Principles Of Accounts 2010 Jamb Examination

Professional accounting bodies, such as the Institute of Chartered Accountants of Nigeria (ICAN) and the Association of National Accountants of Nigeria (ANAN), are primarily established to regulate the activities of their members. A core aspect of this regulation is the development and enforcement of a strict code of professional conduct and ethics. By ensuring that members maintain high standards of integrity, objectivity, and professional competence, these bodies protect the public interest and maintain the credibility of financial reporting within the country. While they may offer guidance on financial management or support member welfare, their foundational mandate is the promotion and preservation of professional ethics.

In double-entry bookkeeping, the general ledger is traditionally divided into three main categories. Personal accounts record transactions related to individuals, firms, or other organisations. Real accounts deal with tangible assets like land, buildings, and machinery, as well as intangible assets. Nominal accounts are used to record income, expenses, gains, and losses. This classification is fundamental because it determines the specific rules of debit and credit that apply to each transaction, ensuring that the trial balance and subsequent financial statements are accurately compiled.

An error of principle occurs when a transaction is recorded in a way that violates the fundamental principles of accounting, typically by entering a transaction in the wrong class of account. In this instance, while both salary and stationery are revenue expenditures (expenses), recording one in place of the other is a misapplication of accounting logic. While some might argue this is an error of commission (entering an item in the wrong account of the same class), the standard examination perspective often classifies the complete misidentification of the nature of the expense—especially when confusing capital and revenue items or distinct operational categories—under the umbrella of principle or specific misclassification. In most academic contexts for this specific question, it is treated as a breach of the principle of correct account classification.

This is an error of original entry where the amount was recorded incorrectly in the books of prime entry and subsequently posted to the ledger. The stationery account was debited with N2,000, which is N1,800 more than the actual cost of N200. To rectify this over-debit, a credit entry must be made to the stationery account for the difference between the wrong amount and the correct amount.\[ \text{Correction Amount} = \text{Amount entered} - \text{Actual amount} \]\[ \text{Correction Amount} = N2,000 - N200 = N1,800 \]By crediting the stationery account with N1,800, the previous incorrect debit of N2,000 is reduced to the correct balance of N200.

Real accounts are the category of ledger accounts that represent the assets and properties owned by a business. These are subdivided into tangible real accounts and intangible real accounts. Tangible real accounts specifically deal with physical assets that have a permanent or long-term nature, such as land, buildings, plant, machinery, furniture, and fixtures. Unlike nominal accounts, which are closed at the end of each financial year, the balances of real accounts are carried forward to the next accounting period on the Statement of Financial Position.

An invoice is a primary source document used in business to record the sale of goods or services on credit. Its main function is to provide a detailed description of the transaction, including the quantity of goods supplied, the unit price, the total amount due, any trade discounts allowed, and the terms of payment. While it eventually serves as the basis for entries in the sales or purchases day books, its immediate defining feature is the itemised specification of the particulars of the goods or services involved in the transaction.

Source documents are the original records that serve as evidence for financial transactions. They are the starting point of the accounting cycle. Examples include invoices, receipts, debit notes, and credit notes. A credit note is issued by a seller to a buyer to inform them that their account is being credited (reduced), usually because goods were returned, damaged, or overcharged. In contrast, the cash book, petty cash book, and general ledger are books of account where these transactions are recorded, not the source documents themselves.

Interest received refers to the interest credited by the bank to the customer's account for maintaining a credit balance. The bank records this directly in the customer's account, which increases the balance on the bank statement immediately. However, the business might not be aware of this transaction until the bank statement is received and checked. Consequently, until the business records this interest in their cash book, the bank statement balance will reflect a higher figure (be overstated) compared to the cash book balance.

Historically and in many traditional banking contexts, bank charges applied to current accounts are referred to as Commission on Turnover (COT). Turnover refers to the total value of withdrawals or debits made from the account during a specific period. Banks apply a certain percentage or rate to this total volume of activity to determine the service fee charged to the customer. This differentiates it from fixed transaction fees or charges on specific transfers, as it is based on the overall movement of funds out of the account.

Uncredited cheques, also known as lodgements in transit, are cheques that have been received by a business and recorded on the debit side of the cash book but have not yet been processed or credited by the bank. Because the business has already increased its cash book balance by the amount of these cheques, but the bank has not yet added them to the bank statement balance, the cash book balance will appear higher (overstated) than the balance shown on the bank statement during the reconciliation period.