Principles Of Accounts 2007 Jamb Examination

The value of sundry expenses must be calculated based on the specific percentages provided in the prompt relative to other account balances.

Calculate 150% of Returns Inwards:\[1.50 \times 1,500 = 2,250\]Calculate 50% of Debtors:\[0.50 \times 900 = 450\]Sum the results to find total Sundry Expenses:\[\text{Sundry Expenses} = 2,250 + 450 = 2,700\]Therefore, the total value for sundry expenses is N2,700.

A trial balance total is found by summing all debit entries or all credit entries. First, we identify the nature of each account and determine its side (Debit or Credit).

Debit Side Items:
1. Returns Inwards: N1,500
2. Cash: N1,550
3. Debtors: N900
4. Sundry Expenses: N2,700 (calculated as \(1.5 \times 1,500 + 0.5 \times 900\))

Credit Side Items:
1. Capital: N3,800
2. Discount: N2,850 (This must be Discount Received to balance)

Calculating the Total (Credit Side):\[\text{Total} = \text{Capital} + \text{Discount}\]\[\text{Total} = 3,800 + 2,850 = 6,650\]Calculating the Total (Debit Side):\[\text{Total} = 1,500 + 1,550 + 900 + 2,700 = 6,650\]The trial balance totals N6,650.

The fundamental accounting equation is \(\text{Assets} = \text{Liabilities} + \text{Equity}\). When a business pays its creditors, two things happen:
1. Cash (an Asset) decreases because money is leaving the business.
2. Creditors/Accounts Payable (a Liability) decreases because the business now owes less money.

In this transaction, Cash decreases by N5,000 and Liabilities decrease by N5,000. Therefore, the total value of assets held by the business decreases by N5,000 to maintain the balance of the equation. There is no direct effect on owners' equity in this specific payment transaction.

Bookkeeping is the systematic recording of financial transactions. While external parties like investors and creditors use final financial statements, the primary internal benefit of detailed bookkeeping records is for management. Management requires up-to-date and accurate data to plan, control, and make informed decisions regarding the day-to-day operations of the business. Without these records, it would be impossible to track expenses, manage cash flows, or evaluate the performance of different departments, making the task of management extremely difficult or even impossible.

To solve this, we must classify each account based on whether it typically carries a debit or credit balance in a trial balance:
1. Cash: This is an asset and carries a Debit balance (N2,000).
2. Furniture: This is a fixed asset and carries a Debit balance (N4,000).
3. Bank Overdraft: This is a liability (it represents money owed to the bank) and carries a Credit balance (N2,000).

Additionally, to make a trial balance actually 'balance,' the Capital must equal the difference between assets and liabilities. However, the question specifically asks for the amount on the credit side based on the provided list. The only item listed with a credit balance is the Bank Overdraft of N2,000. Note: If capital was included, it would be N4,000 (making the total N6,000), but strictly based on the items given as account balances, the credit-entry item is N2,000.

In accounting, there is a fundamental distinction between 'discount allowed' and 'discount received'. Discount allowed is the reduction given to customers to encourage prompt payment on sales, while discount received is the reduction granted by suppliers on purchases.

The trader conducted two transactions:
1. Purchase: N2,000 at a 2% discount. This results in a discount received of \(0.02 \times 2,000 = N40\).
2. Sale: N1,000 at a 2% discount. This results in a discount allowed of:\[\text{Discount Allowed} = 2\% \text{ of } 1,000\]\[\text{Discount Allowed} = 0.02 \times 1,000 = 20\]Since the question specifically asks for the amount of discount allowed, we only consider the discount given on the sales transaction.

To determine the amount owed (Closing Balance), we prepare a Sales Ledger Control Account (Debtors Account). We must record all items that increase the debt on the debit side and all items that decrease the debt on the credit side.


1. Opening Balance (Debit): N20,000
2. Sales (Debit): N40,000
3. Dishonoured Cheque (Debit): N8,000. When a cheque is dishonoured, the customer's debt is re-established, so we debit the account.
4. Cheques Received (Credit): N40,000. This reduces the debt.
5. Sales Returns (Credit): N10,000. This reduces the debt.
6. Discount Allowed (Credit): N1,000. This reduces the debt.

Calculation for Balance c/d:\[\text{Total Debits} = 20,000 + 40,000 + 8,000 = 68,000\]\[\text{Total Credits} = 40,000 + 10,000 + 1,000 = 51,000\]\[\text{Balance c/d} = 68,000 - 51,000 = 17,000\]The final amount owed by the debtors is N17,000.

To find the closing balance, we must first determine the total sales figure using the provided discount percentage.

Determine Sales
We are told Discount Allowed (N500) is 2.5% of sales.\[0.025 \times \text{Sales} = 500\]\[\text{Sales} = \frac{500}{0.025} = 20,000\]Calculate Total Debits\[\text{Total Debits} = \text{Bal. b/d} + \text{Sales}\]\[\text{Total Debits} = 18,400 + 20,000 = 38,400\]Calculate Total Credits (excluding Bal c/d)\[\text{Total Credits} = \text{Bad debt} + \text{Discount} + \text{Cheque} + \text{Cash}\]\[\text{Total Credits} = 1,500 + 500 + 25,000 + 10,000 = 37,000\]Determine the Closing Balance (Bal. c/d)\[\text{Bal. c/d} = \text{Total Debits} - \text{Total Credits}\]\[\text{Bal. c/d} = 38,400 - 37,000 = 1,400\]The closing balance in the sales ledger is N1,400.

Surplus income is calculated using the Income and Expenditure Account, which includes only revenue income and revenue expenditure for the period. It excludes opening/closing cash balances and capital items.


1. Total Income:Income = Donations + Subscriptions + Sales of Refreshments + Entertainment
Income = 5,000 + 7,000 + 11,000 + 21,000 = 44,000
2. Total Expenditure:Expenditure = Salaries + Secretariat Expenses + Dance Expenses + Refreshments
Expenditure = 5,000 + 5,000 + 5,000 + 15,000 = 30,000
3. Calculate Surplus: Surplus = Total Income - Total Expenditure
Surplus = 44,000 - 30,000 = 14,000
The surplus for the period is N14,000.

To find the opening cash balance, we reconstruct the Receipt and Payments account. The total of the receipts side must equal the total of the payments side.

Calculate Total Credits (Payments side)\[\text{Total Payments given} = 8,200\]\[\text{Bank Deposit (200% of Closing Cash)} = 2.0 \times 1,110 = 2,220\]\[\text{Closing Cash Balance} = 1,110\]\[\text{Total Credits} = 8,200 + 2,220 + 1,110 = 11,530\]Sum up known Receipts (excluding Opening Balance)\[\text{Entrance Fees} = 1,200\]\[\text{Subscriptions} = 4,310\]\[\text{Donations} = 1,500\]\[\text{Proceeds from Sales} = 2,300\]\[\text{Sum of Receipts} = 1,200 + 4,310 + 1,500 + 2,300 = 9,310\]Calculate Opening Balance\[\text{Opening Balance} + 9,310 = 11,530\]\[\text{Opening Balance} = 11,530 - 9,310 = 2,220\]Depreciation is ignored as it is a non-cash item. The opening balance is N2,220.