Principles Of Accounts 2016 Jamb Examination

An error of commission occurs when a transaction is recorded in the correct class of account (in this case, both Rent and Rates are expense accounts) but in the wrong specific account. Since the bookkeeper correctly identified that an expense occurred but simply debited 'Rent' instead of 'Rates', it is a clerical error of commission. If the entry had been made in a completely different class of account (e.g., debiting a fixed asset instead of an expense), it would have been an error of principle.

To find the amount charged to the Profit and Loss account for the *provision* specifically, we compare the new provision required with the existing provision in the books.
Step 1: Calculate the new provision requirement.\[ \text{New Provision} = 10\% \times \text{Debtors (28,000)} = 2,800 \]Step 2: Determine the increase in provision.\[ \text{Increase} = \text{New Provision} (2,800) - \text{Old Provision} (1,500) = 1,300 \]Note: While the bad debt written off (3,000) is also charged to the P&L, the question asks specifically for the 'provision' portion. Based on the standard calculation, 1,300 is the increase to be charged. If the question implies the total 'bad and doubtful debt' expense, it would be \(3,000 + 1,300 = 4,300\). Given the options, C is the most accurate calculation for the adjustment.

The nominal value (or par value) is the face value of a share as stated in the company's memorandum. It is calculated by dividing the total authorised share capital by the total number of authorised shares.
Total Authorised Capital = ₦50,000,000
Total Authorised Shares = \(100,000,000\)
Calculation: \[ \text{Nominal Value} = \frac{50,000,000}{100,000,000} \] = ₦0.50 The 60k (₦0.60) mentioned in the question is the issue price, indicating the shares were issued at a premium of 10k.

Under the Imprest System of petty cash, the petty cashier is given a fixed sum (the float or imprest). At the end of the period, the cashier is reimbursed with the exact amount spent to restore the balance to the original sum.
Step 1: Calculate total expenses.\[ \text{Total Spent} = 420 \text{ (Printing)} + 250 \text{ (Cleaning)} + 175 \text{ (Postage)} = 845 \]Step 2: Reimbursement amount.\[ \text{Amount to be reimbursed} = \text{Total Spent} = 845 \]By receiving ₦845, the cashier will have \((2,450 - 845) + 845 = 2,450\), restoring the original imprest.

Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life. It represents the loss in value due to wear and tear, usage, passage of time, or obsolescence. It is treated as an expense in the Profit and Loss account to ensure that the cost of using the asset is matched against the revenue it helps generate (Matching Concept). Amortisation is a similar concept but specifically applies to intangible assets like patents or goodwill.

In accounting, particularly during the dissolution of a partnership or the liquidation of a company, 'realisation' refers to the process of selling the business's assets on the open market. The goal is to 'realise' their value by converting them into cash so that the proceeds can be used to pay off creditors and return any remaining capital to the owners or partners.

Cost apportionment is a stage in overhead analysis where common costs (costs that cannot be directly attributed to a single department, such as factory rent or electricity) are shared among various cost centres (departments) on a fair and logical basis. For example, rent is apportioned based on floor area, while canteen costs might be apportioned based on the number of employees in each department. This ensures that the total cost of running each department is accurately reflected.

Preliminary expenses are the costs incurred during the formation and registration of a company (e.g., legal fees, stamp duties, printing of the memorandum). These costs have no physical substance and cannot be sold to realise cash, which is why they are called 'fictitious assets'. In modern accounting practice, they are usually written off against profits as soon as possible, but on the balance sheet, they represent an expenditure that has not yet been fully charged to the P&L account.

Prime cost is the sum of all direct manufacturing costs, including direct materials consumed and direct labour. Indirect costs such as factory lubricants, depreciation, and insurance are classified as factory overheads and are not included in prime cost.

Step 1: Calculate Raw Materials Consumed

Raw Materials Consumed = Opening Stock + Purchases − Closing Stock

Raw Materials Consumed = 5,000 + 45,000 − 5,800 = 44,200

Step 2: Calculate Prime Cost

Prime Cost = Raw Materials Consumed + Direct Wages (Salary)

Prime Cost = 44,200 + 61,000 = 105,200

When a business sells a fixed asset (like a generator) rather than regular trading stock, the entry must reflect the reduction of that specific asset. Since the sale is on credit, the person receiving the asset (the debtor, Patrick) is debited to show he owes the business money. The Generator account is credited because the asset is leaving the business. Note that 'Sales Account' is only used for the sale of goods intended for resale, not for the disposal of fixed assets.