Principles Of Accounts 2015 Jamb Examination

A Creditors Ledger Control Account (or Purchases Ledger Control Account) is a liability account. It is credited when the amount owed to suppliers increases and debited when the debt decreases. Credit purchases increase the debt, so they are a credit entry. Returns outwards, cash payments to suppliers, and discounts received all reduce the debt and are therefore debit entries. Bad debts apply to debtors, not creditors.

In a single-entry system where full double-entry records are not kept, the capital is found using a 'Statement of Affairs.' This is essentially a list of assets and liabilities at a specific date. The difference between the total assets and total liabilities is deemed to be the capital (Owner's Equity) at that date.

Not-for-profit organisations generate 'income' to fund their activities through member-related fees and external gifts. Subscriptions, fines, and donations are all forms of revenue income. A loan from a bank, however, is a liability (capital receipt) that must be repaid; it is not considered 'income' earned by the organisation. Therefore, only items I, II, and III qualify as income sources.

A prepayment occurs when an amount paid exceeds the actual expense incurred for the accounting period.
Step 1: Calculate the annual rent expense.\[ \text{Monthly Rent} \times 12 \text{ months} = 200 \times 12 = 2,400 \]Step 2: Compare total paid to annual expense.\[ \text{Prepayment} = \text{Total Paid} - \text{Annual Expense} \]\[ \text{Prepayment} = 2,800 - 2,400 = 400 \]

In incomplete records (single entry), credit purchases are calculated by reconstructing the Total Creditors Control Account. By taking the closing balance of creditors, adding payments made to them, and subtracting the opening balance, the resulting figure is the total credit purchases for the period.

When an owner takes goods (stock) for personal use, it reduces the business's inventory and increases the owner's total drawings. According to double-entry rules, we debit the account receiving the value (Drawings) and credit the source (Purchases or Stock). Standard practice is to credit 'Purchases' at cost price to ensure the trading account reflects only goods available for sale to customers.

The 'Net Debtors' figure on the balance sheet is the gross amount minus the provision for doubtful debts.
Step 1: Calculate the provision.\[ 5\% \text{ of } 800,000 = 0.05 \times 800,000 = 40,000 \]Step 2: Subtract provision from total debtors.\[ 800,000 - 40,000 = 760,000 \]

A Receipts and Payments account is a summary of the cash book. It only records transactions that involve the actual movement of cash. Interest on a bank deposit is an actual cash inflow. Accruals, prepayments, and depreciation are non-cash adjustments that only appear in the Income and Expenditure account.

When a company is bought for less than the fair value of its net assets (Assets - Liabilities), the difference is considered a 'gain on bargain purchase.' This 'negative goodwill' is treated as a capital profit and is credited to a Capital Reserve account, as it is a gain from a capital transaction rather than regular trading.

If a government department finds that its original budget (estimates) is insufficient to cover its needs during the fiscal year, it must seek approval for additional funds through a 'Supplementary Estimate.' Once approved by the legislature, this allows for the extra expenditure. Virement, by contrast, is moving funds between sub-heads within the same department's existing budget.