Principles Of Accounts 2013 Jamb Examination

The primary objective of accounting is to maintain a systematic, chronological, and permanent record of all financial transactions of a business entity. This ensures that every exchange of value is documented for future reference, allowing for the preparation of financial statements and the assessment of the firm's financial health. While analysis and auditing are parts of the accounting process, the fundamental seeking of accounting information systems is to ensure that a complete 'audit trail' or permanent history of business activities exists.

In ledger accounting, the 'balance' of an account is determined by comparing the total of the debit (left) side with the total of the credit (right) side. If the sum of the entries on the debit side is greater than the sum of the entries on the credit side, the resulting difference is called a debit balance. This is typical for asset accounts (like cash or machinery) and expense accounts. Conversely, if the credit side were heavier, it would be a credit balance, typical for liabilities, capital, and revenue accounts.

When an owner starts a business by introducing cash, the business entity receives an asset and incurs a liability towards the owner (equity). Under the rules of double entry:
1. The asset 'Cash' is increasing, so the Cash Account must be debited.
2. The owner's equity or 'Capital' is increasing, so the Capital Account must be credited.
This follows the accounting equation: \( \text{Assets} = \text{Capital} + \text{Liabilities} \). By debiting cash and crediting capital, the equation remains balanced with #10,500 on both sides.

This transaction involves the settlement of a debt to a creditor (Agromachinex). When the payment is made in cash:
1. The liability to Agromachinex decreases. According to the rules of double entry, a decrease in a liability is recorded as a debit. Therefore, we debit Agromachinex's account.
2. The asset 'Cash' decreases as money leaves the business. A decrease in an asset is recorded as a credit. Therefore, we credit the Cash Account.
This transaction reduces both an asset and a liability by #6,000.

The sales day book (also known as the sales journal) is a book of original entry used specifically to record all credit sales transactions as they occur. Cash sales are recorded in the cash book, and returns are recorded in the returns books. At the end of a period, the total of the sales day book represents the total credit sales, which is then posted to the Sales Account in the General Ledger and the individual customers' accounts in the Sales Ledger.

For employees paid on a time-rate basis, the primary source document for payroll calculation is the time sheet or clock card, which provides a record of the number of hours worked. Without this objective data, the employer cannot determine the gross pay (Hours Worked \(\times\) Hourly Rate). While the nominal roll contains employee names and dependants might affect tax deductions, the actual 'wage' calculation is driven by the time recorded in the system.

Capital expenditure is spending on the acquisition, improvement, or extension of the life of non-current (fixed) assets. The purchase of office machinery is a capital expenditure because it provides a long-term benefit to the business (usually lasting more than one year) and is not intended for resale. Maintenance, stationery, and carriage inwards are revenue expenditures because they are day-to-day running costs incurred to maintain the earning capacity of the business during the current accounting period.

The debit side of the cash book records receipts of cash. When cash is received from a person (a debtor), the entry in the cash book is a debit. Following the principle of double entry—'every debit must have a corresponding credit'—the amount must be posted to the credit side of that individual's personal account in the ledger. This credit entry reduces the balance owed by the debtor to the business.

In Saka's books (the creditor/seller), the 10 percent discount is an expense because Saka is accepting less money than was originally owed to encourage prompt payment. This is known as 'Discount Allowed'.
Step 1: Calculate the discount amount: \( 10\% \times 15,000 = 1,500 \).
Step 2: According to double-entry rules, expenses are debited. Therefore, Saka debits the 'Discount Allowed Account'.
Step 3: The corresponding credit is made to Alaka's account to show that the #1,500 debt has been cleared by the discount. Saka will also debit Cash with #13,500 and credit Alaka with #13,500 to fully close the #15,000 debt.

The imprest system is a management method for petty cash.
Statement (iii) is correct: The essence of the system is that the petty cashier is 'reimbursed' or 'topped up' with the exact amount spent during the period to return the cash float to its original level.
Statement (iv) is correct: It provides control by limiting the amount of cash available for small expenses and requiring vouchers for every reimbursement.
Statement (i) is incorrect because different companies have different cash needs. Statement (ii) is technically incorrect because the sum received is not 'fixed' but is specifically equal to the amount spent to restore the float.