JAMB Accounting Past Questions & Answers - Page 47

To answer this question, we need to understand what the underlisted terms mean seperately. 

Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product. Items designated as direct materials are usually listed in the bill of materials file for a product. example, when a car is being assembled from the manufacturing company, every material used up in assembling that car untill it gets to the consumer, is refered to as direct material.

Direct expense is an expense incurred that varies directly with changes in the volume of a cost object. A cost object is any item for which you are measuring expenses, such as products, product lines, services, sales regions, employees, and customers. ie, Direct expenses are costs that can be traced back to a specific department, often called an object, and are incurred only to benefit that department. Expenses connected with purchases of goods are known as direct expenses. that is to say, after the purchase of a machinery by a firm, the servicing and repairs of that machinery is an expenses incurred directly on the machine. 

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 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.

Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments. In this method, a fund consists of a self-balancing set of accounts and each are reported as either unrestricted, temporarily restricted or permanently restricted based on the provider-imposed restrictions.