nominal value). Since the share premium is negative, it means that the market value of the shares is less than their nominal value, and the company will not receive any share premium. Therefore, the answer is (d) ₦420,000, which is the product of 120,000 shares and ₦2.00 nominal value per share.

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The founders of a company are the individuals or group of individuals who initiate and establish the company. They are responsible for bringing the company into existence by taking the necessary steps, such as registering the company, drafting the memorandum and articles of association, and securing the initial capital required to start the business. These individuals are also known as the promoters of the company.

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Timing differences in bank reconciliation process are discrepancies that occur due to the differences in the timing of the recording of transactions in the cash book and bank statement. These discrepancies arise because the transactions are recorded at different times in the cash book and the bank statement. Timing differences can occur due to many reasons, such as uncleared cheques, deposits in transit, bank charges, or interest earned on the bank account. The timing differences need to be adjusted in the bank reconciliation process to ensure that the cash book and the bank statement reflect the same balance.

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Petroleum income tax accounts for the highest revenue to Nigeria. This is because Nigeria is a major oil-producing country and oil is the backbone of the Nigerian economy. The petroleum industry contributes the largest share of Nigeria's export earnings and government revenue. Therefore, the taxes and royalties paid by oil companies on their income generated from the exploration and production of crude oil and natural gas contribute significantly to the government's revenue.

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The interest on Kemi's capital can be calculated using the formula: Interest on capital = Rate of interest x Capital x Time Here, the rate of interest is 5%, Kemi's capital is ₦10 000, and time is not given. However, we can assume that the time period is one year as it is a common practice in such calculations. So, the interest on Kemi's capital = 0.05 x ₦10 000 x 1 = ₦500 Therefore, the answer is ₦500.

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To calculate the net profit, we need to first calculate the cost of goods sold (COGS) using the gross profit margin formula: Gross Profit Margin = (Revenue - COGS) / Revenue Re-arranging the formula, we get: COGS = Revenue - (Gross Profit Margin x Revenue) Given that the gross profit margin is 20%, we can calculate the COGS as follows: COGS = 10,600 - (0.20 x 10,600) = ₦8,480 To calculate the net profit, we need to deduct all expenses from the gross profit. From the extract, we have only one expense, which is depreciation. Depreciation of the vehicle is 10% of its cost of ₦5,000, which is ₦500. Therefore, the net profit can be calculated as: Net Profit = Gross Profit - Expenses Net Profit = 10,600 - 8,480 - 200 - 500 = ₦1,420 Hence, the answer is ₦1,420.