JAMB UTME - Principles of Accounts - 1995

Why are adjustments in the profit and loss account necessary?

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Adjustments in the profit and loss account are necessary to ascertain the actual expenses incurred and income earned during the year. The purpose of adjustments is to ensure that all expenses and incomes are recognized in the correct accounting period, and to make sure that the financial statements reflect a true and fair view of the company's financial performance. For example, some expenses or revenues may have been recognized in the wrong period or may need to be accrued or deferred. Adjustments may also be necessary to provide for depreciation, bad debts, or other provisions required by accounting standards. By making these adjustments, the profit and loss account can accurately reflect the company's financial performance for the year, which is important for making business decisions and complying with accounting regulations.

Which of the following is a strong feature of partnership?

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The feature of partnership that is considered strong is that the owners are liable personally for all debts of the business. This means that the partners are not only responsible for their own actions but also for the actions of their partners. This liability makes the partners more careful in their business activities and decisions. It also ensures that the partners have a vested interest in the success of the business, as they will be personally liable for any losses that the business incurs. This liability feature also promotes transparency and accountability among partners as they have to work together to ensure that the business is successful and profitable.

An effective accounting system should provide information

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An effective accounting system should provide information on internal and external reporting for managers and third parties. This means that the system should be able to generate accurate and timely financial reports that can be used by management to make informed decisions and by third parties, such as investors and creditors, to assess the financial health of the organization. The accounting system should be able to provide information on financial transactions, including revenues, expenses, assets, liabilities, and equity. It should also be able to generate financial statements, such as income statements, balance sheets, and cash flow statements, which can be used to analyze the financial performance of the organization. Additionally, the accounting system should have internal controls to ensure the accuracy and integrity of financial information.

Interest on a partner's drawings is debited to the

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When a partner withdraws money from the business, it is called a "drawing." If the partner continues to keep the money in their current account in the business, the business will usually pay interest to the partner for the use of the money. The correct answer to this question is "Partners current account and credited to the profit and loss appropriation account". This means that the interest on a partner's drawing is debited to the partner's current account (to decrease the balance in the account) and credited to the profit and loss appropriation account (to increase the business's expenses). This treatment of interest on a partner's drawing ensures that the partner is compensated for the use of their money and that the business's expenses accurately reflect the cost of using the partner's money.

Given: Motor van, ₦3,600, Premises, ₦5,000; Loan from R. Nwaeke, ₦1,000; Cash at bank; ₦1,650; stock of goods ₦4,800; Creditors, ₦2,560; Cash in hand, ₦250 and debtors ₦6,910. calculate the capital figure.

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A partnership on admitting a new member, revalued the business' land and building from ₦30,000 to ₦70,00. The difference of ₦40,000 should be

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The factory cost of producing goods is made up of

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The factory cost of producing goods is made up of two components: prime cost and factory overhead. Prime cost is the sum of direct material cost and direct labor cost. It represents the cost of the materials and labor used directly in the production of the goods. Factory overhead, on the other hand, refers to the indirect costs of production, such as rent, utilities, and indirect labor. These costs are not directly related to the production of a specific unit of product, but are necessary for the production process to take place.

Halidu and Hamed are business partners with ₦30,000 and ₦20,000 capital respectively. At the end of the financial year, a profit of ₦12,000, which included Halidu's salary of ₦3,000 was made.

Hamed's share of the profit should be

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A total of 400,000 shares of ₦1 each are to be issued by Sariki company Ltd at a price of ₦1.20 per share. Application were received for 600,000 shares out of which 100,000 were dishonored. If the available share were distributed pro-rata, what refund will be due a subscriber who applied for 5,000 shares?

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The total number of shares applied for is 600,000, but only 500,000 shares are available (400,000 issued and 100,000 dishonored). This means that each subscriber will be allocated 5/6 of the shares they applied for. For a subscriber who applied for 5,000 shares, the number of shares allocated to them will be 5,000 x 5/6 = 4,167 shares. The total amount paid by the subscriber for these shares will be 4,167 x ₦1.20 = ₦5,000.40. However, the subscriber only applied for 5,000 shares at a cost of ₦6,000. Therefore, the refund due to the subscriber will be: Refund = Amount paid - Amount due Refund = ₦6,000 - ₦5,000.40 Refund = ₦999.60 Therefore, the refund due to the subscriber who applied for 5,000 shares is ₦999.60. Option A, ₦1,000, is the closest answer to the actual refund due.

Adama's bank account showed an overdraft of ₦600 on 31st march. On going through the account, it was discovered that the ₦1,080 paid into the account on 29th March had not been credited. what should be the balance in Adama's cash accounts?

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Accumulated depreciation on the asset as at 31/12/81 was

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A member of a club paid ₦1,000 as is subscription for 1993 and ₦1,200 as subscription for 1992. If the financial year of the society ended on 31st December 1993, the ₦1,200 subscription will be treated in the balance sheet as

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Sales ledger control account contains the total amount in respect of

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The Sales Ledger Control Account is an account in the general ledger that contains the total amount owed to a business by its customers or debtors. It acts as a summary of all the individual customer accounts in the sales ledger, showing the total amount outstanding from all customers. Therefore, the correct option is "debtors."

A payment of cash of ₦20 to John was entered on the receipt side of the cash book in error and credited to John's account. Which of the following journal entry can be used to correct the error?

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To correct the error, we need to reverse the incorrect entry by debiting John's account and crediting the cash account with the same amount of the incorrect entry. Therefore, the correct journal entry to rectify the error is: John: ₦20 Dr, Cash: ₦20 Cr This will reduce the amount credited to John's account by ₦20 and increase the cash balance by ₦20, which will cancel out the initial error in the cash book.

The measure of a company's ability to pays its debts quickly is called

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The measure of a company's ability to pay its debts quickly is called the "acid test ratio." This ratio measures the ability of a company to meet its short-term liabilities with its current assets that can be easily converted into cash, such as cash, marketable securities, and accounts receivable. A higher acid test ratio indicates a better ability to pay off short-term debts and is generally considered to be a good indicator of a company's financial health.

Diamond Ringo business was started when Mr. Diamond brought in a cheque of ₦500,000, which was paid into the bank account. Which of the following entries properly records the transaction?

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The correct entry that properly records the transaction is: Bank account was debited with ₦500,000 and capital account was credited with ₦500,000. This is because Mr. Diamond brought in a cheque of ₦500,000, which was paid into the bank account. Therefore, the bank account should be debited with the ₦500,000 to reflect the inflow of cash into the account. The capital account should be credited with the ₦500,000 to record the increase in the owner's equity in the business resulting from the contribution of capital by the owner. is incorrect because it credits the cash account instead of the capital account, which would result in an incorrect balance in the capital account. is incorrect because it only records the inflow of cash into the bank account and does not reflect the increase in the owner's equity resulting from the contribution of capital. is incorrect because it debits Mr. Diamond's account, which is unnecessary since the transaction is between Mr. Diamond and his business, and does not involve any other parties.

I. A retailer when fixing his selling price adds one-quarter to the cost of the article

II. The expenses of the retailer is 10% of his sales

III. The total sales is ₦23,000

IV. he turned over his stock five times in the year.

Compute the average amount of stock in hand at cost price

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To compute the average amount of stock in hand at cost price, we need to use the inventory turnover ratio formula: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory We can calculate the cost of goods sold using the given information: Cost of Goods Sold = Total Sales - Gross Profit To calculate the gross profit, we need to know the cost price of the goods sold. From statement I, we know that the selling price is 1.25 times the cost price. Therefore, the cost price is 4/5 of the selling price. Let x be the cost price of an item. Then, the selling price is 1.25x. The gross profit per item is: Gross Profit = Selling Price - Cost Price = 1.25x - x = 0.25x The expenses of the retailer are 10% of his sales, so his net profit per item is: Net Profit = Gross Profit - Expenses = 0.25x - 0.1(1.25x) = 0.125x The turnover rate is 5 times, which means the cost of goods sold is 5 times the average inventory. Cost of Goods Sold = 5 * Average Inventory * x Total Sales = Cost of Goods Sold + Gross Profit + Expenses 23,000 = 5 * Average Inventory * x + 0.25x * 5 * Average Inventory + 0.1 * 23,000 23,000 = 5x * Average Inventory * (1 + 0.25) + 0.1 * 23,000 23,000 = 6.25x * Average Inventory Average Inventory = 23,000 / (6.25x) Substituting the value of cost of goods sold, we get: Average Inventory = 5 * Average Inventory * x / (6.25x) Simplifying, we get: Average Inventory = 4 * Total Sales / 25 Average Inventory = ₦3,680 Therefore, the average amount of stock in hand at cost price is ₦3,680. The answer is (C) ₦3,680.

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The starting point for the production of accounts from incomplete records is to

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The starting point for the production of accounts from incomplete records is to prepare an opening statement of affairs. This is because incomplete records mean that not all financial transactions are recorded in the accounting system. Therefore, the opening statement of affairs is prepared to determine the opening capital, which includes the value of assets, liabilities, and capital at the beginning of the accounting period. This statement helps to establish a starting point for the preparation of financial statements and ensures that all financial transactions are accounted for in a systematic manner. Once the opening statement of affairs is prepared, it is possible to compute the profit or loss made during the period, by calculating the difference between the closing capital and the opening capital, and to prepare other financial statements like the balance sheet and profit and loss account.

Bola, UTC's regular customer, owed ₦1,00 on account of a radio bought. If he sent in a cheque for ₦1,500, UTC would send him a

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If Bola owed ₦1,000 on account of a radio bought and sent in a cheque for ₦1,500, UTC would have an excess of ₦500. To refund this excess payment, UTC would issue a credit note to Bola, which represents a document or a slip given by the seller to the buyer, acknowledging that the buyer has returned goods or has been overcharged. In this case, the credit note would acknowledge that UTC has been overpaid and would serve as evidence to reduce the balance owed by Bola on account. Therefore, the correct answer is a credit note.

Given:

Prime cost ₦220,000

Factory cost ₦32,000

Work in progress at beginning ₦25,000

Work in progress at close ₦19,000

Administrative expenses ₦21,000

Determine the production cost

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Which of the following accounting records are source documents?

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which of the following factors has aided the development of accounting?

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Departmental accounts re maintained to ascertain the

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Departmental accounts are maintained to ascertain the contribution of each department. This means that departmental accounts are used to determine the revenue generated by each department and the corresponding costs incurred in generating that revenue. By analyzing the revenues and expenses of each department, management can make informed decisions about the efficiency and profitability of each department. This information is valuable in helping management to allocate resources, improve performance, and identify areas that require attention or improvement. By maintaining departmental accounts, an organization can improve its financial management and overall performance.

The following represent extracts from the trading account of a retail outlet for a given month:

Opening stock ₦2,400

Closing stock ₦6,400

Other expenses ₦2,000

Sales ₦11,000

Profit ₦900

What is the purchase figure for the month?

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To calculate the purchase figure for the month, we need to use the formula: Purchase = Opening stock + Purchases - Closing stock We have the opening stock as ₦2,400, and the closing stock as ₦6,400. We also know that the profit for the month is ₦900. Using the formula above, we can rearrange it to solve for purchases: Purchases = Closing stock + Cost of sales - Opening stock We can calculate the cost of sales as the sales figure minus the other expenses and the profit: Cost of sales = Sales - (Other expenses + Profit) = ₦11,000 - (₦2,000 + ₦900) = ₦8,100 Substituting the values we have into the formula, we get: Purchases = ₦6,400 + ₦8,100 - ₦2,400 = ₦12,100 Therefore, the purchase figure for the month is ₦12,100. Answer is correct.

One major advantage of ledger is that it

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Which of the following statement is correct about the head office current account and the branch current account?

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Where a non-profit making organization prepares the account using accruals basis of reporting, the statement showing how well the organization is doing is the

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When a non-profit making organization prepares accounts using the accruals basis of reporting, the statement that shows how well the organization is doing is the income and expenditure account. This account is used to record the organization's revenue earned and expenses incurred during a specific period, regardless of whether the cash has been received or paid. The income and expenditure account helps the organization to measure its financial performance by comparing the revenue generated with the expenses incurred. The resulting surplus or deficit is then transferred to the balance sheet as unrestricted funds. Therefore, the income and expenditure account is the statement that shows how well a non-profit making organization is doing over a given period.

Which of the following ratios gives an idea of the liquidity of a firm?

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The ratio that gives an idea of the liquidity of a firm is the Quick ratio. The quick ratio, also known as the acid-test ratio, measures a company's ability to pay off its current liabilities with its quick assets, which are assets that can be easily converted to cash. Quick ratio provides a more conservative measure of liquidity compared to other liquidity ratios like the current ratio, which includes all current assets. A higher quick ratio indicates that a company has enough quick assets to cover its current liabilities and can quickly pay off its obligations. Therefore, option B (Quick ratio) is the correct answer.

The factory cost of producing goods is made up of

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The factory cost of producing goods is made up of prime cost and factory overhead. Prime cost includes direct costs like raw materials, labor, and other direct expenses incurred during production. Factory overhead, on the other hand, includes indirect costs such as rent, utilities, and other expenses that cannot be directly attributed to the production of goods. Therefore, the total cost of producing goods in a factory is the sum of the prime cost and factory overhead.

Interest on a partner's drawings is debited to the

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Interest on a partner's drawings refers to the interest charged on the amount of money withdrawn by a partner from the business for personal use. This interest is charged by the partnership firm to the partner, and therefore, it is debited to the Partner's current account. At the same time, since it is an expense for the partnership firm, it is credited to the profit and loss appropriation account. Therefore, the correct answer is "Partners current account and credited to the profit and loss appropriation account."

Which of the following transaction is BEST recorded in the general journal?

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The conversion of a partners business into a limited liability company affords the

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What are the advantages of an imprest petty cash book?

I cheques can be drawn easily

II A cheque on the use of cash

III Liability of the petty cashier is limited to the value of petty cash

IV Loses through the petty cashier can be minimized

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Halidu and Hamed are business partners with ₦30,000 and ₦20,000 capital respectively. At the end of the financial year, a profit of ₦12,000, which included Halidu's salary of ₦3,000 was made.

Halidu's share of the profit is

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Halidu and Hamed are business partners and the total capital they invested is ₦30,000 + ₦20,000 = ₦50,000. Since no profit sharing ratio is given, we will assume that the profits will be shared in the ratio of their capital investment. Halidu invested ₦30,000 which is 3/5 (60%) of the total capital, while Hamed invested ₦20,000 which is 2/5 (40%) of the total capital. Halidu's salary of ₦3,000 is an expense to the partnership and it is first deducted from the profit before sharing. Therefore, Profit available for sharing = Total Profit - Halidu's salary = ₦12,000 - ₦3,000 = ₦9,000 Halidu's share of the profit = (60% of the total profit available) = (60/100) x ₦9,000 = ₦5,400 Therefore, the answer is option C: ₦5,400.

Eko Local Government expenditure

Hospital building ---------------------- ₦200,000

Drugs ---------------------------------- ₦180,000

Hospital beds and mattresses ------------ ₦40,000

Doctors' and nurses' salaries ---------- ₦120,000

Administrative expenses ----------------- ₦50,000

Recurrent expenditure is

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What was the balance showed wages, ₦2 500 and a note stated that ₦500 wages were due but unpaid when preparing final accounts and loss account with

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A government accounting systems must make sure that

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A government accounting system must make sure that all applicable legal provisions are complied with. This means that the government's financial transactions should follow the relevant laws and regulations, ensuring transparency and accountability in the use of public funds. This includes ensuring that revenue is collected and recorded accurately, expenditures are authorized and properly documented, and all financial statements are prepared in accordance with the applicable standards and guidelines. The government must also ensure that it has adequate controls in place to prevent fraud, waste, and abuse of public resources.

THE BOOK VALUE OF THE ASSET AS AT 31/12/86 WAS

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Equity shareholders' fund is

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Which of the following are sources of revenue to state government in Nigeria?

I Statutory allocation

II Fines from customary courts

III Petroleum tax

IV Income tax

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The sources of revenue to state government in Nigeria are: 1. Statutory allocation: This is the money allocated to states from the federal government's revenue. It is shared based on a formula that takes into account factors like population, landmass, and internally generated revenue. 2. Fines from customary courts: This is the money collected as fines from customary courts. Customary courts are traditional courts that handle cases involving customary law, such as disputes over land, marriage, and inheritance. 3. Petroleum tax: This is a tax imposed on companies that operate in the petroleum industry in Nigeria. The tax is based on the profits earned by these companies from their operations in Nigeria. 4. Income tax: This is a tax imposed on the income earned by individuals and companies in Nigeria. It is collected by the federal government but shared with the states based on the revenue allocation formula. Therefore, the correct options that are sources of revenue to state government in Nigeria are I and IV, which are Statutory allocation and Income tax.

The purchase ledger control account of a company had an opening balance of ₦45,600 credit and closing balance of ₦72,600 credit. The company made payments of 437,000 to credit suppliers during the period: and had discount received of ₦18,600 on this account. What were the credit purchase for the period?

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I. A retailer when fixing his selling price adds one-quarter to the cost of the article

II. The expenses of the retailer is 10% of his sales

III. The total sales is ₦23,000

IV. he turned over his stock five times in the year.

The net profit for the year is

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A charitable club has the following figures:

N

Subscriptions received in 1991 2 800

Subscriptions unpaid in 1990 300

Subscriptions paid for 1992 150

Subscriptions due 1991 180

How much should be charged to the income and expenditure of this club as subscription for 1991?

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A trail balance is usually prepared by an accountant from account balances in the ledger for the purpose of

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A trial balance is a list of all the balances of accounts in the ledger of a company at a specific point in time. The purpose of preparing a trial balance is to test the arithmetical accuracy of the ledger accounts by ensuring that the total of all debit balances equals the total of all credit balances. This process helps to identify any errors in the ledger accounts and to ensure that the financial statements prepared from these accounts are accurate. Therefore, the correct option is "testing arithmetical accuracies of the ledger account balances".

The Asa branch of Emene company Ltd, made a sales of ₦549,000 from the goods sent from the head office during the period ended 31/12/94. These sales were based on a 22% mark up. If branch expenses were ₦34,400 and there were no discrepancies, what should be the profit of the branch for the period?

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Subscription in arrears are

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The following information is provided for amusa company limited , a manufacturer Prime cost ₦999,000Manufacturing overhead ₦132,000Closing work in progress ₦75,000values of finished goods transferred to thetrading account ₦1,116,000If including in the manufacturing overhead were rents of ₦5,000 paid in advance, what is the opening work in progress for the period?

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Which of the following concept stipulates that accounting profit is the difference between revenue and expenses?

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The concept that stipulates that accounting profit is the difference between revenue and expenses is the accrual concept. Under this concept, revenues are recognized when they are earned, regardless of when the payment is received, and expenses are recognized when they are incurred, regardless of when the payment is made. This means that revenue and expenses are recorded in the accounting period to which they relate, rather than when the cash is received or paid out. This allows for a more accurate and fair representation of the financial performance of a company, as it takes into account all the transactions that have occurred during the period, rather than just those for which payment has been received or made.