JAMB Accounting Past Questions & Answers - Page 51

The role of accounting in business is to help internal and external stakeholders make better business decisions by providing them with financial information. This means that., the purpose of accounting is to accumulate and report on financial information about the performance, financial position, and cash flows of a business. This information is then used to reach decisions about how to manage the business, or invest in it, or lend money to it.

What is 'Net Debt'?. Net debt shows a business's overall financial situation by subtracting the total value of its cash, cash equivalents, and other liquid assets, a process called netting. All the information necessary to determine a company's net debt can be found on its balance sheet.

A bad debt is a monetary amount owed to a creditor that is unlikely to be paid and, or which the creditor is not willing to take action to collect for various reasons, often due to the debtor not having the money to pay, for example due to a company going into liquidation or insolvency.

net debtors = 7,200,000 (after all necessary deductions have been made)

bad debts = 15% ( an amount to be deducted from the total of all the debts owed to the company)

The question says, ''the total balance of debtors before adjustment'' Remember net debtors is gotten after necessary deductions are made. This means that, the 15% provided as bad debts to be written off by the company, had already been deducted as well. to get the initial balance before the deductions, we simply get 15% of 7,200,000 and add it to the net debtors. Hence we have;

15/100 * 7,200,000 = N1,080,000

7,200,000 + 1,080,000 = N8,280,000

n accumulated fund is the capital fund of a nonprofit organization. Money is directed into the accumulated fund when revenues are greater than expenditures and there is a budgetary surplus. Capital fund (also known as general fund and accumulated fund) is a balance sheet item which represents the surplus of assets over liabilities of a non-trading concerns. In other words, we can say that the capital fund of non-profit organizations is equivalent to the capital of for-profit organizations. It increases as a result of surplus and decreases as a result of deficit computed by preparing an income and expenditure account. 

A partnership deed is a document containing an agreement that details the rights and obligations of each partner participating in a venture. For example, a deed of partnership could specify how proceeds from the partnership's business are to be divided among the partners.

we will look at the way in which a business deals with any differences between the balance of the bank account in the cash book and the closing balance of the bank account shown by the bank statement for the same period.
These differences are explained by a document known as a bank reconciliation statement: which lists
• items which are in the cash book but not on the bank statement
• items which are on the bank statement but not in the cash book
This process is an important one: it enables the business to update its cash book and also helps to prove the accuracy of the bookkeeping of the business and the bank.

 1 Prepare a Bank Reconciliation Statement
(a) Compare transactions that appear on both Cash Book and Bank Statement
(b) Update Cash Book from details of transactions appearing on Bank Statement
(c)  Balance the bank columns of the Cash Book to calculate the revised balance

2 Complete a Bank Reconciliation Statement
(a) Enter correct date of the statement
(b) Enter the balance at bank as per the Cash Book
(c) Enter details of unprecedented cheques
(d) Enter sub-total on reconciliation statement
(e) Enter details of bank lodgements
(f) Calculate balance as per Bank Statement