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JAMB Principles of Accounts 1995 Question 20

Question 20

Accruals and Prepayments

The trial balance showed wages, ₦2 500 and a note stated that ₦500 wages were due but unpaid. When preparing final accounts and balance sheet it is required to debit profit and loss account with

  1. A.₦3 000 and show wages accrued ₦500 in the balance sheet
  2. B.₦2 000 and show wages accrued ₦500 in the balance sheet
  3. C.₦3 000 and show wages prepaid ₦500 in the balance sheet
  4. D.₦2 000 and show wages paid in advance ₦500 in the balance sheet.
Show the answer and explanation

Answer: A (₦3 000 and show wages accrued ₦500 in the balance sheet)

Explanation

Wages for the year = paid 2 500 + owing 500 = ₦3 000 charged to profit and loss; the ₦500 owing is a current liability (accrual).