JAMB UTME - Principles of Accounts - 2025
Pergunta 1 Relatório
Factory cost of production
Detalhes da Resposta
The factory cost of production (also called the cost of goods manufactured) represents the total cost incurred in converting raw materials into finished goods within the factory. It is computed by combining all direct and indirect manufacturing costs and adjusting for any changes in work-in-progress.
The standard computation follows this structure:
- Raw materials consumed = Opening stock of raw materials + Purchases of raw materials - Closing stock of raw materials
- Prime cost = Raw materials consumed + Direct wages (direct labour)
- Total factory cost = Prime cost + Factory overheads (indirect materials, indirect wages, factory rent, depreciation of factory machinery, etc.)
- Factory cost of production = Total factory cost + Opening work-in-progress - Closing work-in-progress
Each step builds on the previous one. Raw materials consumed captures only the materials actually used in production, not the full amount purchased. Prime cost isolates the direct costs. Factory overheads add the indirect costs that support production but cannot be traced to a single product. Finally, the work-in-progress adjustment accounts for partially completed goods: opening WIP adds costs brought forward from the previous period, while closing WIP removes costs that relate to goods not yet finished.
Applying these steps to the figures in the manufacturing account provided, the factory cost of production is #56,300.
Common errors on this type of question include forgetting to adjust for work-in-progress (which would give an incorrect total factory cost figure), or subtracting opening WIP instead of adding it. Remember: opening WIP is added because those partially completed goods from last period are now being finished, adding to this period's output. Closing WIP is subtracted because those goods are not yet complete and their cost should not be included in the cost of finished production.
Pergunta 2 Relatório
A financial plan of action expressed in monetary terms is known as
Detalhes da Resposta
Several public-finance terms describe how money is planned, released, or held for government or organisational spending, and it is important to distinguish them from one another.
A budget is a financial plan of action, expressed in monetary terms, that sets out expected income and planned expenditure for a future period, usually a financial year. It is the master document from which spending authority is derived. A warrant is an authorisation, issued after the budget is approved, permitting a specific amount to actually be spent or withdrawn from public funds; it releases money rather than planning it. The consolidated fund is the main account into which government revenues are paid and from which authorised expenditure is drawn, it is a fund, not a plan. Imprest is a fixed sum of cash advanced to an officer for minor, day-to-day expenses, to be accounted for and replenished periodically; it is a method of controlling petty spending, not a plan expressed for the whole organisation.
Because it is the document that sets out a plan of action in monetary terms before any spending happens, the correct description is a budget.
Examination tip: a budget plans spending in advance, while a warrant authorises money to actually be released against that plan; do not confuse the planning stage with the release stage.
Pergunta 3 Relatório
The cost of raw materials consumed is
Detalhes da Resposta
In manufacturing accounts, the cost of raw materials consumed represents the total value of raw materials actually used in production during a period. It is calculated using the formula:
\[ \text{Cost of Raw Materials Consumed} = \text{Opening Stock of Raw Materials} + \text{Net Purchases} - \text{Closing Stock of Raw Materials} \]
where Net Purchases equals Purchases of Raw Materials plus any Carriage Inward, minus any Returns Outward on raw materials.
To solve the question:
- Identify the opening stock of raw materials from the data provided.
- Add the purchases of raw materials (and carriage inward, if given) to get the total raw materials available for use.
- Subtract any returns outward on raw materials to arrive at net purchases.
- Subtract the closing stock of raw materials from the total raw materials available.
Applying this formula to the figures provided in the table yields a cost of raw materials consumed of #43,500.
A common error is to confuse the cost of raw materials consumed with the total purchases figure (ignoring opening and closing stocks), or to add the closing stock instead of subtracting it. Another frequent mistake is to include factory overheads or direct wages in the raw materials figure, which belong to later stages of the manufacturing account.
Exam tip: Always distinguish between raw materials purchased and raw materials consumed. The consumed figure adjusts purchases for changes in raw material inventory (opening and closing stocks) and is the figure that enters the manufacturing cost calculation.
Pergunta 4 Relatório
Which of the following is not true of a trial balance?
Detalhes da Resposta
A trial balance is a working schedule prepared by listing every account balance carried in the general ledger, side by side under debit and credit columns, at a given date.
Three of the statements describe genuine, well-established purposes of a trial balance. Listing the balances in the general ledger is literally what a trial balance is. Checking that total debits equal total credits proves the arithmetical accuracy of the double-entry postings (though it cannot catch every type of error, such as an error of omission or an error of principle). It is also the summary document from which the trading account, profit and loss account, and balance sheet are prepared.
The statement that does not belong describes a different schedule entirely: a list of balances taken from a subsidiary (sales or purchases) ledger and compared against the related control account in the general ledger. That comparison is carried out through a schedule of debtors or schedule of creditors, reconciled against the Sales Ledger Control Account or Purchases Ledger Control Account. The trial balance, by contrast, is drawn from the general ledger itself, not from a subsidiary ledger, and it is not used to test agreement with a control account.
A common slip is to blur the trial balance with the schedule of debtors/creditors because both are "lists of balances used to check something agrees." Keep them separate: the trial balance checks that debits equal credits across the whole general ledger; the schedule of debtors or creditors checks that individual customer or supplier balances add up to the corresponding control account balance.
Pergunta 5 Relatório
Discounts received are
Detalhes da Resposta
Discounts received are cash discounts a business is given by its suppliers for paying amounts owed promptly. Because this discount reduces what the business has to pay for goods already recorded at full price in the Purchases account, it represents a gain to the business, not a trading item.
Gains of this kind are recorded in the Profit and Loss Account, on the credit side, because they increase net profit without arising directly from the buying and selling of goods that the Trading Account measures. The Trading Account is reserved for calculating gross profit from sales, cost of sales, and closing stock, so a financial gain such as a discount received does not belong there.
It is also useful to keep discounts received and discounts allowed separate in your mind: discounts allowed are an expense to the business (debited to the Profit and Loss Account) because they represent an amount forgone from customers, while discounts received are the opposite, an income, so they are credited.
Remember that the discount received account is a gain (credit balance) that is transferred to the credit side of the Profit and Loss Account, never to the trading section of the final accounts.
Pergunta 6 Relatório
Provision for depreciation on delivery van is charged to
Detalhes da Resposta
Depreciation is the systematic allocation of the cost of a fixed asset over its useful life, reflecting the wearing out, obsolescence, or reduction in value of the asset as it is used in the business.
A delivery van is used to distribute goods to customers, so the cost of running and maintaining it, including depreciation, is a distribution or selling expense rather than a cost of manufacturing goods. The manufacturing account gathers only the costs of getting goods into a finished state, such as raw materials, direct labour, and factory overheads like depreciation on production machinery. The trading account is used to calculate gross profit from sales revenue and the cost of goods sold, so it does not carry expense items such as depreciation. The appropriation account deals with how net profit is shared, for example between partners or as tax and dividends, not with operating expenses.
Because depreciation on the delivery van is an operating expense connected with distributing goods rather than producing them or sharing profit, it is deducted in arriving at net profit, which is calculated in the profit and loss account.
Examination tip: to place depreciation correctly, identify what the asset is used for. Assets used in production belong in the manufacturing account; assets used in selling, distribution, or administration belong in the profit and loss account.
Pergunta 7 Relatório
When shares are sold at less than the nominal value, it means they are issued at
Detalhes da Resposta
Every share has a nominal (or par) value, which is the fixed face value stated on the share certificate and in the company's memorandum of association. Shares can be issued at exactly this nominal value, above it, or below it, and each situation has its own accounting term.
When shares are sold for less than their nominal value, they are said to be issued at a discount, and the shortfall between the nominal value and the (lower) issue price is recorded as a discount on issue of shares. If shares are sold for exactly their nominal value, they are issued at par; if sold for more than their nominal value, they are issued at a premium, with the excess credited to a share premium account. "At a loss" is not the correct technical term used in share issue accounting for this situation, even though the company receives less cash than the shares' face value.
Examination reminder: keep the three issue-price terms distinct: at par (equal to nominal value), at a premium (above nominal value), and at a discount (below nominal value); each has its own specific accounting treatment.
Pergunta 8 Relatório
Which of the following is used before the appropriation bill is approved?
Detalhes da Resposta
In government (public sector) accounting, spending from the treasury cannot begin until the relevant authority has been formally granted. The appropriation bill, once passed, becomes the Appropriation Act, which provides the main legal authority for government ministries and departments to spend money on approved programmes for the year.
Because the legislative process of passing the appropriation bill can take time, government business often needs to continue before it is finally approved. A provisional general warrant is the instrument used to authorise limited, temporary spending during this gap, so that essential government activities are not brought to a halt while the bill is still going through the legislature. Once the appropriation bill is passed, it is superseded by the substantive authority to spend under the Act.
The other warrants operate at different stages: a supplementary general warrant authorises additional spending after the main budget has already been approved and found insufficient; a warrant transfer permits moving an already-approved allocation from one budget head to another; and a reserved expenditure warrant relates to spending set aside for specific reserved purposes. None of these apply before the appropriation bill itself has been approved.
Examination reminder: the word "provisional" is the key clue; it signals temporary authority granted in advance of the appropriation bill's approval, distinguishing it from the other warrants, which all assume the main budget is already in force.
Pergunta 9 Relatório
Use the following information to answer this question
Rent for 2014 chargeable to the profit and loss account is
Detalhes da Resposta
This question tests the accrual (matching) principle: the profit and loss account must reflect the rent expense that belongs to the accounting period, not merely the cash paid during that period. Two adjustments are needed when prepaid rent exists at both the start and end of the year.
Rent prepaid at the start of the year (1 January 2014) is an amount that was paid in the previous year but relates to 2014. Because it covers part of 2014, it must be added to the rent paid during 2014 to capture the full expense for the period.
Rent prepaid at the end of the year (31 December 2014) is an amount paid during 2014 but relates to 2015. Because it does not belong to 2014, it must be subtracted from the total.
Applying the formula:
\[ \text{Rent chargeable to P\&L} = \text{Rent paid} + \text{Opening prepaid} - \text{Closing prepaid} \]
\[ = \text{₦}3{,}200 + \text{₦}600 - \text{₦}400 = \text{₦}3{,}400 \]
The rent chargeable to the profit and loss account for 2014 is therefore \(\text{₦}3{,}400\).
A common mistake is to reverse the adjustments, subtracting the opening prepaid and adding the closing prepaid, which would give \(\text{₦}3{,}200 - \text{₦}600 + \text{₦}400 = \text{₦}3{,}000\). Another error is to ignore the opening prepaid entirely and subtract only the closing prepaid, yielding \(\text{₦}3{,}200 - \text{₦}400 = \text{₦}2{,}800\). Both results understate the true expense for the year.
When adjusting for prepayments, remember: opening prepaid is a benefit consumed this year (add it), while closing prepaid is a benefit to be consumed next year (subtract it).
Pergunta 10 Relatório
The head office usually issues goods to branches at
Detalhes da Resposta
When a head office supplies goods to its branches, the usual practice, unless the question states an arrangement involving a mark-up (invoicing at selling price with a "loading" for unrealised profit), is to issue the goods at cost price, that is, the price the head office itself paid for them.
Issuing goods at cost keeps the branch's stock records straightforward: the branch simply carries the goods at what they cost the business as a whole, and any profit is only recognised when the branch actually sells the goods to outside customers. This avoids recording unearned or unrealised profit within the business's own internal transfers between head office and branch.
Prime cost and production cost describe cost concepts used in manufacturing to build up the cost of producing goods, not the value at which finished goods are transferred internally to a branch; net realisable value is the estimated selling price less costs to complete and sell, which is used for valuing stock at the lower of cost and net realisable value, not for internal goods transfers to branches.
Unless a question specifically describes a branch invoicing arrangement with an added mark-up, treat goods sent to branches as valued at cost price.
Pergunta 11 Relatório
Which of the following is used before the appropriation bill is approved?
Detalhes da Resposta
In government (public sector) accounting, spending by ministries and agencies can only take place once the legislature has approved the appropriation bill that authorises the year's expenditure. Because the process of approving the appropriation bill can take time, a mechanism is needed to allow essential government spending to continue before that approval is granted.
A provisional general warrant is the authority issued to permit government spending to continue, usually based on a proportion of the previous year's approved estimates, during the period before the appropriation bill for the new year has been passed into law. It bridges the gap between the start of the financial year and the date the full budget is approved. Once the appropriation bill is approved, a general warrant, or a supplementary general warrant for any additional amounts approved later, takes over as the basis for further releases. A virement warrant authorises the transfer of funds from one approved budget head to another after the budget is already in force, and a reserved expenditure warrant relates to spending charged directly on the consolidated fund rather than to expenditure requiring prior appropriation approval; neither is specifically the warrant used before the appropriation bill itself is approved.
Because it specifically authorises spending during the gap before the appropriation bill is approved, the correct term is provisional general warrant.
Examination tip: link each warrant to its stage, provisional general warrant comes before appropriation is approved, and general or supplementary general warrants come after.
Pergunta 12 Relatório
Cash receipts and payments involving discounts are entered in
Detalhes da Resposta
A three-column cash book has three money columns on each side: one for discount, one for cash, and one for bank. This structure allows a business to record cash receipts and payments, bank receipts and payments, and any discount allowed or received, all within the same book, on the same line as the underlying transaction.
Because discounts are recorded in their own dedicated column alongside the cash and bank entries, the three-column cash book is the correct book for transactions that involve both a receipt or payment and an associated discount. A two-column cash book only has cash and bank columns, with no discount column, so discounts cannot be recorded there. An analytical cash book analyses payments or receipts across different expense or income headings rather than tracking discount separately, and a petty cash book is used only for small, day-to-day cash expenses, not for discounts on customer or supplier settlements.
Examination reminder: the presence of a discount column is the defining feature that separates the three-column cash book from the simpler two-column version; look for that column whenever a question mentions discount allowed or discount received.
Pergunta 13 Relatório
A suspense account is used to
Detalhes da Resposta
A suspense account is a temporary account opened when the total debits and total credits in a trial balance do not agree, and the exact cause of the difference cannot be found immediately. The difference between the two totals is placed in the suspense account so that the trial balance balances, allowing the accountant to proceed with preparing draft final accounts while the underlying error is investigated further.
Once the error (or errors) causing the imbalance is located and corrected through the appropriate journal entries, the suspense account is cleared to zero and closed. It therefore exists purely as a temporary holding place to make the trial balance agree, not as a permanent record of sales, purchases, or a substitute for the balance sheet.
Recording sales and recording purchases are handled by the sales and purchases accounts respectively, using entries generated by actual trading transactions, and preparing the balance sheet is a separate step of summarising ledger balances once they are all correct; none of these is the function of a suspense account.
Whenever a trial balance fails to balance and the error cannot be traced immediately, opening a suspense account for the difference, then investigating and correcting the error afterward, is the standard procedure to remember.
Pergunta 14 Relatório
Which of the following is not credited to debtors control account?
Detalhes da Resposta
The Debtors (Sales Ledger) Control Account is credited with everything that genuinely reduces the total amount customers owe, based on entries actually posted from the books of original entry during the period. Cash and cheques received from debtors, discounts allowed to them, returns inward, bad debts written off, and bills receivable accepted from debtors in settlement of their accounts are all credit entries, because each one represents debt that has actually been cleared, written off, or converted into another form.
A provision for bad debts is fundamentally different from these items. It is an estimate set aside for debts that might become uncollectible in the future; it is not a transaction that has actually happened to reduce any specific customer's outstanding balance. Because the control account only reflects real transactions that affect the total of individual debtor balances in the sales ledger, a general provision, which is an accounting estimate rather than a posted transaction against any particular debtor, is never entered in it at all. It is instead recorded only in the general (nominal) ledger and shown as a deduction from debtors in the balance sheet.
Examination reminder: a control account total must always be traceable back to real, individually posted transactions in the subsidiary ledger; provisions and estimates, which are not tied to specific customer transactions, never appear in it.
Pergunta 15 Relatório
Use the following information to answer questions 52 to 54
Taiwo is a sole trader who keeps his petty cash on the imprest system, the imprest amount being #4,000.
The following transactions took place for a particular month:
Dec 1 petty cash in hand 517
1 petty cash to imprest 3,483
6 Bought notebooks 328
7 Paid wages 914
14 Bought postage stamps 375
16 Paid to J. Thomas, a creditor 536
21 Paid wages 928
23 Bought envelopes 437
27 Bought postage stamps 210
Amount to be reimbursed at the end of the month is
Detalhes da Resposta
The imprest system fixes petty cash at a set amount, here \( \text{#}4{,}000 \). At the start of December, \( \text{#}517 \) remained in hand, and the cashier was reimbursed \( \text{#}3{,}483 \) to restore the float back to the full imprest amount: \( \text{#}517 + \text{#}3{,}483 = \text{#}4{,}000 \).
During the month, the following payments were made out of petty cash:
| Date | Item | Amount (#) |
|---|---|---|
| 6 Dec | Notebooks (stationery) | 328 |
| 7 Dec | Wages | 914 |
| 14 Dec | Postage stamps | 375 |
| 16 Dec | Paid to J. Thomas (creditor) | 536 |
| 21 Dec | Wages | 928 |
| 23 Dec | Envelopes (stationery) | 437 |
| 27 Dec | Postage stamps | 210 |
Under the imprest system, the amount reimbursed at the end of the period is always exactly equal to the total spent during that period, because reimbursement restores the float back up to the fixed imprest amount. Adding all the payments made during the month gives:
\[ 328 + 914 + 375 + 536 + 928 + 437 + 210 = \text{#}3{,}728 \]This total, \( \text{#}3{,}728 \), is the amount that must be reimbursed at the end of the month, since it is precisely what has been drawn down from the \( \text{#}4{,}000 \) float. Reimbursing this figure brings the imprest back to \( \text{#}4{,}000 \) ready for the following month.
Examination reminder: in an imprest system, always sum every payment made during the period; that total, not the opening balance or the earlier mid-month top-up, is what gets reimbursed at period end.
Pergunta 16 Relatório
The capital of a sole trader changes as a result of
Detalhes da Resposta
Capital is what the owner of a sole-trader business has invested in it, and it changes only when transactions directly affect the owner's stake, principally through profits earned, losses incurred, additional capital introduced, or drawings taken out for personal use.
Drawings occur when the owner withdraws cash, goods, or other assets from the business for personal purposes. Paying for something by cheque drawn from the business bank account for the owner's own use reduces what the business owns without the owner supplying anything in return, so it directly reduces the capital account.
The other transactions do not change capital at all: buying equipment by cheque, or buying goods by cheque, simply exchanges one business asset (cash at bank) for another (equipment or stock), leaving total assets, and therefore capital, unchanged. Paying wages by cash is a business expense, which affects net profit for the period and only impacts capital indirectly once that period's profit or loss is eventually transferred to the capital account at year end; it is not the direct, immediate capital movement that drawings represents.
Examination reminder: capital only moves directly when the owner puts something in or takes something out; ordinary asset-for-asset exchanges within the business leave it untouched.
Pergunta 17 Relatório
Use the following information to answer this question
A fixed asset was bought for #60,000 on 1st January, 1997. Depreciation was provided at 10% on cost. It was sold for #16,000 on 30th June, 2001.
The profit or loss sale was
Detalhes da Resposta
The asset cost \( \text{#}60{,}000 \) and is depreciated at \( 10\% \) of cost per year (straight-line method), so the annual depreciation charge is:
\[ \text{#}60{,}000 \times 10\% = \text{#}6{,}000 \text{ per year} \]The asset was bought on 1 January 1997 and sold on 30 June 2001. Counting the full years 1997, 1998, 1999 and 2000, plus the half year from January to June 2001, gives a total useful life to the point of sale of \( 4.5 \) years.
\[ \text{Accumulated depreciation} = 4.5 \times \text{#}6{,}000 = \text{#}27{,}000 \]| Item | Amount |
|---|---|
| Cost | #60,000 |
| Accumulated depreciation (4.5 years) | #27,000 |
| Net book value at date of sale | #33,000 |
| Sale proceeds | #16,000 |
The net book value at the date of sale is \( \text{#}60{,}000 - \text{#}27{,}000 = \text{#}33{,}000 \). Since the asset was sold for only \( \text{#}16{,}000 \), which is less than its net book value, the difference is a loss on disposal:
\[ \text{Loss on sale} = \text{#}33{,}000 - \text{#}16{,}000 = \text{#}17{,}000 \]A profit would only arise if the sale proceeds exceeded the net book value; here proceeds are well below it, confirming a loss rather than a profit, and the figure of \( \text{#}16{,}000 \) alone is simply the sale proceeds, not the loss.
Examination reminder: always calculate accumulated depreciation for the exact number of years and part-years the asset was actually held before comparing net book value with sale proceeds.
Pergunta 18 Relatório
The objective of a departmental accounts is to ascertain the
Detalhes da Resposta
Departmental accounts split a business's trading results into separate sections for each department, so that the sales, cost of sales, and expenses of each department are recorded and reported individually rather than being merged into a single overall figure.
The main reason for doing this is to find out how well each department is actually doing, that is, to ascertain departmental performance: which departments are generating strong profit margins, which ones are barely breaking even, and which ones may need corrective action such as better pricing, cost control, or even closure. Management can only make these decisions if the results are broken down by department rather than lumped together.
Labour turnover, stock levels, and staff numbers may all be tracked as part of running a department, but none of them is the core purpose of preparing departmental accounts. Those figures belong to human resource or stock-control records; departmental accounts exist specifically to measure and compare financial performance across departments.
Examination reminder: whenever a question asks about the objective of segmenting accounts (by department, by branch, or by product line), the underlying reason is almost always to evaluate performance and support internal decision-making, not to track operational statistics.
Pergunta 19 Relatório
Use the following information to answer the question
The following transactions were recorded in the cash book of Ibusah for the month of February 2019
The balance brought down at the end of the month is
Detalhes da Resposta
Balance Brought Down = Opening Balance + Income(Expenses + Drawings)
Balance Brought Down = (D 200,000 + D 180, 000 + D 98, 000) - (D 40,000 + D 73, 000 + D 28,600 + D 12, 800)
= D 478, 000 - D 154, 8000 = D 323, 200
Pergunta 20 Relatório
Use the following information to answer questions 11 and 12.
Receipt and Payments: 31st December, 2016
The total income received for the year is
Detalhes da Resposta
This question tests the ability to identify and sum up income items in a Receipts and Payments Account of a non-profit organisation (such as a club or society).
A Receipts and Payments Account is a summary of all cash and bank transactions during a period. The receipts (debit) side lists all money coming in, and the payments (credit) side lists all money going out. However, not every item on the receipts side counts as income.
To find the total income received for the year, you must include only those receipt items that represent revenue or income earned during the year. These typically include:
- Subscriptions received
- Entrance fees
- Donations received
- Hall hire or rental income
- Proceeds from fundraising activities
You must exclude the following from total income:
- Opening balance (balance brought forward from the previous year) - this is not income; it is simply the cash or bank balance the organisation started the year with
- Capital receipts such as proceeds from sale of fixed assets or investments, and loans received - these are not revenue income
By adding together all the income items on the receipts side of the account (excluding the opening balance and any capital receipts), the total income received for the year amounts to #2,640.
Exam tip: When asked for "total income received," always exclude the opening cash/bank balance brought forward. The opening balance represents funds already held, not income earned during the current period.
Pergunta 21 Relatório
The balance on the Sales Ledger Control Account at the end of the accounting year represents total
Detalhes da Resposta
The Sales Ledger Control Account (Debtors Control Account) is built up during the year from total credit sales, cash received, discounts allowed, returns inward, bad debts, and similar movements affecting debtors, and it mirrors, in total, every individual customer account kept in the sales ledger.
Whatever balance remains on this account at the end of the accounting year is, by definition, the total of all amounts still owed by customers that have not yet been collected, written off, or otherwise cleared. In other words, it represents the total trade debtors outstanding at that date, and this is the figure that appears as trade debtors (accounts receivable) under current assets in the balance sheet.
It is not simply the total credit sales for the year, since credit sales are only one side of the account; receipts, discounts, and returns during the year have already reduced that figure down to what is still owed. It excludes cash sales entirely, since cash sales never pass through this account at all, and it is not merely the total transferred from the Sales Day Book, which records only credit sales made, not the net amount still outstanding after collections and adjustments.
Examination reminder: the closing balance on any control account represents the net outstanding position at that date, not a single component such as sales or receipts alone.
Pergunta 22 Relatório
A business should not lay claim to any profit before it is earned. This is in accordance with the
Detalhes da Resposta
The rule that a business should not anticipate profit before it is actually earned is the prudence concept (also called the concept of conservatism). It requires that revenues and profits are recognised only when they are reasonably certain, while potential losses and liabilities are provided for as soon as they are foreseen, even if not yet certain.
Applying prudence prevents a business from overstating its financial position by recording profit on a transaction that has not yet been completed or confirmed, which would mislead anyone relying on the accounts, such as creditors, investors, or tax authorities.
This is different from the going concern concept, which assumes the business will continue operating for the foreseeable future; the consistency concept, which requires the same accounting methods to be used from one period to the next so that results can be compared; and the dual aspect concept, which underpins double-entry bookkeeping by recognising that every transaction has two effects. None of these three concepts is about withholding recognition of unearned profit.
Whenever a question describes caution in recognising gains but full recognition of foreseeable losses, that combination is the hallmark of prudence.
Pergunta 23 Relatório
Which of the following is a spreadsheet application?
Detalhes da Resposta
A spreadsheet application is software designed to organise data into rows and columns of cells, allowing calculations, formulas, and data analysis to be performed automatically. Microsoft Excel is the most widely used example of this category of software, built specifically for entering figures, applying formulas, and generating charts or summaries from tabular data, which is exactly what accounting and business record-keeping requires.
The other items serve entirely different purposes. The Internet is a global network for accessing and sharing information, not an application for organising figures. Windows is an operating system that manages the computer's hardware and runs other programs, including spreadsheet software, rather than being a spreadsheet itself. Word is a word-processing application, used to create and format text documents such as letters and reports, not to perform tabular calculations.
Examination reminder: when identifying software categories, focus on the primary function: word processors handle text, spreadsheets handle numerical/tabular data and calculations, and operating systems manage the computer as a whole.
Pergunta 24 Relatório
Use the following information to answer this question
A fixed asset was bought for #60,000 on 1st January, 1997. Depreciation was provided at 10% on cost. It was sold for #16,000 on 30th June, 2001.
The net book value at the time of sale was
Detalhes da Resposta
The asset cost \( \text{#}60{,}000 \) and is depreciated at \( 10\% \) of cost per year (straight-line method), so the annual depreciation charge is:
\[ \text{#}60{,}000 \times 10\% = \text{#}6{,}000 \text{ per year} \]The asset was bought on 1 January 1997 and sold on 30 June 2001. Counting the full years 1997, 1998, 1999 and 2000, plus the half year from January to June 2001, gives a total useful life to the point of sale of \( 4.5 \) years.
\[ \text{Accumulated depreciation} = 4.5 \times \text{#}6{,}000 = \text{#}27{,}000 \]| Item | Amount |
|---|---|
| Cost | #60,000 |
| Accumulated depreciation (4.5 years) | #27,000 |
| Net book value at date of sale | #33,000 |
| Sale proceeds | #16,000 |
The net book value (also called carrying amount) of a fixed asset is its cost less the depreciation accumulated up to the date of disposal:
\[ \text{Net book value} = \text{Cost} - \text{Accumulated depreciation} = \text{#}60{,}000 - \text{#}27{,}000 = \text{#}33{,}000 \]This is the figure that would have appeared in the asset account (or the balance sheet) immediately before the sale was recorded. It is distinct from the sale proceeds of \( \text{#}16{,}000 \), and from the resulting loss on disposal of \( \text{#}17{,}000 \), which is simply the difference between the net book value and the proceeds.
Examination reminder: net book value depends only on cost and accumulated depreciation up to the disposal date; it has nothing to do with what the asset is eventually sold for.
Pergunta 25 Relatório
Receipts and payments Account of Abalure Youth Club for the year ended 31st December 2018
Subscriptions for 2017 and 2019 received during the year were #180,000 and #150,000 respectively.
Total expenses debited to income and expenditure Account for 2018 was
Detalhes da Resposta
A Receipts and Payments Account records every cash inflow and outflow during the year, regardless of which accounting period the transaction belongs to. It also includes the opening and closing cash balances, which are assets, not income or expenses. To prepare an Income and Expenditure Account, only items that are revenue in nature and that relate to the current year are recognised.
On the payments side of the Receipts and Payments Account, two categories of items must be separated:
- Revenue expenditure (day-to-day running costs such as rent, salaries, stationery, printing, postage, refreshments, repairs, utilities, and similar recurring expenses). These are debited to the Income and Expenditure Account.
- Capital expenditure (purchases of fixed assets such as equipment, furniture, or investments) and the closing cash balance. These go to the Balance Sheet, not to the Income and Expenditure Account.
Unlike the income side, the payments side does not require an adjustment for the subscription timing difference. The subscription adjustment (removing the #180,000 received for 2017 arrears and the #150,000 received for 2019 in advance) affects only the income figure in the Income and Expenditure Account, not the expenses.
Adding up all the revenue expenditure items on the payments side of the Receipts and Payments Account gives the total expenses debited to the Income and Expenditure Account for 2018. That total is #8,095,000.
This can be cross-checked against the surplus. The surplus for 2018 from the same data is #5,235,000. Since:
\[ \text{Surplus} = \text{Total Income} - \text{Total Expenses} \]
\[ \text{Total Income} = \#5{,}235{,}000 + \#8{,}095{,}000 = \#13{,}330{,}000 \]
This confirms that the total expenses figure and the surplus are consistent with the underlying data.
A common mistake is to include the closing cash balance or a capital asset purchase as an expense. Neither belongs in the Income and Expenditure Account. Similarly, confusing the subscription adjustment (which reduces income) with an expense adjustment would lead to a wrong answer. Expenses on the payments side are taken at face value because they were all paid in cash during the year and relate to the club's operations for 2018.
Pergunta 26 Relatório
Taiwo is a sole trader who keeps his petty cash on the imprest system, the imprest amount being #4,000.
The following transactions took place for a particular month:
Dec 1 petty cash in hand 517
1 petty cash to imprest 3,483
6 Bought notebooks 328
7 Paid wages 914
14 Bought postage stamps 375
16 Paid to J. Thomas, a creditor 536
21 Paid wages 928
23 Bought envelopes 437
27 Bought postage stamps 210
Amount to be posted to the personal ledger is
Detalhes da Resposta
The imprest system fixes petty cash at a set amount, here \( \text{#}4{,}000 \). At the start of December, \( \text{#}517 \) remained in hand, and the cashier was reimbursed \( \text{#}3{,}483 \) to restore the float back to the full imprest amount: \( \text{#}517 + \text{#}3{,}483 = \text{#}4{,}000 \).
During the month, the following payments were made out of petty cash:
| Date | Item | Amount (#) |
|---|---|---|
| 6 Dec | Notebooks (stationery) | 328 |
| 7 Dec | Wages | 914 |
| 14 Dec | Postage stamps | 375 |
| 16 Dec | Paid to J. Thomas (creditor) | 536 |
| 21 Dec | Wages | 928 |
| 23 Dec | Envelopes (stationery) | 437 |
| 27 Dec | Postage stamps | 210 |
The personal (ledger) column in an analysed petty cash book is reserved for payments made to, or received from, a named individual or business whose account is kept in the sales or purchases ledger, rather than for a general expense heading such as stationery, postage, or wages.
Of the seven transactions listed, only the payment to J. Thomas, a creditor, involves a personal account. This \( \text{#}536 \) payment reduces the amount owed to J. Thomas and must be posted to his individual account in the purchases ledger, in addition to being recorded in the petty cash book itself. Notebooks, wages, postage stamps, and envelopes are all impersonal expense items posted to their respective nominal ledger expense accounts, not to a personal account.
Examination reminder: the giveaway for a personal-ledger posting is a named individual or trader in the transaction description; expense words like "wages," "postage," or "stationery" signal a nominal account instead.
Pergunta 27 Relatório
Receipts and Payments Account of Abalure Youth Club for the year ended 31st December 2018
Subscriptions for 2017 and 2019 received during the year were #180,000 and #150,000, respectively.
The surplus for the year 2018 was
Detalhes da Resposta
This question requires converting a Receipts and Payments Account (which records all cash received and paid during the year, regardless of the period they relate to) into an Income and Expenditure Account (which recognises only income earned and expenses incurred for the current accounting period, 2018).
The critical adjustment here involves subscriptions. The Receipts and Payments Account includes all subscriptions received in cash during 2018, but some of those subscriptions relate to other years:
- Subscriptions received for 2017: #180,000 (an arrear collected in 2018, but it is 2017 income, not 2018)
- Subscriptions received for 2019: #150,000 (an advance collected in 2018, but it is 2019 income, not 2018)
To determine subscriptions income for 2018, subtract both amounts from the total subscriptions shown in the Receipts and Payments Account:
\[ \text{Subscriptions for 2018} = \text{Total subscriptions received} - \#180{,}000 - \#150{,}000 \]
Next, to compute the surplus (excess of income over expenditure) for 2018:
- Take the adjusted subscription figure for 2018 and add any other revenue income items shown on the receipts side of the account (such as donations, hall rentals, or interest received). Exclude the opening cash balance, since that is an asset, not income.
- Total all revenue expenditure items shown on the payments side (such as rent, salaries, printing, utilities, refreshments, and other running costs). Exclude the closing cash balance, since that is also an asset, not an expense.
- Surplus = Total income for 2018 minus Total expenditure for 2018.
Applying this method to the figures in the Receipts and Payments Account:
\[ \text{Surplus} = \text{Total adjusted income for 2018} - \text{Total expenditure for 2018} = \#5{,}235{,}000 \]
The surplus for the year 2018 is therefore #5,235,000.
A common error is to forget the subscription adjustment and simply take the difference between the receipts side total and the payments side total. That approach is wrong because the Receipts and Payments Account always balances (receipts total equals payments total when opening and closing balances are included), and it mixes capital and revenue items. Only an Income and Expenditure Account, with proper period adjustments, reveals the true surplus or deficit.
Pergunta 28 Relatório
Shares issued below the nominal value are referred to as shares at
Detalhes da Resposta
Every share has a nominal (face) value stated on its certificate, which is the amount originally set for that share when the company was formed. A company may issue new shares for less than this stated nominal value, and shares sold on those terms are described as being issued at a discount.
Shares sold at exactly their stated nominal value are said to be issued at face value, while shares sold for more than their nominal value are issued at a premium, with the extra amount recorded separately as a share premium. "Cumulative value" is not a recognised term for the price at which shares are issued; cumulative instead describes certain types of preference shares whose unpaid dividends carry forward to future years. Because the question specifically describes shares issued below their nominal value, the correct term is issued at a discount.
Examination reminder: keep the three issue terms distinct by comparing the issue price to the nominal value: below it is at a discount, equal to it is at face value, and above it is at a premium.
Pergunta 29 Relatório
Which of the following errors affects the agreement of a Trial Balance?
Detalhes da Resposta
A trial balance lists the closing debit and credit balances of every account, and it will balance (agree) as long as total debits equal total credits. Some errors disturb this equality; others do not, because they still leave debits and credits equal even though the accounting records are wrong in another sense.
A wrong addition (casting error) in the sales account changes only that account's total without a matching, offsetting change elsewhere, so total debits and total credits no longer match; this is the type of error that is caught by the trial balance.
The other errors listed are all errors that leave the trial balance balanced: posting the purchase of a van to the purchases account debits the correct amount to a debit-side account, so the totals still agree even though it is really a fixed asset, not a purchase for resale (an error of principle); failing to enter sales in the books at all omits both the debit and credit sides equally (an error of omission), so the totals still match; and crediting a purchase to the wrong personal account (A. Tambi's instead of F. Tambi's) still uses the correct amount and side, just the wrong person's account (an error of commission), so total debits and credits remain equal.
The key distinction to remember: errors that affect only one side of the double entry, such as a wrong addition, break the trial balance's agreement, while errors of omission, principle, and commission typically do not, because both the debit and credit sides are still affected by the same, correct amount.
Pergunta 30 Relatório
The balance sheet as at 31st December, 2014, will show
Detalhes da Resposta
This question tests the treatment of subscriptions on the balance sheet of a club or society. In non-profit accounting, subscriptions are the periodic fees members pay to belong to the organisation. At the end of a financial year, any subscriptions that members still owe (subscriptions in arrears) represent money the club expects to collect, while any subscriptions members have paid ahead of time (subscriptions in advance) represent an obligation the club owes back in the form of future membership services.
Subscriptions in arrears are classified as a current asset on the balance sheet because they are amounts receivable from members - effectively debtors. Subscriptions received in advance are classified as a current liability because the club has received payment for a service period it has not yet provided.
From the data provided, the subscriptions in arrears as at 31st December, 2014 amount to \(\naira 400\). Since these are amounts owed to the club by its members, they appear on the balance sheet as a current asset of \(\naira 400\).
Examination tip: When a question asks how subscriptions appear on the balance sheet, always determine whether they are in arrears (current asset/debtor) or in advance (current liability/creditor). Do not confuse the two - arrears benefit the club (an asset it expects to collect), while advance payments obligate the club (a liability it must honour).
Pergunta 31 Relatório
The directors of Olu Ltd. recommended a dividend of 10% on 1,000,000 ordinary share capital of GH¢ 2.00 each. The amount of dividend declared is
Detalhes da Resposta
A dividend declared as a percentage is calculated on the nominal (face) value of the total share capital, not on the number of shares alone. The nominal value of the total ordinary share capital must first be found before the percentage can be applied.
- Find the total nominal value of the share capital: \[ 1{,}000{,}000 \text{ shares} \times \text{GH¢}2.00 = \text{GH¢}2{,}000{,}000 \]
- Apply the declared dividend rate of 10% to this total nominal value: \[ 10\% \times \text{GH¢}2{,}000{,}000 = \text{GH¢}200{,}000 \]
The amount of dividend declared is therefore GH¢200,000. A common error is to apply the 10% directly to the number of shares (1,000,000) instead of to their total nominal value, which produces the smaller, incorrect figure of GH¢100,000; the percentage must always be applied to the monetary value of the capital, not the share count.
Examination reminder: always convert the number of shares into their total nominal value first, then apply the declared dividend percentage to that monetary total.
Pergunta 32 Relatório
In the absence of a partnership agreement, additional capital contributions by partners attract interest of
Detalhes da Resposta
Where partners have not drawn up a formal partnership agreement, the default rules that apply are those laid down by partnership law. Under these default rules, partners are not entitled to interest on the capital they have contributed to the business.
However, if a partner contributes money to the business beyond the capital they agreed to bring in, that additional contribution is treated in the same way as a loan made to the firm rather than as ordinary capital. Loans (or advances) made by a partner in excess of agreed capital attract interest at the default statutory rate of 5% per annum, charged as an expense in the Profit and Loss Account before the residual profit is shared among the partners.
This distinction matters because it separates two very different defaults: no interest at all on agreed capital contributions, but a fixed 5% on anything advanced beyond that agreed capital, since the excess behaves economically like a loan rather than an equity stake.
When a partnership question has no partnership agreement and mentions "additional" contributions beyond the agreed capital, apply the 5% default interest rate rather than assuming no interest is payable at all.
Pergunta 33 Relatório
Which of the following is a component of prime cost?
Detalhes da Resposta
Prime cost is made up of direct materials, direct labour, and direct expenses, that is, costs that can be traced directly to specific units of output. A royalty paid to the owner of a patent, design, or process, calculated per unit produced or sold, is a direct expense, because it is incurred specifically because those units were made, and it can be traced to them.
Factory rent, depreciation, and factory electricity, by contrast, are all factory (production) overheads. They are costs of running the factory as a whole rather than costs that can be attributed to any one unit of product; a factory still incurs rent, depreciation, and electricity costs even during periods when production output changes, so they cannot be traced directly to individual units in the way a royalty can.
The test to apply is whether a cost is incurred directly because of, and in proportion to, the units actually produced. Royalty payments pass this test; rent, depreciation, and electricity do not.
When prime cost components are being tested, look for costs described as "direct" or paid per unit of output, since these signal prime cost items rather than overheads.
Pergunta 34 Relatório
Which of the following is not a source document?
Detalhes da Resposta
A source document is the original piece of paper or electronic record that provides evidence that a transaction has taken place and supplies the details (date, amount, parties involved) needed to make an entry in the books of account. Examples used in bookkeeping include invoices, credit notes, debit notes, receipts, cheques, and petty cash vouchers.
An invoice is issued when goods or services are sold on credit and shows what is owed. A credit note is issued to reduce an amount owed, typically when goods are returned by a customer. A debit note is issued to increase an amount owed or to request that a supplier's invoice be corrected. Each of these is created specifically to record and support a business transaction, so each qualifies as a source document.
A bank note, however, is simply a unit of currency, a piece of paper money used as a medium of exchange. It does not record the details of a transaction and is not raised to provide evidence for a bookkeeping entry, so it cannot be classified alongside invoices, credit notes, and debit notes as a source document.
Examination tip: when a question lists "source documents," check whether the item records transaction details (who, what, how much) or is simply a form of money; only the former qualifies.
Pergunta 35 Relatório
Which of the following is not a credit item in the Sales Ledger Control Account?
Detalhes da Resposta
The Sales Ledger Control Account mirrors, in total, all the individual debtor accounts kept in the sales ledger. It opens with the total debtors owed at the start of the period, is debited with everything that increases what customers owe, and is credited with everything that reduces what customers owe.
Cash received from debtors, discount allowed to them for prompt payment, and returns inward (goods customers send back) all reduce the amount debtors owe, so each is correctly recorded as a credit entry in this account.
A dishonoured cheque works the opposite way. When a customer's cheque is not honoured by the bank, the amount that customer owes is not actually settled after all, so the debt has to be reinstated. This is recorded as a debit entry in the Sales Ledger Control Account, increasing the balance back up, not a credit entry reducing it.
Examination reminder: think of the control account from the business's point of view: anything that genuinely reduces what customers owe (cash, discount allowed, returns, bad debts, bills receivable) is a credit; anything that increases or restores the debt, such as further credit sales, dishonoured cheques, or interest charged, is a debit.
Pergunta 36 Relatório
Below-the-line item in public sector accounting means such an item is
Detalhes da Resposta
In public sector (government) accounting, the main budget statement is divided by a dividing line that separates ordinary recurrent and capital revenue and expenditure, which are the items that have been formally planned for and approved in the year's budget, from special or unplanned transactions that fall outside the normal appropriation.
Items placed above the line are the regular revenue and expenditure heads that were anticipated and included when the budget was drawn up. Items placed below the line are transactions that were not part of that planned budget for the year, such as unforeseen financing transactions, supplementary items, or receipts and payments that arise outside the normal budgeted programme. Describing an item as "below-the-line" therefore signals that it was not budgeted for in the current fiscal year.
A common misconception is to treat "below-the-line" as meaning the amount fell short of what was budgeted. That is incorrect: the term is about whether an item appears in the approved budget at all, not about whether a budgeted figure was met or exceeded.
When you see "above/below the line" in a government accounting question, check whether the item was part of the original budget provision; if it was not, it belongs below the line.
Pergunta 37 Relatório
A bank statement shows an overdraft of GH¢190,000. Kofi, a debtor, paid GH¢400,000 into the account. The new bank balance is
Detalhes da Resposta
An overdraft means the bank balance is negative from the business's point of view: the business owes the bank GH¢190,000. When a debtor pays money directly into the bank account, that receipt reduces the amount owed to the bank.
Treating the overdraft as a negative balance and adding the deposit gives the new position:
\[ -190{,}000 + 400{,}000 = 210{,}000 \]Because the result is positive, the account now holds GH¢210,000 in the business's favour rather than being overdrawn. The deposit of GH¢400,000 was large enough not only to clear the GH¢190,000 owed to the bank but to leave a surplus of GH¢210,000 in the account.
A common mistake is to add the two figures together as if both were on the same side (giving GH¢590,000 overdrawn), forgetting that an overdraft is a liability that a deposit first cancels out before any surplus can build up. Always convert the overdraft to a negative figure before combining it with new deposits.
Pergunta 38 Relatório
Which of the following is not a source document?
Detalhes da Resposta
A source document is the original paper or electronic record that provides evidence that a transaction occurred and supplies the details needed to make an entry in the books of account. Common source documents include invoices, debit notes, and credit notes, each of which is generated at the point a transaction takes place.
A debit note is issued, typically by a buyer to a supplier, to record that goods have been returned or an amount owed should be increased. A sales invoice is issued to a customer to evidence a credit sale and states what is owed. A credit note is issued to reduce an amount owed, most often when goods are returned or an overcharge is corrected. Each of these documents is created outside the accounting books themselves, to record the details of a specific transaction as it happens.
The journal proper, however, is not a document at all; it is a book of prime entry used to record transactions that do not belong in any of the other specialised daybooks, such as the correction of errors, the writing off of bad debts, or opening entries when a business starts. It is prepared from other evidence, such as narrations and supporting calculations, rather than being itself a piece of evidence generated by an external transaction.
Examination tip: distinguish source documents, which are the raw evidence of a transaction, from books of prime entry, such as the journal proper, which record and summarise that evidence.
Pergunta 39 Relatório
Resources owned and controlled by a business are classified as
Detalhes da Resposta
The accounting equation, capital plus liabilities equals assets, defines how the resources of a business and the claims on those resources relate to one another.
Assets are the resources that a business owns and controls, and from which it expects to derive future economic benefit, examples include cash, inventory, buildings, and equipment. Capital represents the owner's claim on the business, the amount the owner has invested and is owed by the business. Liabilities represent outside parties' claims, amounts the business owes to lenders, suppliers, or other creditors. Drawings are amounts of cash or goods the owner withdraws from the business for personal use, and are deducted from capital rather than being a resource the business owns.
Because assets are defined precisely as the resources a business owns and controls, this is the correct classification for such resources.
Examination tip: keep the accounting equation in mind, resources the business owns are assets, while capital and liabilities describe who has a claim on those resources.
Pergunta 40 Relatório
Which of the following describe trial balance?
Detalhes da Resposta
A trial balance is prepared by extracting the closing balance of every account in the general ledger and arranging these balances in two columns, one for debit balances and one for credit balances, as at a specific date.
This makes it, in essence, a list of accounting balances taken from the books, drawn up mainly to confirm that total debits equal total credits before the final accounts are prepared. It is not itself an account (it has no debit and credit sides recording individual transactions the way a ledger account does), so calling it "a special account" mischaracterises what it is. It also does not reveal the financial position of a business; that is the role of the balance sheet, which is prepared afterwards using the trial balance as raw material. Finally, it does not show every entry made in the books, only the net closing balance of each account, so individual transactions cannot be traced from it.
Examination reminder: distinguish a trial balance (a list of net balances used as a checking and preparation tool) from an account (which records individual debit and credit entries) and from a balance sheet (which presents the financial position after the trial balance has been used to draw up the final accounts).
