(a)Distinguish between Authorized Capital and Called-up Capital (b) Use the following information to answer the questions that follow: XYZ Limited is a trad...

Answer Details

(a) Authorized Capital vs Called-up Capital

Authorized capital (also called nominal or registered capital) is the maximum amount of share capital that a company is allowed to raise, as stated in its Memorandum of Association. Called-up capital is that part of the issued capital which the company has actually demanded (called up) from shareholders to be paid. Authorized capital sets the legal ceiling, while called-up capital is the amount shareholders are presently required to pay.

(b) Calculations

Cost of purchases:

• Suitcases: 32 × N3,500 = N112,000
• Shirts: 42 × N800 = N33,600
• Total purchases = 112,000 + 33,600 = N145,600

Add carriage inwards (transport to premises) = N2,500

Cost of goods sold = 145,600 + 2,500 = N148,100

(a) Gross profit

Gross profit = Sales - Cost of goods sold = 180,000 - 148,100 = N31,900

(b) Net profit

Wages and salaries = 2 workers × N4,500 = N9,000

Net profit = Gross profit - Expenses = 31,900 - 9,000 = N22,900