Principles Of Accounts 2014 Jamb Examination

The petty cash book is a book of original entry that follows the double-entry principle. It has a debit side used to record the receipt of the cash float (imprest) from the main cashier, and a credit side used to record the various small payments made by the petty cashier.

The imprest system is a highly effective internal control mechanism. By giving the branch a fixed float and requiring them to submit all expenditure vouchers to the headquarters to receive reimbursement, the headquarters can monitor and verify every kobo spent before replenishing the funds, thereby reducing the risk of fraud.

In a cash book, the debit side is the 'receiving' side. Any transaction that results in cash coming into the business—such as cash sales (I) or general cash receipts (V) from debtors or other sources—must be recorded on the debit side. Cash purchases and payments are credit entries.

A direct deposit (or credit transfer) occurs when a third party pays money directly into the firm's bank account. The bank records this as a credit on the bank statement. However, the firm may not be aware of the transaction until they receive the statement, meaning it remains unrecorded in the cash book until the bank reconciliation process.

The primary purpose of the trading account is to calculate the gross profit or gross loss of a business. This represents the 'gross margin'—the difference between the revenue from sales and the direct cost of those sales (COGS) before operating expenses are deducted.

To find the final payment, we deduct the cash discount from the gross price.

Step 1: Calculate the discount amount.\[ 5\% \times 9,000 = 450 \]Step 2: Subtract the discount from the cost price.\[ 9,000 - 450 = 8,550 \]

Using the straight-line method, we first find the annual depreciation charge and then multiply it by the number of years requested.

Step 1: Calculate annual depreciation.\[ \text{Annual Depreciation} = \frac{\text{Cost} - \text{Scrap Value}}{\text{Life Span}} \]\[ \frac{600,000 - 50,000}{5} = \frac{550,000}{5} = 110,000 \; \text{per year} \]Step 2: Calculate for two years.\[ 110,000 \times 2 = 220,000 \]

Current assets are items owned by the business that are expected to be converted into cash within one year. From the list, these are:
Stock (#4,500) + Debtors (#905) + Cash (#4,956) + Prepaid Expenses (#290).

Calculation:\[ 4,500 + 905 + 4,956 + 290 = 10,651 \]

Current liabilities are debts or obligations that the business must settle within one year. From the list, these are:
Creditors (#7,940) + Accrued Expenses (#323).

Calculation:\[ 7,940 + 323 = 8,263 \]

Gross profit is the fundamental measure of trading success. It is the surplus remaining after the cost of goods sold (opening stock + purchases - closing stock) is subtracted from the revenue generated by sales. Net profit is only found after further deducting administrative and operating expenses.