JAMB Accounting Past Questions & Answers - Page 54

The accounting profession is no different. Foremost among the objectives of accounting and reporting is to provide useful information for investors, creditors, analysts, governments, and others. Accounting information is general purpose and should be designed to serve the information needs of all types of interested parties. The purpose of accounting is to accumulate and report on financial information about the performance, financial position, and cash flows of a business.

A control account, often called a controlling account, is a general ledger account that summarizes and combines all of the subsidiary accounts for a specific type. In other words, it’s a summary account that equals the sum of the subsidiary account and is used to simplify and organize the general ledger. The purpose of the control account is to keep the general ledger nice and clean without any details, yet contain the correct balances to be used in the financial statements. 

• Control accounts allow a single trial balance to be extracted from the general ledger.
• If the trial balance does not balance, only the accounts whose control account does not reconcile need to be checked for errors.
• A different person can maintain the control account as a check against fraud.
• Control accounts speed up the process of producing management accounts information as the control account balance can be used without waiting for the individual balances to be reconciled and extracted.
• Control accounts reduce the amount of detail needed in the general ledger.

The gross profit formula is calculated by subtracting total cost of goods sold from total sales.Both the total sales and cost of goods sold are found on the income statement. Gross profit is a way to compare the cost of the goods your company sells and the income derived from those goods. It can be gotten as;

Gross profit = total sales - cost of goods sold

The impurest system is a form of financial accounting system. The most common imprest system is the petty cash system. The base characteristic of an imprest system is that a fixed amount is reserved, which after a certain period of time or when circumstances require, because money was spent, it will be replenished. This replenishment will come from another account source, e.g., petty cash will be replenished by cashing a cheque drawn on a bank account.

The advantages of using the Imprest system are versatility, accountability, practicality, limitation of theft, ease of use and limitation of expenditure. The system is a form of managing petty cash in a business. 

Trial balance is prepared when transactions posted into the accounts are balanced up. The trial balance is then prepared to check the accuracy of those posted transaction. It is normal some times that some errors may be apparent but despite this, they may not affect the trial balance. It is very important for any accounting officer to note that these may occur in one way or another.

A transposition error is simply substituting two sequential digits.Transposition errors are errors where figures (digits) are written in the wrong order in either a credit or a debit entry.This would create an imbalance between credits and debts, and so the error would be indicated by extracting a trial balance.For example, the number 78 for 87 or 1346 for 1436.