JAMB UTME - Principles of Accounts - 2015

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The ledger entry to be made if cash sales is banked is "bank, credit cash." When a business makes a cash sale, the cash received from the customer is considered an asset for the business. To record this transaction, the business would debit the "cash" account to increase its cash balance and credit the "sales" account to recognize the revenue earned from the sale. However, when the cash is then deposited into the bank, the business must make another ledger entry to reflect this change. The business would debit the "bank" account to increase the bank balance and credit the "cash" account to decrease the cash balance, since the cash has now been transferred to the bank. In summary, the ledger entry for banked cash sales would be: Debit: Bank Credit: Cash

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i.e. creditors plus subscription in advance 85000 + 3000 = 88,000

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given that a maximum of 260 units can be taken from the last receipt, the balance of 440 units (700-260) would be issued at ₦1.00 which would be taken from the first materials received (100 units)

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The nominal value of each share is ₦0.50. Authorized share capital is the maximum amount of share capital that a company is allowed to issue, while issued share capital is the actual amount of share capital that the company has offered to shareholders and has been accepted. In this case, the authorized share capital is 50 million and the company has split it into 100 million shares. However, only 80 million shares have been offered for subscription, and they have been fully subscribed on issue at a price of 60k per share. To calculate the nominal value of each share, we can divide the total amount of issued share capital (which is 80 million shares x 60k per share = 4.8 billion) by the total number of shares issued (which is 80 million shares). This gives us a nominal value of ₦0.06 per share. Therefore, the correct answer is option D: ₦0.50. Note that this is not the same as the issue price of the shares, which was 60k per share. The issue price is the price at which the shares were offered to shareholders and is usually higher than the nominal value.

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To determine how much rent is apportioned to department Z, we need to use the floor space occupied by department Z as a percentage of the total floor space occupied by all three departments. The total floor space occupied by all three departments is: 80 sqm (Department X) + 60 sqm (Department Y) + 60 sqm (Department Z) = 200 sqm The percentage of floor space occupied by department Z is: 60 sqm (Department Z) / 200 sqm (Total floor space) = 0.3 or 30% To apportion the rent to department Z, we need to multiply the total rent of ₦6,000 by the percentage of floor space occupied by department Z: ₦6,000 x 0.3 = ₦1,800 Therefore, the rent apportioned to department Z is ₦1,800.

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An advantage of using accounting ratios is that they facilitate decision making. Accounting ratios are useful tools for evaluating the financial performance of a business, as they provide insight into how well the business is managing its finances. By comparing different ratios, such as the current ratio or return on investment, investors and managers can gain a better understanding of the company's financial health and make informed decisions about how to improve it. For example, if a company's current ratio is low, it may indicate that the company is having difficulty paying its short-term debts, which could lead to financial trouble down the road. By using accounting ratios to identify areas of weakness, the company can take steps to address them, such as reducing expenses or increasing revenue. Overall, accounting ratios are a valuable tool for decision making because they help to provide a clear picture of a company's financial situation and can be used to identify areas for improvement.

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Patrick is receiving and should be debited while generator account is giving

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The accounting concept that assumes that a business will continue to operate into the foreseeable future is called the "going concern" concept. This concept is based on the idea that a business will not be liquidated or cease operations in the near future, but rather will continue to operate and fulfill its obligations to its stakeholders. This assumption is important because it allows accountants to value assets, liabilities, and equity based on the assumption that the business will continue to operate. This makes it easier to prepare financial statements, which provide important information to investors, creditors, and other stakeholders about the financial health of the business. For example, if a business is assumed to be a going concern, its assets will be valued at their expected future use, rather than their liquidation value. This means that equipment and buildings, for example, will be valued at their expected useful life, rather than the amount they could be sold for if the business were to be liquidated. Overall, the going concern concept is an important assumption that helps ensure that financial statements accurately reflect the financial position and performance of a business.

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When bad debt is recovered, the appropriate accounting entries to be made depend on the original entry made when the bad debt was written off. Assuming that the original entry was a debit to bad debt expense account and a credit to accounts receivable: The correct accounting entry when bad debt is recovered is to debit the accounts receivable account and credit the bad debt recovered account. This reflects the fact that the amount owed by the customer is being received and the previously written-off bad debt is being reversed. Therefore, the correct option is: debit debtors accounts and credit recovered account.

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A liquidity ratio is a financial ratio that measures the ability of a company to meet its current obligations (i.e., debts due within one year) using its current assets (i.e., assets that can be easily converted into cash within a year). In other words, it measures the company's short-term solvency or its ability to pay off its debts on time. There are different types of liquidity ratios, such as the current ratio and the quick ratio. The current ratio compares a company's current assets to its current liabilities, while the quick ratio (also called the acid-test ratio) only considers the most liquid assets, such as cash and marketable securities, and compares them to the current liabilities. Investors and creditors use liquidity ratios to assess a company's ability to manage its cash flow and avoid liquidity problems. A high liquidity ratio indicates that the company has enough short-term assets to cover its short-term debts, while a low liquidity ratio may suggest that the company may struggle to pay off its debts when they become due. However, a very high liquidity ratio may also indicate that the company is not using its assets efficiently, as it is holding too much cash and not investing it in growth opportunities.

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Being that debtors balance minus bad debt written off multiplied by 10% and subtracted from the initial provision

28000 – 3000 = 25,000 X 10% = 2500

:. 2500 – 1500 = 1,000 (increase in provisions)

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When shares are sold at a price that is higher than their nominal or face value, they are said to have been issued at a premium. The nominal value of a share is the minimum value at which it can be issued as specified in the memorandum of association. The premium is the amount paid by the buyer of the share over and above its nominal value. For example, if a company issues shares with a nominal value of $1 and sells them at $2, the shares are issued at a premium of $1. The premium amount is added to the share capital of the company, and it represents the excess amount that investors are willing to pay for the shares. The issuance of shares at a premium is a common practice in the stock market. It can help companies raise more capital than they would have been able to with shares issued at par or below par value. This is because investors are willing to pay a premium for shares of a company that is performing well, has good growth potential, or has a strong market reputation. In summary, when shares are sold at a price higher than their nominal or face value, they are said to have been issued at a premium. The premium represents the excess amount that investors are willing to pay for the shares, and it can help companies raise more capital.

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Total purchases = credit purchases plus cash purchases i.e. ₦52000 + ₦3000 = ₦55,000

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The option that cannot be realized is "goodwill." Goodwill is an intangible asset that represents the value of a business beyond its tangible assets, such as property, equipment, and inventory. It includes the value of the company's reputation, brand recognition, customer loyalty, and other factors that contribute to the company's overall worth. Goodwill cannot be realized because it is not a physical asset that can be bought or sold separately from the business itself. It only exists as part of the overall value of the business. For example, if a business is sold for a price that includes goodwill, the seller cannot expect to receive a separate payment specifically for the goodwill. In contrast, creditors and debtors are realizable because they represent actual financial obligations between two parties that can be settled through payment or other means. Motor vehicles are also realizable because they are physical assets that can be sold or traded for a specific amount of money.

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The income and expenditure account of a club is the same as a profit and loss account. A profit and loss account is a financial statement that shows a company's revenues, expenses, gains, and losses over a specific period, usually a year. The purpose of the profit and loss account is to determine whether the business has made a profit or a loss during the accounting period. Similarly, the income and expenditure account of a club is a financial statement that shows the club's income and expenses over a specific period. It is used to determine whether the club has a surplus or a deficit during that period. The income and expenditure account is prepared on the basis of the accrual accounting system, where income is recognized when earned, and expenses are recognized when incurred, regardless of when the cash is received or paid. In contrast, a cash book is a financial record of cash transactions of the club, including receipts and payments. It does not show the overall financial performance of the club over a specific period, as does the income and expenditure account. Therefore, the income and expenditure account of a club is the same as a profit and loss account, as they both serve the same purpose of determining the financial performance of an organization over a specific period.

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This is the basis for recording in government accounting where revenue are recorded when cash is received.

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Cost apportionment is the sharing of commonly incurred expenses proportionately where two or more cost centres are involved

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Total asset less current liabilities

400000 + 205000 + 150,000 + 32000– 85000– 3000 = 699000

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The accounting convention that states that stock should be valued at the lower of cost and net realized value is called the "prudence" convention. The prudence convention requires accountants to be cautious when valuing assets, such as stock, and to err on the side of caution when there is uncertainty about their value. In the case of stock, the convention suggests that it should be valued at either the cost at which it was purchased or the net realized value that it can be sold for, whichever is lower. This approach ensures that the financial statements of a company do not overstate the value of its stock, which could mislead investors and other stakeholders. Instead, it provides a conservative estimate of the stock's value that takes into account any potential losses that may occur.

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The major distinguishing element between the final account of a partnership and that of a sole trader is the inclusion of the appropriation account in the partnership's final account. The appropriation account shows how the profits or losses of the partnership are divided among the partners. In a sole trader's final account, there is no need for an appropriation account because all the profits or losses belong to the sole trader alone. However, in a partnership, the profits or losses are divided among the partners according to their agreed-upon sharing ratio. The appropriation account shows how these profits or losses are divided and allocated to each partner's capital account. The other accounts listed in the question (drawing account, capital account, and creditor account) are common to both sole trader and partnership final accounts. However, the appropriation account is unique to partnership final accounts and is necessary to show how the profits or losses of the partnership are distributed among the partners.

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To determine the profit sharing ratio based on capital contribution, we need to calculate the total capital contributed by each partner. Timo's total capital = ₦12,000 (cash) + ₦18,000 (furniture) + ₦70,000 (vehicle) = ₦100,000 Chris's total capital = ₦10,000 (cash) + ₦105,000 (building) + ₦35,000 (personal computers) = ₦150,000 The total capital contributed by Teechi and Co. is the sum of Timo's and Chris's capital: Total capital = ₦100,000 + ₦150,000 = ₦250,000 The profit sharing ratio based on capital contribution is the proportion of the total capital contributed by each partner. Timo's proportion = ₦100,000 / ₦250,000 = 2/5 Chris's proportion = ₦150,000 / ₦250,000 = 3/5 Therefore, the profit sharing ratio based on capital contribution by Teechi and Co. is 2:3, which means that Timo will receive 2 parts of the profit for every 5 parts received by Chris.

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To realize an asset means to turn it into cash or its equivalent, such as selling it for money. When you realize an asset, you're essentially converting the asset into a liquid form that can be easily used or spent. This could involve selling a physical asset, like a car or a house, or selling a financial asset, like stocks or bonds. Once you've realized an asset, you have the cash or funds to use for other purposes, such as investing, paying off debt, or making a purchase. So, to realize an asset means to convert it into cash or its equivalent, so that it can be used or spent more easily.

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To calculate the gross profit for department A, you need to subtract the cost of sales from the sales revenue. Sales revenue for department A = ₦180,000 Cost of sales for department A = ₦79,000 Therefore, the gross profit for department A is: Gross profit = Sales revenue - Cost of sales Gross profit = ₦180,000 - ₦79,000 Gross profit = ₦101,000 So, the correct answer is ₦101,000.

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To determine the closing capital as at 31/12/2014, we need to calculate the total assets and total liabilities of SegunOjo's business as at that date, and then subtract the total liabilities from the total assets. The resulting figure will be the closing capital. Total assets as at 31/12/2014: - Cash in hand: 1200 - Cash at bank: 2500 - Debtors: 10000 - Stock: 20500 - Furnishing: 4000 Total assets = 1200 + 2500 + 10000 + 20500 + 4000 = 41,700 Total liabilities as at 31/12/2014: - Creditors: 17000 Total liabilities = 17000 Closing capital = Total assets - Total liabilities = 41,700 - 17000 = 27,700 Therefore, the closing capital as at 31/12/2014 is 27,700. Option (D) is the correct answer.

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dishonoured cheques are added to uncredited cheques just like standing order and bank charges.

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The feature that is not a feature of accounting information is "affordability." Accounting information provides data and insights that are essential for businesses and individuals to make informed financial decisions. There are several features of accounting information that are important to ensure that the information is reliable and useful. First, accounting information should be timely, which means that it is available when it is needed. This allows users of the information to make decisions based on current and relevant data. Second, accounting information should be accurate, which means that it is free from errors and reflects the true financial position of the business or individual. Third, accounting information should be complete, which means that it includes all relevant information and data that is necessary for making informed financial decisions. However, affordability is not a feature of accounting information. While the cost of obtaining accounting information can vary depending on the complexity and scope of the information needed, affordability is not a characteristic of the information itself. Instead, the cost of obtaining accounting information is a practical consideration that individuals and businesses must take into account when deciding whether or not to seek out accounting information.

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The correct answer is "depreciation". Depreciation is a non-cash expense that represents the wear and tear of a fixed asset over time. Fixed assets are long-term assets, such as buildings, machinery, and equipment, that are used to produce goods or services. Depreciation is used to spread the cost of these assets over their useful life, which is typically several years. Depreciation is important because it reduces the value of an asset on a company's balance sheet, which in turn affects its financial statements. By including depreciation in its financial statements, a company can better reflect the true cost of using its assets, which can help investors and other stakeholders make more informed decisions.

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Dishonoured cheques are not added to uncredited cheques, standing order, or bank charges. Uncredited cheques refer to cheques that have been received by a business but have not yet been cleared by the bank. These cheques are added to the business's cash book as receipts but are not immediately added to the bank balance because they have not been credited to the account by the bank. Standing order refers to a regular, fixed payment that is made from a bank account, such as rent or loan payments. These payments are deducted automatically by the bank and are included in the bank statement. Bank charges refer to the fees charged by the bank for various services such as account maintenance, overdrafts, or returned cheques. These charges are deducted from the bank account by the bank and are included in the bank statement. Dishonoured cheques refer to cheques that have been returned by the bank unpaid, usually due to insufficient funds or other issues with the account. These cheques are not included in the uncredited cheques or any other receipts in the cash book because they are not a valid form of payment. Instead, they are recorded in the cash book as a reduction in the bank balance. In summary, dishonoured cheques are not added to uncredited cheques, standing orders, or bank charges. They are treated as a reduction in the bank balance and are recorded separately in the cash book.

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Allotment = 500,000 = 0.4 or 40%

∴ Each subscriber would get 40% shares of what they applied for.

∴ 50,000 x 0.4 = 20,000 units

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Financial accounting is a systematic process of recording, analyzing and reporting financial transactions and events to provide information that is useful in making business decisions. The specific principles, bases, conventions, rules, and practices adopted by an enterprise in preparing and presenting financial statements are known as accounting policies. These policies help ensure that the financial statements are consistent, reliable, and comparable from one period to another, and are in accordance with applicable accounting standards and regulations. In a simple way, accounting policies set the guidelines for how financial information is recorded and presented in financial statements.

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The gross profit percentage of sales would be

20% x ₦10,000 = ₦2000

If cost of sales + gross profit = ₦10,000 = ₦2000

:. ₦8000 + ₦2000 = ₦10,000

If cost of goods available for sales less closing stock

= cost of sales

:. ₦8200 + ₦200 = ₦8000

Hence; cost of goods available for sale = opening stock + purchases

:. ₦8200 = ₦250 + A

= ₦8200 – ₦250

=₦7950

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This type of error deals directly with the wrong use of figures

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An expense is said to be revenue in nature if it adds or contributes to the operating income of the business. Revenue expenses are the day-to-day expenses that a business incurs in order to maintain its operations and generate revenue. Examples of revenue expenses include rent, salaries and wages, utilities, advertising, and office supplies. These expenses are considered as necessary to maintain the normal operations of a business and generate revenue. Revenue expenses are different from capital expenses, which are incurred for acquiring or improving fixed assets of the business, such as land, buildings, or machinery. Capital expenses are not considered as revenue expenses because they are not part of the day-to-day operations of the business and do not directly contribute to generating revenue. In summary, revenue expenses are those expenses that are necessary to maintain the normal operations of a business and generate revenue. They add or contribute to the operating income of the business.

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If the partnership agreement does not specify how the net profit is to be divided, then the profit should be divided equally among all partners. This means that each partner would receive an equal share of the profits, regardless of their individual contributions or investments in the partnership. This is a default method of dividing profits in the absence of any specific agreement between the partners.

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The loss made by a non-profit organization is called a "deficit". A deficit occurs when the organization's expenses exceed its revenue or funding sources. In other words, the organization is spending more money than it is bringing in. Non-profit organizations, unlike for-profit companies, do not exist to make a profit for shareholders or owners. Instead, they have a mission to serve a particular cause or group of people. They rely on donations, grants, and other sources of funding to support their operations. When a non-profit organization has a deficit, it can be a cause for concern because it means that the organization may not be able to fulfill its mission and serve its beneficiaries effectively. However, deficits can be managed and addressed through strategies such as increasing revenue, reducing expenses, or seeking additional funding sources.

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general reserves is not a form of capital reserves. It is considered as revenue reserves

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The correct double entry to record the goodwill in the books is: "goodwill account and credit purchase of business account." When a business is purchased for a price that exceeds the fair value of its identifiable assets and liabilities, the excess amount is called "goodwill." Goodwill represents the value of the business's reputation, customer base, and other intangible assets that are not recognized on the balance sheet. In this case, Dangote acquired Dantata's business for ₦350,000, which is less than the total asset worth of ₦820,000 but more than the liabilities of ₦640,000. This means that there is goodwill of ₦170,000 (₦820,000 - ₦640,000 - ₦350,000) associated with the acquisition. To record the goodwill in the books, the goodwill account should be debited for ₦170,000, and the purchase of business account should be credited for ₦350,000 (the purchase price). This entry recognizes the value of the goodwill and the cost of acquiring the business. Therefore, is the correct answer.

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When a delivery van is sold for cash, the "cash account" is debited. In accounting, every transaction involves at least two accounts, one to be debited and the other to be credited. In this transaction, the "delivery van account" is credited since it represents a tangible asset that is being sold. On the other hand, the "cash account" is debited, as cash is received in exchange for the delivery van. The "sales account" is not debited in this transaction because it only records the revenue earned from the sale of goods or services. The delivery van is not a product or service sold by the business, but rather a capital asset used for transportation purposes. The "profit and loss accounts" are not affected by the sale of a delivery van for cash since they are used to record revenues, expenses, gains, and losses that occur during the normal course of business operations. The sale of a capital asset like a delivery van falls outside of normal business operations and is recorded separately in the balance sheet. In summary, the "cash account" is debited when a delivery van is sold for cash, representing the inflow of cash into the business as a result of the sale of the delivery van.

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The purpose of a trading account is to ascertain the gross profit or loss made by a company during a specific period of time, usually a year. In simple terms, a trading account is a financial statement that shows the revenue generated from the sale of goods or services and the cost of producing or purchasing those goods or services. It includes the cost of goods sold, which is the total cost of all the goods sold during the period, and the revenue from sales. The difference between these two figures is the gross profit or loss. The gross profit or loss is an important measure of a company's profitability and provides valuable information for decision-making. If a company has a high gross profit, it means that it is generating a significant amount of revenue from its sales and is able to cover its costs of production. On the other hand, if a company has a low or negative gross profit, it may indicate that it is not generating enough revenue from sales to cover its costs, which can have implications for its long-term viability. Therefore, the purpose of a trading account is to provide information about a company's revenue and expenses related to the sale of goods or services, and to calculate the gross profit or loss made during a specific period, which is a crucial measure of a company's financial performance.

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If a trial balance is in agreement, it does not necessarily mean that the accounting system is error-free. A trial balance is simply a tool used to check the mathematical accuracy of the accounting system. It lists all the accounts in the ledger with their debit and credit balances. The total debits should equal the total credits. If they do, the trial balance is said to "balance." While a balanced trial balance is a good indication that the equal debit and credit entries were recorded for each transaction and the debit and credit from the journal were posted to the accounts, it does not guarantee that the account balances were correctly computed. For example, a company may have recorded a transaction incorrectly in both the debit and credit accounts, resulting in an overall balanced trial balance but incorrect account balances. Alternatively, a company may have accidentally transposed numbers when recording transactions, resulting in a balanced trial balance but incorrect account balances. Therefore, while a balanced trial balance is an important step in the accounting process, it is not a guarantee that all accounts have been recorded and computed correctly. Additional checks and balances should be performed to ensure the accuracy of the accounting system.

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simple average method usually add up all receipt prices ahead of the issued material divided by 2