Principles Of Accounts 2007 Jamb Examination

The closing capital is determined by adding profits and additional investments to the opening capital, then subtracting drawings. We can rearrange this formula to find the drawings:
Closing Capital = Opening Capital + Additional Capital + Net Profit - Drawings
Substituting the values:
10,250 = 7,000 + 3,500 + 2,500 - Drawings
10,250 = 13,000 - Drawing
Drawings = 13,000 - 10,250 = 2,750
 

To find the profit or loss, we compare the closing capital (adjusted for drawings and additional capital) with the opening capital.

First, calculate additional capital:
Additional Capital = 300\% \times 3,000 = 9,000
Next, use the capital equation:
Profit/Loss = Closing Capital + Drawings - Opening Capital - Additional Capital
Profit/Loss = 42,500 + 3,000 - 25,000 - 9,000
Profit/Loss = 45,500 - 34,000 = 11,500
Since the result is positive, it represents a net profit of N11,500.

The additional capital is explicitly defined as 300% of the drawings made during the period.

Given:
Drawings = N3,000\[\text{Additional Capital} = 300\% \times N3,000\]\[\text{Additional Capital} = \frac{300}{100} \times 3,000\]\[\text{Additional Capital} = 3 \times 3,000 = 9,000\]Thus, the owner introduced N9,000 as additional capital during the financial year.

Control accounts (such as Sales Ledger and Purchase Ledger Control accounts) serve several vital functions in bookkeeping:
1. Facilitating Final Accounts: By providing a single summary balance for hundreds of individual debtors or creditors, they make it much faster to prepare the Trial Balance and Balance Sheet.
2. Error Detection: If the balance on the control account does not match the sum of the individual ledger balances, an error is immediately evident, narrowing down where the mistake occurred.
3. Checking Accuracy: They act as an independent check on the accuracy of the subsidiary ledgers and ensure the overall integrity of the ledger system. All three points provided are correct uses.

In accounting, the provision for discount on debtors is always calculated on the good debtors—that is, the balance of debtors *after* the provision for bad debts has been deducted. This is because a business does not expect to give a discount to someone who is not expected to pay at all.

1. Calculate Provision for Bad Debts:\[10\% \times 20,000 = 2,000\]2. Calculate Net (Good) Debtors:\[20,000 - 2,000 = 18,000\]3. Calculate Provision for Discount on Debtors:\[5\% \times 18,000 = 900\]Note: If the debtor amount was N20,000 (assuming the trailing '20' in the prompt was 20,000), the answer is 900. If the question implies different base numbers, C remains the standard answer based on the calculation order.

Endorsement is the legal process of transferring the rights of a negotiable instrument, such as a cheque, from one person to another. When the payee of a cheque signs the back of it, they are 'endorsing' it, which allows the cheque to be cashed or deposited by someone else or a different entity. This is common in business transactions where a cheque made out to one party is used to settle a debt with a third party. Cheque crossing, on the other hand, refers to drawing two parallel lines on the face of a cheque to ensure it is paid only through a bank account, not cashed over the counter.

The Journal Proper (or General Journal) is a book of original entry used to record transactions that do not fit into any of the specialised subsidiary books like the Sales Day Book, Purchase Day Book, or Cash Book. Examples of entries made in the journal proper include the opening and closing entries, the purchase or sale of fixed assets on credit, correction of errors, and the writing off of bad debts. Since these transactions do not occur as frequently or regularly as daily sales or cash receipts, they are categorised as non-regular transactions.

To calculate the balance as per the bank statement starting from the cash book balance, adjust first for items the bank knows about but the cash book does not (Adjusted Cash Book), then reconcile timing differences (Unpresented cheques and Uncredited lodgements).

Calculate Adjusted Cash Book Balance

Adjusted Balance = Initial Balance + Dividends − Bank Charges − Standing Order

Adjusted Balance = 13,560 + 2,000 − 280 − 600 = 14,680

Reconcile to Bank Statement Balance

Bank Statement Balance = Adjusted Balance + Unpresented Cheques − Uncredited Lodgements

Bank Statement Balance = 14,680 + 5,120 − 2,300 = 17,500

Note: The bank statement balance is higher because unpresented cheques have been deducted in our books but not yet by the bank, while uncredited lodgements have been added in our books but not yet by the bank.

The adjusted cash book balance is found by updating the existing cash book with items appearing in the bank statement that were previously unrecorded in the business records. These include direct credits (dividends) and direct debits (bank charges and standing orders).

Calculation:\[\text{Balance as per Cash Book} = 13,560\]\[\text{Add: Dividend received} = 2,000\]\[\text{Sub-total} = 15,560\]\[\text{Less: Bank charges} = (280)\]\[\text{Less: Standing order} = (600)\]\[\text{Adjusted Balance} = 15,560 - 880 = 14,680\]This adjusted balance represents the true cash position of the business before considering timing differences like unpresented cheques.

The accounting cycle or information system generally follows a specific sequence:
1. Identification of transactions
2. Recording in journals
3. Classifying (posting to ledgers)
4. Summarising (preparing the Trial Balance and Final Accounts)
5. Interpreting and communicating the results to users.


Summarising involves condensing the vast amount of data recorded in the ledgers into a readable format, primarily through the Trial Balance, Trading, Profit and Loss Account, and the Balance Sheet. This allows stakeholders to see the overall performance of the entity at a glance.