JAMB UTME - Principles of Accounts - 2023

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The purchases ledger control account is also known as the creditors control account.
Let me explain it simply for you.
In a business, the purchases ledger records all the transactions related to buying goods or services on credit. It keeps track of the amounts owed to suppliers or vendors. Now, the purchases ledger control account is a summary account that helps in monitoring and controlling these transactions.
Think of it as a big picture view. The purchases ledger control account combines all the individual creditor balances from the purchases ledger. It shows the total amount the business owes to its creditors at any given time.
By using the purchases ledger control account, the business can easily track the total purchases made on credit and manage its outstanding payments to suppliers. It provides a summary of the business's total credit purchases and the total amount owed to creditors.
So, in summary, the purchases ledger control account is the same as the creditors control account because it represents a summary of all the amounts owed to suppliers or vendors.

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Change in profit sharing ratio may occur as a result of the following:
- changes in skill contributed by partners
- ill health
- old age

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The capital is calculated as the difference between total assets and total liabilities. Therefore, the correct answer is ₦60,650.

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The main purpose of a transaction file is to **record the individual transactions** that occur within an organization. It serves as a **detailed record** of all the financial activities and events that take place, including the buying and selling of goods and services, making payments and receiving payments, and any other actions that involve the organization's finances. The transaction file is important because it allows for the **accurate and up-to-date tracking** of changes in assets, liabilities, income, and expenses. Each transaction is recorded with specific details, such as the date, amount, parties involved, and the specific accounts that are affected. By **updating the master files** (which contain information about accounts, customers, products, etc.) based on the transactions recorded in the transaction file, the organization can maintain accurate and reliable information for decision-making and financial reporting purposes. In summary, the main purpose of a transaction file is to **record individual financial transactions** and use that information to **update master files** and provide an accurate and complete picture of an organization's financial activities. It is a crucial tool for effectively managing and understanding an organization's financial position.

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The expense that is not apportioned in proportion to turnover is **rent**. To understand why, let's first understand what it means to apportion an expense in proportion to turnover. When an expense is apportioned in proportion to turnover, it means that the amount of the expense is allocated based on the amount of revenue or sales generated by a business. Now, let's look at the other expenses listed: - **Commission**: This expense is typically a percentage of the sales or revenue earned by the business. So, it is directly proportional to turnover. The more sales or revenue generated, the higher the commission expense will be. - **Discount allowed**: This expense is also directly related to turnover. When a business offers discounts to customers, the amount of the discount is deducted from the revenue earned. So, the higher the turnover, the higher the discount allowed expense. - **Carriage outwards**: This expense refers to the cost of delivering goods to customers. It is directly related to turnover because the more goods sold, the more deliveries need to be made and therefore the higher the carriage outwards expense. Now, let's focus on **rent**. Rent is a fixed expense that a business pays for using a physical space, such as a store or office. It is not directly related to the amount of sales or revenue generated. Even if a business has higher sales or turnover, the rent expense remains the same. Therefore, it is not apportioned in proportion to turnover. In summary, among the given options, the expense that is not apportioned in proportion to turnover is **rent**.

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The features are:
- include capital and revenue items
- accruals and prepayments are not included
- it is a real account
- only actual receipts and payments are recorded
- balance represent cash in hand

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Balance c/d = net profit + profit and loss - ( goodwill + ordinary share + preference share)
= (90,000 + 10,000) - ( 1000 + 25000 + 7500)
= 100,000 - 33500
= ₦66500

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Branch accounts are important tools that assist organizations in effectively managing their branch operations. They provide valuable information about the performance and profitability of each branch. However, **the importance of branch accounts does not include allowing fraud and wastage of resources**. Let's look at the other three options: 1. **Assisting the organization to determine the performance of a branch manager**: Branch accounts help evaluate the performance of a branch manager by providing detailed financial information about their branch. This can include sales revenue, expenses, and profit or loss generated by the branch. By analyzing this information, the organization can assess how well the branch manager is managing their resources and achieving targets. 2. **Enabling the organization to determine the branch that is making either profit or loss**: Branch accounts provide clear insights into the profitability or loss incurred by each branch. This information is crucial for decision-making purposes, such as whether to allocate additional resources, close an unprofitable branch, or implement measures to improve the performance of a struggling branch. 3. **Allowing proper control over the branch by the head office**: Branch accounts facilitate effective control and oversight of branch operations by the head office. By maintaining detailed financial records, the head office can monitor the financial performance of each branch, identify any irregularities, and take corrective actions when needed. This control ensures that the overall functioning of the branches is aligned with the organization's objectives and policies. In summary, while branch accounts are instrumental in evaluating branch manager performance, determining profitability, and ensuring control over branch operations, they do not permit fraud or wastage of resources.

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To calculate the interest on Dairo's drawings, we need to find out the total drawings made by Dairo during the year. Dairo's drawings: ₦12,000 Now, let's calculate the interest on Dairo's drawings using the formula: Interest on Drawings = Drawings * Rate of Interest Given: Rate of Interest = 10% Interest on Dairo's drawings = ₦12,000 * 10% = ₦1,200 Therefore, the interest on Dairo's drawings is ₦1,200.

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Subscription in advance is treated in the balance sheet as a current liability.
This is because subscription in advance represents money that has been paid by customers for products or services that will be delivered or rendered at a future date. Since the provision of these products or services has not yet occurred, the company has an obligation to fulfill this commitment in the future.
As a current liability, subscription in advance is considered a short-term obligation that is expected to be settled within the next operating cycle, typically within one year. It is categorized as a liability because the company owes a future performance to its customers.
On the balance sheet, current liabilities are listed under the liabilities section and represent obligations that are expected to be settled in the near future using current assets or by creating new liabilities. Examples of other current liabilities include accounts payable, accrued expenses, and short-term loans.
It is important for companies to accurately present subscription in advance as a current liability on the balance sheet, as it reflects the company's financial obligations and helps provide a clearer picture of its overall financial health and future cash flow obligations.

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When cash is paid into the bank, the effect on the transaction is that **the bank balance increases and the cash balance decreases**. Let's break it down step by step: 1. When cash is paid into the bank, we are essentially depositing money into our bank account. This means that the money is moving from our possession (cash balance) to the bank. 2. As the cash balance decreases, our bank balance increases. The bank keeps track of the money we deposit and adds it to our account balance. So, to summarize, when cash is paid into the bank, the bank balance increases because the bank is receiving the money, and the cash balance decreases because we no longer have the cash in our possession.

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The correct accounting entry for dissolution expenses is:
Dr: Realization account; Cr: Cash account.
When a partnership is dissolved, there may be expenses incurred during the winding up of the business. These expenses could include legal fees, accounting fees, and other costs related to the dissolution process.
In accounting, we need to record these expenses accurately. The first step is to debit (Dr) the Realization account. The Realization account is used to record all the assets that are sold or converted to cash during the liquidation process. By debiting this account, we reduce the value of the assets being realized.
Next, we credit (Cr) the Cash account. This entry reflects the payment of actual cash for the dissolution expenses. By crediting the Cash account, we increase the amount of cash that is being paid out from the partnership.
Overall, the dissolution expenses are recorded by debiting the Realization account and crediting the Cash account. This ensures that the expenses are properly accounted for and the financial statements accurately reflect the partnership's liquidation process.

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The amount ₦16,387.50 described as "Bank" in the Sales Ledger Control Account represents receipts from all debtors of the business.
In accounting, a Sales Ledger Control Account is used to keep track of the total amount owed by the customers (debtors) of a business. It is a summary account that consolidates all the individual customer accounts.
When a customer makes a payment, it is recorded as a receipt in the Sales Ledger Control Account. This includes payments received from both trade debtors (customers who owe money for credit sales) and cash sales (sales made in cash).
The ₦16,387.50 recorded as "Bank" in the Sales Ledger Control Account includes all the cash received from trade debtors as well as the cash sales made during the month, including any discounts given. Therefore, the correct answer is receipts from all debtors of the business.
It is important to note that the other options provided - receipts from trade debtors only, cash sales for the month including discount, and cash sales for the month excluding discount - are not accurate descriptions of the ₦16,387.50 recorded as "Bank" in the Sales Ledger Control Account.

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The methods of stock valuation are: FIFO, LIFO, Weighted Average Price Method, Simple Average Price Method, Base stock method.

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Factory overheads are also known as indirect cost. This term refers to the expenses incurred in a factory that cannot be directly attributed to the production of a specific product or service. These costs include items such as factory rent, utilities, depreciation of factory equipment, and indirect labor costs. Unlike direct manufacturing expenses, which are directly tied to the production process, factory overheads contribute to the overall manufacturing process but are not directly traceable to a specific product.

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When the goods are sold on credit to a buyer, the account receivable account debits, increasing the company's assets as the amount is receivable from the third party. The corresponding credit will be in the sales account, increasing the company's revenue.

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The short term solvency of a company is determined using the current ratio. The current ratio is a financial ratio that measures a company's ability to pay off its short-term liabilities (debts due within one year) with its short-term assets (assets that can be converted into cash within one year).
To calculate the current ratio, you divide a company's current assets (such as cash, inventory, and accounts receivable) by its current liabilities (such as accounts payable and short-term loans). The formula is:
Current Ratio = Current Assets / Current Liabilities
The current ratio provides valuable insight into a company's ability to meet its short-term financial obligations. A ratio higher than 1 indicates that the company has enough current assets to cover its current liabilities. This generally indicates good short-term solvency.
For example, if a company has current assets of $100,000 and current liabilities of $50,000, its current ratio would be 2. This means that the company has twice as many current assets as current liabilities, which is generally a good sign.
On the other hand, a current ratio lower than 1 implies that the company may have trouble paying off its short-term debts. This could indicate potential financial strain or difficulty in managing short-term liquidity.
Overall, the current ratio helps assess a company's ability to meet its short-term obligations. It provides a simple and comprehensible way to evaluate a company's short-term solvency by comparing its current assets to its current liabilities.

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Expenditure paid on bahalf of joint venture
Accountint entries:
Dr: Joint venture account
Cr: Bank account

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Salaries in arrears are treated in the balance sheet as a **current liability**. A balance sheet is a financial statement that shows a company's financial position at a specific point in time. It consists of three main sections: assets, liabilities, and owners' equity. Salaries in arrears are payments that a company owes to its employees for work that has already been performed but not yet paid. This is usually the result of a timing difference between when the work was done and when the payroll is processed. Since these unpaid salaries are obligations that need to be settled within one year, they are classified as current liabilities. Current liabilities are debts or obligations that must be paid within a year or the normal operating cycle of a business, whichever is longer. By reporting salaries in arrears as a current liability on the balance sheet, it provides information to stakeholders, such as investors and creditors, about the company's short-term financial obligations. It helps to give a more accurate picture of the company's financial health and its ability to meet its current obligations. Therefore, salaries in arrears are considered a current liability on the balance sheet.

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The item that does not appear in the trading account is **carriage outward**. The trading account is a financial statement that shows the calculation of gross profit or loss by comparing the value of goods bought (cost of goods sold) with the value of goods sold (sales). Let's break down the other three options: 1. **Carriage inward**: This refers to the transportation cost incurred to bring goods into the business. It is considered as part of the cost of goods sold, as it directly relates to acquiring the goods for sale. 2. **Opening stock**: This represents the value of goods held in the beginning of the accounting period, before any sales or purchases. It is included in the trading account as it helps determine the cost of goods sold. 3. **Sales**: This represents the total revenue generated from selling goods or services. It is a crucial component of the trading account since it represents the value of goods sold during the period. However, **carriage outward** does not belong in the trading account. It refers to the transportation cost incurred when delivering goods to customers. Carriage outward is not directly related to the cost of goods sold or the calculation of gross profit/loss. Therefore, it is not included in the trading account. In summary, the trading account includes carriage inward, opening stock, and sales, while carriage outward is not part of it.

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The correct answer is the statement of affairs.
The statement of affairs is a financial statement prepared to determine the trader's capital when complete records are not available. It is used in situations where a business does not keep detailed records of its transactions.
Statement of affairs helps determine the value of assets (what the business owns) and liabilities (what the business owes) at a specific point in time. It shows the overall financial position of the business by listing the assets and liabilities side by side.
By comparing the total value of assets with the total value of liabilities, we can calculate the trader's capital, which represents the difference between the two. It provides an estimate of the business owner's investment or equity in the business.
Since incomplete records lack a detailed record of transactions and financial data, the statement of affairs becomes a helpful tool to assess the trader's capital and provide a snapshot of the business's financial health.

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A journal is a book of original entry where all the financial transactions of a business are recorded in a chronological order. It serves as a primary record-keeping tool for accounting purposes. The main purpose of a journal is to provide a detailed record of each transaction that occurs in a business. This allows for accurate and transparent financial reporting and analysis. The journal typically has several headings to organize the information recorded. These headings include the date, debit, credit, and discount. - The "date" heading is used to record the date on which the transaction occurred. This is important for reference and to maintain a chronological order of the transactions. - The "debit" heading is used to record the amount of money or value that is going out of the business due to the transaction. This could include expenses, assets being sold, or liabilities being paid off. - The "credit" heading is used to record the amount of money or value that is coming into the business due to the transaction. This could include revenue, loans, or other sources of income. - Finally, the "discount" heading is used to record any discounts given or received during the transaction. Discounts are often given to customers as an incentive or to settle outstanding debts. Therefore, based on the given options, the heading that would not typically be found in a journal is "discount." This is because the journal mainly focuses on recording and summarizing financial transactions, and discounts are not directly related to the core financial operations of a business.

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Contra entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, it will be recorded on the credit side and vice-versa.

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The cash discount is allowed for prompt payment of an account or for payment within a specified period of time. It is divided into discount allowed and discount received.

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The fund that is specifically set aside to meet unforeseen or urgent expenditure is called the **contingencies fund**. The purpose of this fund is to provide financial resources for unexpected and urgent expenses that may arise during the year. These expenses could be related to emergencies, natural disasters, or any unforeseen circumstances that require immediate attention. The contigencies fund acts as a safety net, allowing the government or organization to swiftly address these unforeseen situations without having to wait for the regular budgetary process. It provides the flexibility and financial capability to handle urgent needs that cannot be foreseen or planned in advance. The main characteristic of the contigencies fund is that it is available for quick access and is not subject to the typical budgetary constraints. This ensures that the necessary funds are readily available in times of emergency, enabling prompt action and timely response. In summary, the contigencies fund is a dedicated fund that caters to unforeseen or urgent expenditure, providing the necessary financial resources to deal with unexpected situations efficiently and effectively.

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The correct answer is profit and loss account.
The Income and Expenditure account is the same thing as the profit and loss account for a sole trader.
The profit and loss account shows all the revenue and expenses incurred by the sole trader during a specific period of time, usually a year. It includes all the sales or income earned by the sole trader, as well as the costs and expenses incurred in running the business.
The revenue or income includes sales from products or services, any interest earned, and other sources of income. The expenses include costs incurred in producing or providing the products or services, wages or salaries of employees, rent, utilities, and other operating expenses.
By subtracting the total expenses from the total revenue, the profit or loss for the sole trader can be calculated. If the revenue is higher than the expenses, it represents a profit, while if the expenses exceed the revenue, it represents a loss.
In summary, the profit and loss account, or the Income and Expenditure account, for a sole trader shows the financial performance of the business by summarizing the revenues and expenses over a specific period. It helps the sole trader assess the profitability of the business and make informed decisions.

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A trading account is a financial statement that shows the profit or loss of a business through its trading activities. It includes all the revenues and expenses directly related to the buying and selling of goods. Out of the options provided, the expenses that are charged to the trading account are: 1. Carriage Inwards: Carriage inwards refers to the transportation costs incurred in bringing goods into the business. It can include expenses such as freight charges, import duties, and handling fees. These expenses are directly related to the purchase of goods and are considered a part of the cost of inventory. Hence, carriage inwards is charged to the trading account. 2. Carriage Outwards: Carriage outwards refers to the transportation costs incurred in delivering goods from the business to the customers. It includes expenses such as delivery charges, packaging costs, and shipping fees. Carriage outwards is not directly related to the purchase of goods but is rather an expense incurred in selling them. Therefore, carriage outwards is not charged to the trading account. 3. Rent: Rent refers to the cost of occupying a property for business purposes. Rent is not directly related to the buying and selling of goods, but rather to the use of the premises where the business operates. Hence, rent is not charged to the trading account. 4. Discount Allowed: Discount allowed represents the reduction in the selling price of goods given to customers as an incentive or reward. It is a reduction in revenue and does not directly relate to the cost of inventory or the buying and selling of goods. Therefore, discount allowed is not charged to the trading account. In summary, the expenses that are charged to the trading account are carriage inwards. Rent, discount allowed, and carriage outwards are not charged to the trading account as they are not directly related to the buying and selling of goods.

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The concept that recognizes the assumption of a business continuing to exist into the foreseeable future is called "going concern." This concept assumes that a business will not be liquidated or cease to operate in the near future. It is based on the belief that businesses are established with the intention of operating indefinitely, unless there is evidence to suggest otherwise. The "going concern" concept is important because it affects how a business's financial statements are prepared. When preparing financial statements, the assumption is made that the business will continue its operations and fulfill its commitments. This assumption allows the use of historical cost accounting, where assets and liabilities are recorded at their original cost. In simpler terms, the "going concern" concept basically means that when a business is being evaluated, it is assumed to be an ongoing entity with no immediate plans of shutting down. This assumption allows for consistent and reliable financial reporting, as it reflects the expectation that the business will continue its operations and meet its obligations in the future.

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One of the advantages of FIFO method is that the stock received first will be issued out first thereby reducing the problem of deterioration or obsolesence and also items are issued in order of receipt therefore, it is realistic.

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In the public sector, the **vote book** is used to monitor and control government expenditure. The vote book is a record-keeping tool that helps in tracking how government funds are being spent. It is used to record and track all financial transactions related to government expenditure. Here is a simple explanation of how the vote book works: 1. Each government department or ministry is allocated a specific budget for a financial year. 2. The vote book is used to allocate and track the funds allocated to each department or ministry. 3. Whenever a department or ministry wants to spend money from their allocated budget, they need to make an entry in the vote book. 4. These entries in the vote book include details such as the purpose of expenditure, the amount, and any supporting documentation. 5. By maintaining a vote book, the government can monitor and control the expenses incurred by each department or ministry. 6. The vote book also helps to ensure that government funds are being used for the intended purposes and are not being misused or wasted. 7. Regular analysis and review of the vote book enable the government to assess the effectiveness of their spending and make informed decisions for future budgets. In summary, the vote book is essential in the public sector as it serves as a monitoring and control mechanism for government expenditure. It ensures transparency and accountability and helps in making informed financial decisions.

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The option that is used to service all operations of government is **consolidated revenue fund**. The consolidated revenue fund is like a big pot where all the money collected by the government goes into. This includes the taxes that people and businesses pay, as well as other sources of revenue such as fees and fines. Once the money is in the consolidated revenue fund, it is then used to pay for various government expenses. This includes things like salaries of government employees, funding for public programs and services, and infrastructure projects like building roads and schools. The important thing to note is that the consolidated revenue fund is used to cover all aspects of government operations. It is the central source of income that allows the government to function and provide services to the public. Therefore, the correct option that is used to service all operations of government is the **consolidated revenue fund**.

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Discount allowed is a benefit that is enjoyed by customers. When a company offers a discount, it means they are reducing the usual price of a product or service. This reduction in price is given to the customers as an incentive to encourage them to make a purchase. Discounts can be given for various reasons, such as promotional offers, seasonal sales, or loyalty programs. By offering discounts, companies aim to attract more customers and make their products or services more affordable and appealing. Managers, staff of the company, and suppliers do not directly benefit from the discount allowed. While managers may strategize and set the discount policies, it is ultimately the customers who get to enjoy the discounted prices. Therefore, when it comes to discounts, it is the customers who receive the advantage of reduced prices, making it a benefit enjoyed by them.

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The balance as per bank statement is calculated by adding the balance as per cash book and the unpresented cheques then subtracting the uncredited cheques. Therefore, the balance as per bank statement is ₦5467 + ₦19404 - ₦4410 = ₦20,461. Unpresented cheques are cheques that have been issued by a company but have not yet cleared through the bank. Uncredited cheques are cheques that have been received by a company but have not yet cleared through the bank.

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Shares can be issued to the public for subscription. A lot of money can be raised to finance the operation of the business through the issue of new shares to members of the public.

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Mark up is when profit is expressed as a percentage of cost price i.e cost of goods sold.

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To calculate the amount of preference shares dividends payable at the end of the year, we need to consider the number of preference shares and the dividend rate. In the given information, we know that Larry Limited has 150,000 preference shares of ₦1 each fully paid. The dividend rate for these preference shares is mentioned as 5%. To calculate the total dividend payable for the preference shares, we can multiply the number of preference shares by the dividend rate. 150,000 preference shares x 5% dividend rate = 7,500. Therefore, the amount of preference shares dividends payable at the end of the year is ₦7,500.

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The document that serves as the legal charter of a company and defines the boundaries of its operations is known as the memorandum of association. This document outlines the company's objectives, activities, and powers, as well as its relationship with shareholders and the outside world. It acts as a guidebook for the company's existence and sets the rules and regulations by which the company must abide. In simpler terms, the memorandum of association is like the Constitution of a country, as it establishes the framework and scope within which the company operates.

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Bank balance = 78,650 - ( 4000 + 20500 + 40000)
= 78650 - 64500
= ₦14,150

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In a partnership, the account where the profit is distributed to the partners according to their profit sharing ratio is called the **appropriation account**. The appropriation account is a separate account created to record the distribution of profit among the partners. It is prepared after the preparation of the trading account, profit and loss account, and balance sheet. Here's a simple breakdown of the other options and their roles in the partnership: - The **trading account** is prepared to calculate the gross profit or loss of the partnership. It includes revenue from sales, cost of goods sold, and any other trading-related expenses. - The **profit and loss account** is prepared to determine the net profit or loss of the partnership. It includes all the operating expenses, such as salaries, rent, advertising, and depreciation. - The **balance sheet** is a financial statement that shows the financial position of the partnership at a specific point in time. It includes the assets, liabilities, and capital of the partnership. So, to summarize, while the trading account, profit and loss account, and balance sheet provide information about the overall financial performance and position of the partnership, the appropriation account specifically deals with the distribution of profit among the partners based on their profit sharing ratio.

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Goods received from head office
Accounting entries:
Dr: Purchase account
Cr: Head office current account