Principles Of Accounts 2017 Jamb Examination

Dissolution expenses (also known as liquidation expenses) represent the costs incurred during the winding up of a partnership. To record these expenses, the Realization Account is debited (to show the expense), and the Cash or Bank Account is credited (to show the outflow of cash). If a partner pays the expense personally, the credit would go to the Partner's Capital Account, but in a general sense, the credit reflects the source of payment.

For-profit organisations, particularly companies, raise their permanent capital by issuing shares to the public or private investors. Subscriptions, donations, and gifts are typical sources of income for non-profit organisations like clubs or charities, rather than capital sources for commercial enterprises.

The Profit and Loss Appropriation Account is prepared after the Profit and Loss Account in a partnership. It is specifically used to show how the net profit is divided among partners after adjusting for interest on capital, interest on drawings, and partners' salaries according to the partnership deed.

While depreciation of factory machinery is charged to the Manufacturing Account as a factory overhead, depreciation of office machines is considered an administrative expense. These period costs are charged to the Profit and Loss Account rather than being included in the cost of production.

A Purchases Ledger Control Account is a liability account. It is credited when the amount owed to creditors increases. Purchases (IV) increase the debt. Cash refunds (I) from suppliers and dishonoured cheques (III) previously paid to suppliers also effectively increase the balance owed or reverse a previous reduction, thus they are credited. Debit notes issued (II) reduce the debt and are debited.

When reconciling from the Cash Book balance to the Bank Statement balance: (1) Add Unpresented Cheques (money already deducted in books but not yet by the bank); (2) Add Dividends and Credit Transfers (money the bank received but the business hasn't recorded yet). Uncredited cheques (lodgments not yet cleared) must be subtracted, not added.

Net profit is calculated by taking the Gross Profit and subtracting revenue expenses (like bad debts and discount allowed). Discount received is an income and should be added.
Step 1: Identify expenses: Bad debts (350) + Discount allowed (500) = 850.
Step 2: Identify other income: Discount received = 1,000.
Step 3: Calculation: \[ \text{Net Profit} = 5,000 (GP) - 850 (Expenses) + 1,000 (Income) = 5,150 \]

In public sector accounting, the Contingencies Fund is a fund established to provide the executive with resources to meet urgent and unforeseen expenditures for which no provision exists in the appropriation act. Once used, the fund is usually replenished through a supplementary appropriation.

In a period of inflation (rising prices), the LIFO (Last-in, First-out) method is often considered appropriate for matching current costs against current revenues, which results in a more conservative profit figure and potentially lower taxes. Note: While LIFO is the theoretical answer for inflation matching, many modern standards (like IFRS) favor FIFO or Weighted Average for balance sheet accuracy.

The Sales Return Journal (also known as the Returns Inward Book) is the subsidiary book used to record goods returned to the business by its customers. The information is typically taken from credit notes issued to the customers.