JAMB UTME - Principles of Accounts - 2023

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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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In a cash book, the discount column on the left-hand side does not represent a discount. The purpose of this column is to record any discounts that are allowed to a debtor. When a debtor pays their outstanding debt earlier than the due date, the creditor may offer them a discount as an incentive for early payment. This discount is recorded in the discount column on the left side of the cash book.
Therefore, the correct answer is "allowed to a debtor."

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Receipt voucher are document used to acknowledge the receipt of public revenue.

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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 concept that recognizes the principle of double entry is **dual aspect**. In simple terms, double entry accounting is a system that records all financial transactions for a business in at least two different accounts. These accounts are known as the debit and credit side. The dual aspect concept is based on the idea that every transaction has two effects - it affects one account by debiting it and another account by crediting it. For example, let's say a company receives cash for the sale of a product. In this transaction, the company's cash account is increased (debited) because it receives cash, and its sales revenue account is increased (credited) because it generates revenue from the sale. By following the dual aspect concept, all financial transactions are recorded in a systematic way, ensuring that the accounting equation remains in balance. The accounting equation states that assets equal liabilities plus equity. This means that for every debit entry, there must be an equal and opposite credit entry, keeping the equation in equilibrium. The dual aspect concept is essential for accurate financial reporting and allows businesses to track their assets, liabilities, and equity in a structured and reliable manner. It helps ensure the integrity and completeness of financial information.

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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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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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The subsidiary book is a book of original entr or prime entry which consists of: purchases day book, sales day book, returns inwards day book, returns outward day book, cash book, journal, petty cash book.

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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 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 amount ₦19,075 represents credit sales. In the Sales Ledger Control Account, the 'Sales' line item typically represents credit sales made during the period. Cash sales would usually be recorded directly in the bank or cash account, not in the sales ledger control account. The sales ledger control account is used to record transactions with credit customers, including sales, payments, returns and discounts

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Working capital = Current Assets - Current Liabilites
= (350,000 + 25,000 + 5,500) - ( 116,500 + 7,500)
= 380,500 - 124, 000
= ₦256,500

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The source of income for a non-profit organization is typically different from that of a for-profit organization. Non-profit organizations do not generate income through the distribution of ordinary shares, as they do not have shareholders who invest in their organization in exchange for ownership and dividends. Instead, non-profit organizations rely on other means to generate income. One of the main sources is through donations. Individuals, corporations, and foundations can donate money, goods, or services to support the organization's mission and activities. These donations are voluntary contributions made out of goodwill and with the intention of supporting the cause the organization is working towards. Another source of income for non-profit organizations is through subscription or dues. Some non-profits have membership programs where individuals or organizations pay a regular fee or due to become a member. These membership fees contribute to the income of the organization and may provide members with certain benefits or privileges. Lastly, entrance fees can also serve as a source of income for non-profit organizations. Some organizations, such as museums, art galleries, or educational institutions, charge entrance fees for individuals to access their facilities or events. These fees help cover operational costs and support the organization's activities. In summary, while non-profit organizations do not generate income through ordinary shares, they rely on donations, subscription/dues, and entrance fees to financially support their mission and work.

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The accounting system in which only one aspect of a transaction is recorded is called single entry accounting. In this system, only the cash or assets received or paid are recorded, without recording the corresponding liabilities or expenses. In single entry accounting, each transaction is recorded only once, typically in a single column cash book. This means that there is no systematic tracking of the financial impact of transactions on both sides of the equation (assets = liabilities + equity). It is important to note that single entry accounting is generally considered less comprehensive and reliable compared to double entry accounting. Double entry accounting, on the other hand, is a more complete and accurate system where each transaction is recorded twice—once as a debit and once as a credit. This allows for a better understanding of the financial health of a business and provides a basis for generating accurate financial statements. Overall, single entry accounting is a simpler but less robust approach to recording financial transactions, as it does not provide a complete picture of a company's financial position and performance.

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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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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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Depreciation of office machines in manufacturing is charged to the profit and loss account.
Depreciation is a method used to allocate the cost of an asset over its useful life. Office machines, such as computers, printers, and photocopy machines, are considered as fixed assets. These assets gradually lose their value and become less useful over time due to wear and tear or technological advancements.
When manufacturing companies calculate their annual expenses, they include the depreciation of their office machines as an expense in the profit and loss account. The profit and loss account records all the revenues and expenses incurred by a company during a specific period, such as a financial year.
By charging the depreciation of office machines to the profit and loss account, manufacturing companies accurately reflect the decrease in value of these assets over time. This allows them to calculate their net profit or loss for the period more accurately.
It is important to note that while depreciation is charged to the profit and loss account, the accumulated depreciation of office machines is shown as a contra-asset on the balance sheet. The balance sheet provides a snapshot of a company's financial position at a specific point in time, showing its assets, liabilities, and shareholders' equity.
In summary, the depreciation of office machines in manufacturing is charged to the profit and loss account, reflecting the decrease in value of these assets over time and accurately calculating the net profit or loss for the period.

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Receipt voucher are documents used for acknowledgement the receipt of public revenue. They must be issued out anytime revenue is collected by government ministries

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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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The accounting term used to describe a partnership firm that stops operation and disposes its assets is Dissolution.
Dissolution refers to the process of ending the partnership and distributing the assets among partners. It occurs when partners agree to terminate the business, or when a specific event, such as the death of a partner, triggers the dissolution.
During the dissolution process, the firm's assets, including cash, inventory, equipment, and investments, are evaluated and sold. The proceeds from the sale are then used to pay off any outstanding liabilities, such as loans or debts. If there are any remaining assets after settling the liabilities, they are distributed among the partners based on their respective capital account balances.
It is important to note that the dissolution of a partnership does not mean the same as bankruptcy. Dissolution is a planned process of winding up the partnership's affairs, while bankruptcy occurs when a business is unable to pay its debts. In dissolution, partners work together to settle the financial obligations and distribute the remaining assets, ensuring a smooth and orderly conclusion to the partnership.

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

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To calculate the cost of raw materials consumed, we need to consider the stock of raw materials at the start of the year, any purchases made during the year, and the stock of raw materials at the end of the year. Given the following information: Stock on 1/1/16: ₦1,000 Purchases: ₦16,000 Stock on 31/12/16: ₦1,400 We can calculate the cost of raw materials consumed using the following formula: Cost of raw materials consumed = Opening stock + Purchases - Closing stock Substituting the values: Cost of raw materials consumed = ₦1,000 + ₦16,000 - ₦1,400 Simplifying the calculation: Cost of raw materials consumed = ₦16,600 Therefore, the cost of raw materials consumed is ₦16,600. So the correct answer is option: - ₦15,600

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On the credit side of a profit and loss account, we can find items that generate income or gains for a business. Let's discuss each option and determine whether it belongs on the credit side or not. - **Advertising:** Advertising expenses are costs incurred to promote products or services. These expenses reduce a company's income or profits and are recorded on the debit side of the profit and loss account. Therefore, advertising does not belong on the credit side. - **Dividend received:** Dividends received are income earned by a company from its investments in other companies. Dividend income increases a company's overall income or profits and is recorded on the credit side of the profit and loss account. So, dividends received are found on the credit side. - **Wages and salaries:** Wages and salaries represent the compensation paid to employees for their work. These expenses are considered as costs incurred to generate revenue and are recorded on the debit side of the profit and loss account. Therefore, wages and salaries do not belong on the credit side. - **Bank charges:** Bank charges are fees or costs that a company incurs for various banking services, such as transaction fees, account maintenance fees, etc. These charges reduce a company's income or profits and are recorded on the debit side of the profit and loss account. Therefore, bank charges do not belong on the credit side. In conclusion, out of the given options, only **dividend received** will be found on the credit side of a profit and loss account.

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Authorized shares are defined as the maximum number of shares that a company is legally allowed to issue to investors as per its own determinations

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The ultimate controller, refers to the shareholder who has the ultimate control in the company and is not controlled by anyone. This ownership structure often results in a certain level of control between the ultimate controller and the listed company.

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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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A control account is a summary account that represents a group of similar transactions or balances. It is used to simplify the management and analysis of a large number of individual accounts. The advantage of a control account is that it provides a way to monitor and track the overall balance or activity within a group of related accounts. It helps to ensure accuracy and identify any discrepancies or errors. Now, let's analyze the options provided one by one to determine which one is NOT an advantage of a control account: 1. **Difficulty in committing fraud**: This is indeed an advantage of a control account. By consolidating and summarizing the information from multiple accounts, it becomes more difficult for individuals to manipulate or misrepresent the data for fraudulent purposes. 2. **It can be used to detect missing figures**: This is also an advantage of a control account. By comparing the total balance of the control account with the sum of the individual accounts it represents, any missing figures or discrepancies can be easily identified. 3. **Helps to determine profit and loss**: This is another advantage of a control account. By summarizing the transactions related to revenue and expenses, a control account can provide an overview of the profit or loss generated by a particular area or department. 4. **Helps in locating errors**: This is also an advantage of a control account. By comparing the balances of the control account with the detailed records, any errors or discrepancies can be quickly identified and addressed. Based on the analysis of the options, it can be concluded that the **difficulty in committing fraud** is not an advantage of a control account. In fact, it is an advantage because it makes it more difficult for fraud to occur.

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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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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 circumstances giving rise to the ascertainment of goodwill are:
- admission of a new partner
- change in profit sharing ratio
- death or retirement of a partner
- the business has been purchased
- dissolution of a business

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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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When starting with balanace as per cash book, unpresented cheques, dividend, credit transfers are added while uncredited cheques, bank charges, dishonoured cheuqes, standing order are substracted.

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Prime cost = Cost of raw materials consumed + Manufacturing wages + Royalties
= 15600 + 42000 + 300
= ₦57,900

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

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The main source document for recording cash paid into a bank is the pay-in-slip.
A pay-in-slip is a form provided by the bank that is filled out by the depositor when cash is deposited into their bank account. It includes important details such as the depositor's name, account number, and the amount of cash being deposited. The pay-in-slip also contains fields for the bank teller to acknowledge the deposit and stamp it.
When a person or business receives cash payments, they need to deposit that cash into their bank account. To do this, they would typically visit the bank and fill out a pay-in-slip with all the necessary information. The pay-in-slip serves as a record of the transaction and provides proof of the deposit made.
Unlike the other options mentioned, an invoice is a document that is issued by a seller to a buyer, indicating the products or services provided and outlining the amount due. A credit note is a document issued by a seller to a buyer to acknowledge a refund or credit towards a future purchase. A cheque book contains blank cheques that can be used to make payments from the account.
In summary, while invoices, credit notes, and cheque books have their own purposes, the pay-in-slip is the specific document designed for recording cash paid into a bank. It is important to use the correct source document to maintain accurate records of financial transactions.

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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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The accounting equation states that:
- Capital( Equity) = Assets - Liabilities
- Assets = Capital (Equity) - Liabilties
- Liabilties = Assets - Capital (Equity)
- Equity(Capital ) = Assets

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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 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.