JAMB UTME - Principles of Accounts - 2019

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The mark-up in this scenario is ₦6,174. When a company sells goods to its branch, it usually does so at a price that is higher than the cost price, to make a profit. In this case, the invoiced price of the goods sent to the branch is ₦30,870, which includes a markup of 25% on the cost price. To find the cost price, we can use the following formula: Cost price = Invoiced price / (1 + Markup percentage) Plugging in the values, we get: Cost price = ₦30,870 / (1 + 25%) = ₦24,696 Now, to find the markup, we can use the following formula: Markup = Invoiced price - Cost price Plugging in the values, we get: Markup = ₦30,870 - ₦24,696 = ₦6,174 Therefore, the mark-up in this scenario is ₦6,174. This represents the amount that the company has added to the cost price of the goods to arrive at the invoiced price that it charged to its branch.

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Retained profits are an example of revenue reserves. Revenue reserves are profits earned by a company that are not distributed as dividends to its shareholders but are kept in the business as a form of retained earnings. Retained profits are a portion of the company's profits that are not paid out as dividends but are instead reinvested in the company to support its growth, pay off debts or improve its operations. These retained profits can be accumulated over time, allowing a company to build up its reserves and strengthen its financial position. This can be particularly useful during times of economic uncertainty or market downturns, as the company will have more financial flexibility and resources to weather the storm. Therefore, retained profits are a crucial component of a company's overall financial health, and they are an example of revenue reserves.

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The correct entry for the transaction where Mr. Roi pays rent of ₦50,000 to his landlord on July 1st, 20x7 by cheque, using the double entry principle would be: - Dr Rent A/c; Cr Bank A/c The transaction has two effects: it decreases Mr. Roi's cash (Bank A/c) balance by ₦50,000 and increases the landlord's Rent A/c balance by the same amount. Applying the double entry principle, we need to record both of these effects in the accounts. Therefore, we will debit Rent A/c with ₦50,000 as it is an expense and credit Bank A/c with the same amount as it is a decrease in cash. This will ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced. In summary, when Mr. Roi pays rent by cheque, we record a debit of ₦50,000 to Rent A/c and a credit of ₦50,000 to Bank A/c to maintain the balance of the accounting equation.

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To calculate the value of goodwill, we need to first calculate the average profit for the past 4 years. We can do this by adding up the profits for each year and then dividing by 4: Average profit = (14,000 + 24,000 + 10,000 + 16,000) / 4 = 16,000 Next, we need to calculate 2 years' purchase of the average profit: 2 x 16,000 = 32,000 Therefore, the value of goodwill is ₦32,000. This is because the value of goodwill is determined by the number of years' purchase of the average profit. Among the options given, the correct answer is 32,000.

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Discount received is usually apportioned to each department on the basis of their purchases. The reason for this is that the discount is typically given by the supplier as a percentage of the total value of goods purchased. Therefore, the more a department purchases from the supplier, the more discount they receive. For example, if a department purchases $10,000 worth of goods and the supplier offers a 5% discount, the department would receive a discount of $500. If another department purchases $5,000 worth of goods from the same supplier, they would only receive a discount of $250. By apportioning the discount on the basis of purchases, each department receives a fair share of the discount based on their contribution to the total purchases from the supplier. This helps to ensure that the discount is allocated in a way that reflects the actual purchasing activity of each department.

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The cost of raw materials consumed is ₦152,120. To determine the cost of raw materials consumed, you need to subtract the stock of raw materials on January 1st from the stock of raw materials on December 31st and add the purchases of raw materials, which is ₦71,380 - ₦50,640 + ₦32,160 = ₦53,000. This amount is then added to the direct expenses, such as factory fuel, carriage inwards on raw materials, and manufacturing wages, which are ₦29,640 + ₦45,000 + ₦16,500 + ₦12,500 + ₦7,000 = ₦100,640. The total of these two amounts is ₦152,120, which is the cost of raw materials consumed.

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In the preparation of accounting records, the owners of the business and the business concerned are treated as separate legal entities. This means that the business is treated as a distinct entity from its owners, and is recognized as having its own financial position, income, and expenses. This is because the business is a separate legal entity, meaning it has its own legal status and is capable of entering into contracts and owning property. For example, if a business takes out a loan, the debt belongs to the business and not to the individual owners. Similarly, if the business makes a profit, the profit belongs to the business and not directly to the owners. Separating the business from its owners in this way allows for a clear and accurate picture of the financial performance of the business, and enables the owners to assess the success of the business as a whole. It also ensures that the business is held responsible for its financial obligations and liabilities, rather than the individual owners.

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When we say that a commercial transaction is a credit transaction, it means that the payment for goods or services is deferred to a future date. In other words, the buyer doesn't pay immediately for the goods they've purchased, but instead, they are given a certain period of time to pay for those goods. This is a common practice in business, as it allows buyers to make purchases without having to pay for them upfront, and it also allows sellers to extend credit to their customers, which can help to build customer loyalty and increase sales. In a credit transaction, an account is usually opened between the buyer and seller, which keeps track of the amount owed and the payment due date. When the payment due date arrives, the buyer is expected to make the payment, which settles the account. It's important to note that in a credit transaction, the item of expenditure doesn't increase. The cost of the goods or services remains the same, but the payment for those goods or services is deferred to a future date.

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The purpose of a profit and loss (P&L) account is to show the financial performance of a business over a specific period of time, usually a month or a year. It helps to determine the net profit or loss of a company by showing the total revenue earned and the total expenses incurred during the period. The P&L account starts with the gross profit, which is calculated by subtracting the cost of goods sold (COGS) from the total revenue. Gross profit shows the amount of money the company made from its sales before any other expenses are taken into account. Next, the P&L account lists all the expenses incurred by the company during the period, such as wages, rent, utilities, advertising, and other operating costs. These expenses are subtracted from the gross profit to arrive at the net profit or net loss. The net profit or loss is the final result of the P&L account and shows whether the company made a profit or suffered a loss during the period. If the net profit is positive, it means the company had more revenue than expenses and made a profit. If the net profit is negative, it means the company had more expenses than revenue and suffered a loss. In conclusion, the purpose of a P&L account is to determine the net profit or loss of a company by showing the total revenue earned, the total expenses incurred, and the difference between the two.

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Capital expenditures are expenditures made by a company to acquire or improve long-term assets that are expected to provide benefits over several years. Examples of capital expenditures include the purchase of equipment, machinery, property, or buildings. Based on the information provided in the question, the following expenditures are capital expenditures: - Sinking of boreholes - Purchase of a motor car - Purchase of beds The total amount spent on these items is ₦2,900,000 + ₦920,000 + ₦425,000 = ₦4,245,000. Therefore, capital expenditure in this case is ₦4,245,000. In conclusion, capital expenditures are expenditures made to acquire or improve long-term assets that are expected to provide benefits over several years. Based on the information provided, the capital expenditure in this case is ₦4,245,000.

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The straight line method of depreciation is a simple way of calculating the amount of depreciation to be charged each year for an asset. To use this method, we subtract the residual value (the value of the asset after it has been fully depreciated) from the original cost of the asset, and then divide this by the number of years the asset is expected to last. So, for the machine in this question: - Original cost: ₦10,000 - Residual value: ₦4,000 - Years expected to last: 4 The amount of depreciation to be charged per year would be: ₦10,000 - ₦4,000 = ₦6,000 ₦6,000 ÷ 4 years = ₦1,500 So, the amount of depreciation charged per annum is ₦1,500.

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Transactions are recorded or posted to the ledger in line with the Double Entry Principle. This principle is the foundation of modern accounting and states that every transaction has two effects: a debit and a credit. Debits and credits must be equal and opposite to keep the accounting equation (assets = liabilities + equity) in balance. So when a transaction occurs, it is analyzed to determine which accounts are affected and how. The debits and credits are then recorded in the ledger, which is a book that contains all the accounts used by a company. Each account has a balance, which reflects the total of all the debits and credits that have been posted to it. For example, let's say a company purchases inventory for $1,000. This transaction affects two accounts: Inventory (an asset) and Accounts Payable (a liability). Using the Double Entry Principle, the company would record a debit of $1,000 to the Inventory account and a credit of $1,000 to the Accounts Payable account. This ensures that the accounting equation stays in balance and that the company's financial statements accurately reflect its financial position. In summary, the Double Entry Principle is the method by which transactions are recorded in the ledger. It ensures that every transaction is properly analyzed and that the resulting debits and credits keep the accounting equation in balance.

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The entity concept is a fundamental principle of accounting that assumes that every economic unit, regardless of its legal form of existence, is treated as a separate entity from parties having an economic interest. This means that a business is viewed as a distinct entity separate from its owners, shareholders, creditors, or any other parties with an economic interest in the business. Under the entity concept, the financial transactions of the business are recorded separately from those of the owner or other parties. This enables the business to track its financial performance and position accurately, and to prepare financial statements that are useful for decision-making. For example, if a business owner invests $10,000 of personal funds into the business, the entity concept requires that the transaction be recorded as a liability owed to the owner by the business. Similarly, if the business borrows $5,000 from a bank, the loan is recorded as a liability owed to the bank by the business. By treating the business as a separate entity, the entity concept enables stakeholders to evaluate the financial performance of the business without confusion or distortion caused by mixing personal transactions with business transactions.

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In the preparation of a statement of profit, the opening capital is the amount of money a business had at the beginning of a given period, and the closing capital is the amount of money a business has at the end of that same period. If the opening capital is greater than the closing capital, it means that the business has used more money than it has received during the period, leading to a decrease in its overall capital. This decrease in capital is referred to as a "loss." Therefore, if the opening capital is greater than the closing capital, it indicates that the business has suffered a loss during the period.

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To calculate the Gross Profit on percentage of sale, we need to use the following formula: Gross Profit Percentage = (Gross Profit / Sales) x 100 First, we need to calculate the Gross Profit, which is the difference between the Sales and Cost of Goods Sold: Gross Profit = Sales - Cost of Goods Sold Gross Profit = 233,000 - 170,000 Gross Profit = 63,000 Next, we can calculate the Gross Profit Percentage using the formula above: Gross Profit Percentage = (Gross Profit / Sales) x 100 Gross Profit Percentage = (63,000 / 233,000) x 100 Gross Profit Percentage = 0.2701 x 100 Gross Profit Percentage = 27.01% Therefore, the Gross Profit on percentage of sale is 27.01%, which means that for every ₦1 of sales, Wazobi Ventures earns a Gross Profit of ₦0.27. The closest option to this answer is 27.0%.

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Depreciation is the fall or decrease in the economic service potential of an asset as a result of wear, tear and obsolescence. Think of an asset as something you own, like a car, a computer, or a building. Over time, these assets lose value because they get older, wear out, or become outdated. This loss of value is called depreciation. It's an estimate of how much an asset has lost in value over a certain period of time. In simple terms, depreciation is like getting older - the more time goes by, the less useful you become. The same thing happens to assets. The longer they're in use, the less valuable they become, and that decrease in value is called depreciation.

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To calculate the gross profit, we need to subtract the cost of goods sold (COGS) from the total revenue (sales). COGS represents the cost of the products that were sold during the period, and it is calculated as: COGS = Opening stock + Purchases - Closing stock In this case, the values are: COGS = ₦20,000 + ₦70,000 - ₦15,000 = ₦75,000 Total revenue (sales) is given as ₦100,000. Therefore, the gross profit can be calculated as: Gross profit = Total revenue - COGS = ₦100,000 - ₦75,000 = ₦25,000 Hence, the answer is option (D) ₦25,000.

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To solve this problem, we need to calculate the total profit and then divide it between A and B in the agreed ratio of 3:2. To calculate the total profit, we need to find the difference between the total revenue and the total expenses: Total revenue = Sales + Advert + Wages = ₦3200 + ₦3278 + ₦516 = ₦6994 Total expenses = Purchases = ₦2600 Total profit = Total revenue - Total expenses = ₦6994 - ₦2600 = ₦4394 Now, to divide the profit between A and B in the agreed ratio of 3:2, we need to use the following formula: A's share = (3 / 5) x Total profit B's share = (2 / 5) x Total profit Substituting the values, we get: A's share = (3 / 5) x ₦4394 = ₦2636.40 B's share = (2 / 5) x ₦4394 = ₦1758.60 Therefore, the profit that A will receive is ₦2636.40, and the profit that B will receive is ₦1758.60. Now, let's calculate the settlement amount by adding the profit to the original amount A paid to B: Settlement amount for B = Original amount paid by A + B's share of profit Settlement amount for B = ₦2000 + ₦1758.60 = ₦3758.60 Therefore, the answer is option (C) ₦993.

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Discount received is a reduction in the amount paid for goods or services purchased by a company. This reduction is usually given by a supplier to a customer as an incentive to encourage prompt payment or to build customer loyalty. In accounting, discount received is considered a gain for the company and is therefore credited to the profit and loss account. The profit and loss account is an account that records all revenues and gains on one side, and all expenses and losses on the other side, for a particular period. By recording discount received in the profit and loss account, the company can track and report its total gains for a specific period, and also calculate the net profit or loss for that period. This helps the company to make informed decisions about its operations and financial position, and to meet its reporting requirements. Therefore, the correct answer is option (B) - profit and loss account. Discount received is a gain for the company, and it is credited to the profit and loss account to be recorded as part of the company's total gains and revenues for a specific period.

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Accounting standards are issued at the international level by the International Accounting Standards Board (IASB). The IASB is an independent organization that sets accounting standards, known as International Financial Reporting Standards (IFRS), for companies to follow when preparing their financial statements. These standards help ensure that financial information is transparent and comparable across different companies and countries. The IASB operates under the oversight of the IFRS Foundation, which provides funding and governance. The Standards Advisory Council and Standing Interpretations Committee are both bodies that provide advice and guidance to the IASB, but they do not have the authority to issue accounting standards. In summary, the IASB is the organization responsible for setting international accounting standards, which are designed to promote transparency and comparability in financial reporting by companies around the world.

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Accounts can be classified into two main categories: personal accounts and impersonal accounts. 1. Personal accounts: These accounts are used to record transactions related to individuals, firms, or companies. Personal accounts can be further classified into two types: - Natural personal accounts: These accounts are related to individuals, such as customers, suppliers, employees, and owners. - Artificial personal accounts: These accounts are related to firms or companies, such as banks, insurance companies, and government organizations. 2. Impersonal accounts: These accounts are used to record transactions that do not involve any individual or firm. Impersonal accounts can be further classified into three types: - Real accounts: These accounts are related to assets, such as property, plant, and equipment, as well as liabilities and capital. - Nominal accounts: These accounts are related to expenses, revenues, gains, and losses. - Representative personal accounts: These accounts are used to record transactions related to a group or category of individuals, such as sales, purchases, and returns. Therefore, the correct option among the given choices is "personal and impersonal account."

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The two recognized accounting bases are Accrual and Cash. Accrual accounting recognizes economic events regardless of when payment is received or made. This means that transactions are recorded in the accounts when they occur, regardless of when the cash is received or paid. Cash accounting, on the other hand, only recognizes transactions when cash is received or paid. This means that transactions are only recorded in the accounts when the cash changes hands. In simple terms, accrual accounting provides a more complete picture of a company's financial performance, while cash accounting is more focused on the company's actual cash flow.

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The authorized share capital of Industry Ltd is ₦200,000, which means the maximum amount of money the company can raise from issuing shares is ₦200,000. The company issued 100,000 shares at ₦1 each, so it raised ₦100,000. This means that ₦100,000 of the authorized share capital has been issued. All shareholders paid in full except for two shareholders who owe a total of ₦20,000. This means that the company received a total of ₦80,000 in payment for the issued shares. The unissued capital of the company is the portion of the authorized share capital that has not been issued yet. Since the authorized share capital is ₦200,000, and ₦100,000 has been issued, the unissued capital is ₦100,000. Therefore, the answer is (2) ₦200,000 is the authorized share capital, and ₦100,000 is the unissued capital.

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