Financial Accounting Sss 1

A cheque could be dishonoured due to an irregular signature. This means that the signature on the cheque does not match the signature on file for the account holder. Banks use signatures as a way to verify the authenticity of a cheque and ensure that it is being authorized by the correct person. If the signature is irregular or does not match, it raises concerns about the validity of the cheque and can result in it being dishonoured.

The correct answer is b) bookkeeper. A bookkeeper is responsible for recording the financial transactions of a business. They maintain accurate and up-to-date records of all the income, expenses, and other financial activities of the company. This includes tasks such as recording sales, processing invoices, reconciling bank statements, and preparing financial reports. The bookkeeper plays a crucial role in ensuring the accuracy and integrity of the company's financial records, which are essential for making informed business decisions and meeting legal and regulatory requirements.

Drawings refer to goods or money taken by the owner of a business for their personal use. This is separate from the capital invested in the business, which refers to the owner's initial investment or additional funds contributed to the business. Sales refer to the revenue generated from selling goods or services, while purchases refer to the goods or services bought by the business for resale or use in operations. Therefore, the correct answer is d) drawings.

The purchases journal is used to record goods bought on credit. This means that when a business purchases goods but does not make an immediate payment, the transaction is recorded in the purchases journal. This allows the business to keep track of its outstanding debts and payments that need to be made in the future.

A start-up fund for a business refers to the initial investment or money required to start and operate the business. This fund is commonly known as capital. It includes the money contributed by the business owner or investors to cover expenses such as purchasing equipment, hiring employees, and marketing. Therefore, the correct answer is c) capital.

The correct answer is b) fixed and current assets. This classification is based on the liquidity and permanence of the assets. Fixed assets are long-term assets that are not easily converted into cash, such as buildings, land, and equipment. Current assets, on the other hand, are short-term assets that can be easily converted into cash within one year, such as cash, accounts receivable, and inventory. This classification helps businesses to track and manage their assets effectively and make informed financial decisions.

In accounting, the debit side is used to record increases in assets and decreases in liabilities and equity. Cash received from Mr. Crayon is an increase in the company's assets, so it should be recorded on the debit side of the accounting equation.

Sales returns can also be referred to as "returns inwards" because it represents the goods that customers return to the seller. This term is used to differentiate it from "returns outwards," which refers to the goods that the seller returns to the supplier. "Total sales" refers to the overall revenue generated from sales, while "total returns" is a more general term that can encompass both returns inwards and returns outwards.

The balance sheet is a financial statement that presents the financial position of a business at a specific point in time. It provides a snapshot of the company's assets, liabilities, and shareholders' equity. This statement helps stakeholders, such as investors and creditors, to assess the financial health and stability of the business. It shows what the company owns (assets), what it owes (liabilities), and the residual interest of the owners (shareholders' equity). The balance sheet is an essential tool for financial analysis and decision-making.

Assets and expenses are posted on the debit side of a trial balance. This is because the debit side represents the increase in assets and expenses. Assets are resources owned by a company, such as cash, inventory, and equipment. Expenses are the costs incurred by a company in its operations, such as salaries, rent, and utilities. By posting these items on the debit side, the trial balance ensures that the total debits equal the total credits, which is a key principle of double-entry accounting.

Petty cash book is used for recording small disbursements. It is a separate book where all small expenses that do not require a formal invoice or receipt are recorded. This helps in keeping track of these small expenses separately from the main cash book, making it easier to monitor and control petty cash expenditures. The petty cash book also helps in reconciling the petty cash fund, ensuring that the amount of cash in hand matches the recorded expenses.

The profit or loss account is prepared after the trading account. The trading account is used to calculate the gross profit or loss by comparing the revenue from sales with the cost of goods sold. Once the gross profit or loss is determined, it is transferred to the profit or loss account, which further includes other expenses and revenues to calculate the net profit or loss for a specific period. Therefore, the trading account is an essential step in preparing the profit or loss account.

The double entry principle completed within the cash book is contra entry. Contra entry refers to a transaction that involves both the debit and credit aspects of an account within the same book. In the cash book, contra entry is used when there is a transfer of funds between two accounts in the same bank. This ensures that the debit and credit sides of the transaction are recorded accurately and helps maintain the balance in the cash book.

A cash transaction refers to the exchange of physical currency (cash) for goods and services. It involves the direct payment of money without the involvement of banks or credit. This type of transaction is typically used for small purchases or in situations where electronic payment methods are not available or preferred.

The cost of goods sold can be calculated by subtracting the closing stock from the sum of the opening stock and purchases. In this case, the calculation would be: ₦40,000 + ₦130,000 - ₦32,000 = ₦138,000. Therefore, the correct answer is b) ₦138,000.

The balances in the trial balance are extracted from the ledger. The ledger is a book that contains all the accounts and their respective balances. It is used to record and summarize all the transactions and financial information of a business. The trial balance is prepared by taking the closing balances of all the accounts from the ledger. Therefore, option c) ledger is the correct answer.

The accounting equation for assets is Assets = Liabilities + Equity. This equation represents the fundamental principle of double-entry bookkeeping, where the total value of assets owned by a company is equal to the sum of its liabilities and equity. Option 1 is the correct answer because it represents the accounting equation for assets.

Trade discounts are given for bulk purchases because when a customer buys a large quantity of goods or services, the seller often offers a discount as an incentive. This is because buying in bulk allows the seller to save on production and distribution costs, and they can pass on some of these savings to the customer in the form of a trade discount. This encourages customers to purchase more, helps the seller to increase sales volume, and can also help to build customer loyalty.

When goods are sold to a consumer on credit, the transaction is recorded in the sales dailybook. This book is used to record all sales made by the company, including those made on credit. It provides a detailed record of the goods sold, the customer to whom they were sold, the amount of the sale, and any other relevant information. By recording credit sales in the sales dailybook, the company can keep track of its accounts receivable and ensure that all sales are properly recorded and accounted for.

Drawings is not an item in the profit or loss account because it represents the amount of money withdrawn by the owner from the business for personal use. Drawings are not considered as an expense or income for the business, but rather a reduction of the owner's equity in the business. Therefore, it is not included in the profit or loss account.

Prepayment refers to payments made in advance for services that are yet to be rendered. This means that the payment is made before the services are actually provided. It is a common practice in many industries, such as subscription-based services or advance payment for goods. Prepayments are recorded as assets on the balance sheet until the services are delivered or the goods are received. Once the services are rendered, the prepayment is then recognized as an expense or deducted from the accounts payable.

Cash sales worth ₦15,000 would be recorded on the debit side of the cash book. The debit side is used to record all the cash inflows or increases in cash, such as cash sales. On the other hand, the credit side is used to record all the cash outflows or decreases in cash. Since cash sales represent an increase in cash, it would be recorded on the debit side.

The correct answer is a) imprest system. The imprest system is a method of managing petty cash in which a fixed amount of money is set aside to fund small, routine expenses. When the petty cash fund runs low, it is replenished back to the original amount. This system helps to ensure that there is always a consistent amount of cash available for small expenses and allows for easy tracking and accountability.

The general ledger contains both real and nominal accounts. Real accounts are used to record assets, liabilities, and equity, while nominal accounts are used to record revenues, expenses, and gains/losses. The general ledger is a comprehensive record of all financial transactions of a company and includes all types of accounts, making it the correct answer.

Turnover is another name for sales. It refers to the total amount of money generated from the sale of goods or services within a given period of time. It represents the company's ability to generate revenue and is an important metric in assessing its financial performance. The turnover can be calculated by multiplying the number of units sold by the selling price per unit. Therefore, the correct answer is c) sales.

In accounting, the debit side represents all the transactions that increase an asset or expense account. Purchases worth ₦7,000 would be recorded as an increase in the expense account, which is typically found on the debit side of the ledger. Therefore, the correct answer is b) debit side.

A ledger is not considered a source document because it is a summary of financial transactions that have already occurred. It is used to record and organize data from source documents such as invoices, cheques, and bank tellers. The ledger provides a consolidated view of all the transactions and is used for financial analysis and reporting purposes. Therefore, it is not considered a direct source document like the others listed.

When any entry is made on both sides of cash book, it is called a Contra entry. In a contra entry, the same amount is recorded on both the debit and credit sides of the cash book. This usually occurs when there is a transfer of funds between different bank accounts or when cash is withdrawn from a bank for personal use. The purpose of a contra entry is to maintain accurate records of all transactions involving cash, ensuring that the cash balance is properly accounted for.

The prime book is where all transactions are initially recorded. These transactions are then posted to the ledger, which is a complete record of all the accounts and their balances. The ledger is used to prepare financial statements such as the balance sheet and income statement. Therefore, the correct answer is c) ledger.

A typical journal book is used to record financial transactions and does not typically include a bank column. The date column is used to record the date of the transaction, the detail column is used to provide a description of the transaction, and the total column is used to calculate the total amount of the transaction. However, the bank column is not necessary in a journal book as it is not directly related to recording transactions.

Consistency is not an accounting concept because it refers to a principle of reporting and presentation, rather than a fundamental concept. Consistency requires that accounting methods and practices remain the same over time, ensuring comparability and reliability of financial information. While consistency is important for accurate financial reporting, it is not considered a core accounting concept like entity, historical cost, and going concern, which are fundamental principles that guide the preparation and presentation of financial statements.

Subsidiary books are a type of accounting record that provides detailed information about specific types of transactions. These books are prepared using information extracted from source documents, which are the original records of transactions such as invoices, receipts, and vouchers. The cash book, ledger, and journals are all important components of the accounting process, but they do not directly provide the information needed for subsidiary books preparation. Therefore, the correct answer is c) source documents.

The principal book of account, also known as the main book of account, is the ledger. The ledger is a book or a computerized record that contains all the accounts of a business, including assets, liabilities, income, and expenses. It is used to record and summarize all financial transactions and is an essential tool for preparing financial statements such as the balance sheet and income statement. The trial balance is a list of all the accounts and their balances, the cash book is a record of all cash transactions, and the balance sheet is a financial statement that shows the company's financial position at a specific point in time.

The item that distinguishes a single column and double column cash book is the bank column. In a single column cash book, only the cash transactions are recorded, while in a double column cash book, both cash and bank transactions are recorded. The bank column is specifically included in the double column cash book to record all the bank-related transactions separately.

An accounting period can range between April and March. This is because many businesses follow the fiscal year, which starts in April and ends in March. During this period, financial transactions and records are maintained and financial statements are prepared. This accounting period allows for the proper tracking and analysis of financial performance over a specific timeframe.

The Chartered Institute of Bankers of Nigeria (CIBN) is not an accounting professional body. It is a professional body for bankers in Nigeria. The other options, ANAN (Association of National Accountants of Nigeria), ICAN (Institute of Chartered Accountants of Nigeria), and ICAEW (Institute of Chartered Accountants in England and Wales), are all accounting professional bodies.

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A contra entry refers to a transaction where both the debit and credit aspects of the entry are made in the same ledger account. In this case, cash is being withdrawn from the bank for office use. This means that the cash account will be debited (increased) as the cash is being received, and the bank account will be credited (decreased) as the cash is being withdrawn. Therefore, this transaction fits the criteria of a contra entry.

The cash book records all transactions related to cash, including both cash inflows and outflows. The debit side of the cash book represents cash outflows, while the credit side represents cash inflows. The bank statement, on the other hand, only shows the transactions that have been processed by the bank. Therefore, if there are items on the debit side of the cash book that are not found on the credit side of the bank statement, it means that these transactions have been recorded in the cash book but have not yet been processed by the bank. Uncredited cheques refer to those cheques that have been issued but not yet cleared by the bank, which explains why they are not found on the credit side of the bank statement.

The payment for the electricity bill of ₦2,200 would be recorded on the credit side. In accounting, the credit side represents decreases in assets or increases in liabilities or equity. Since the payment is an expense, it would decrease the amount of cash or bank balance, which is an asset. Therefore, it would be recorded on the credit side.

The correct answer is "goods bought for re sales." This means that purchases refer to goods that are bought with the intention of reselling them to customers. This can include inventory items that are bought by retailers or wholesalers for the purpose of selling them to end consumers. It does not refer to goods bought for personal consumption, goods bought on credit, or goods that have been paid for.

The correct answer is c) ₦42,000. This is the gross profit because it is the amount of money left after deducting the cost of goods sold from the total revenue. It represents the profit made before any other expenses, such as operating expenses or taxes, are taken into account.

Prepayment in the balance sheet refers to the advance payment made by a company for goods or services that will be received in the future. Since it represents an obligation to pay for these goods or services within the next accounting period, it is classified as a current liability. This is because the payment will be settled within a year or the operating cycle, whichever is longer. Therefore, option c) current liability is the correct answer.

Rent paid in advance is considered a liability because it represents an amount that has been paid in advance for future rental periods. Since the benefit of the rent has not yet been received, it is classified as a liability because the company owes the landlord for the future use of the property. This liability will be recognized as an expense over the period in which the rent is earned.

The accounting equation, also known as the balance sheet equation, represents the fundamental relationship between a company's assets, liabilities, and equity. It states that a company's assets are equal to the sum of its liabilities and equity. This equation ensures that the balance sheet remains balanced, with every asset having a corresponding claim against it, either from creditors (liabilities) or owners (equity).

The correct answer is d) Four. Cash book can be classified into four types: single column cash book, double column cash book, triple column cash book, and petty cash book. Each type of cash book serves a specific purpose and allows for the recording of different types of transactions.

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Carriage outwards is a trading account item because it represents the expenses incurred by a business for delivering goods to customers. These expenses are directly related to the sale of goods and are therefore considered part of the trading activities of the business. Discount allowed and discount received are not trading account items as they are related to financial transactions and not directly related to the sale of goods. Carriage inwards is also not a trading account item as it represents the cost of transporting goods purchased by the business, which is considered part of the cost of goods sold.

The concept that shows separation between owner and his business is post payment. Post payment refers to the payment made by the business owner after the goods or services have been received. This concept emphasizes the idea that the business and its owner are separate entities, and the owner is not personally liable for the business's debts or obligations.

The purchases day book is a book of original entry that records all purchases made by a business. It serves as both a ledger and a journal because it contains a chronological record of all purchases, similar to a journal, and also provides a detailed account of each purchase, similar to a ledger. This book is used to track and summarize all purchases made, making it an essential record for accounting and financial purposes.