Commerce and Financial Accounting - Post-UTME Study Guide
Commerce and Financial Accounting in the Post-UTME combines trade and business organisation with bookkeeping. Expect questions on business units, banking, insurance, double entry, trial balances and final accounts.
Core rules
- Commerce covers trade and aids to trade: banking, insurance, transport, warehousing and advertising.
- Business units include sole trader, partnership and limited company; a company has separate legal personality.
- The accounting equation is Assets = Liabilities + Capital.
- Double entry: every debit has an equal credit; assets and expenses are debited when increased; liabilities, capital and income are credited when increased.
- Gross profit = sales − cost of goods sold; net profit = gross profit − expenses.
Worked example
A business has total assets of ₦250,000 and liabilities of ₦90,000. Using Assets = Liabilities + Capital, Capital = Assets − Liabilities = ₦250,000 − ₦90,000 = ₦160,000. The reasoning rearranges the accounting equation; the capital figure is the owner's residual interest in the assets after liabilities.
Traps
Do not reverse debit and credit for liabilities. A trial balance balancing does not prove there are no errors; compensating errors can hide. Do not treat capital expenditure as a revenue expense. Do not confuse gross profit with net profit.