JAMB UTME - Principles of Accounts - 2019

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To calculate the net profit as a percentage of expenses, we need to first determine the total expenses of the company for the year. We can do this by adding up all of the overhead expenses: admin expenses + selling expenses + other overhead expenses. Total expenses = ₦16,800 + ₦15,000 + ₦6,200 = ₦38,000 Next, we can calculate the net profit as a percentage of expenses by dividing the net profit by the total expenses and multiplying by 100. Net profit as a percentage of expenses = (Net profit / Total expenses) x 100 = (₦25,000 / ₦38,000) x 100 = 65.79% Therefore, the correct answer is 65.79%, which is option (D). This means that for every ₦1 spent on expenses, the company earned a net profit of approximately ₦0.66. It's important to note that this percentage does not take into account the cost of goods sold, which is a separate expense and is already deducted from the sales figure.

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The opening cash balance can be found by looking at the Receipts and Payments Account. The "Bal b/f" column represents the balance brought forward from the previous period, which is the opening cash balance. In this case, the opening cash balance is ₦3,650, which is the first entry under "Bal b/f" in the Receipts and Payments Account. Therefore, the correct option is (3) ₦3,650.

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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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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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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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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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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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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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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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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 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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The method of stock valuation in which the issue price is obtained by dividing the value of stock in hand by unit of stock in hand is called Weighted Average Price (WAP). WAP is a method of determining the average cost of a stock that a company holds in its inventory. It takes into account the cost of each unit of stock and the number of units held. The total cost of the stock is then divided by the total number of units to determine the average cost per unit. This average cost per unit is then used as the value of the stock for accounting purposes. The WAP method is useful for companies that purchase stocks at different times and different prices, as it provides a more accurate reflection of the value of the stock. It is also useful for companies that sell stock frequently, as it provides a more accurate reflection of the cost of the stock and helps to ensure that the company is not overcharging or undercharging for the stock.

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Land is the item that cannot depreciate. Depreciation is the reduction in the value of a fixed asset due to wear and tear, obsolescence or other factors. It is a non-cash expense that is charged against the income of a company over the useful life of the asset. However, land is a fixed asset that has an unlimited useful life, and its value does not diminish over time. Therefore, it cannot be depreciated. On the other hand, plant and machinery, motor vans, and premises are all fixed assets that have a limited useful life, and their values decrease over time due to wear and tear, obsolescence or other factors. As a result, they can be depreciated. In summary, land is the item that cannot be depreciated, while plant and machinery, motor vans, and premises are all items that can be depreciated.

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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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The instrument issued by the Minister who authorized an officer to incur expenditure is called a "warrant". A warrant is a legal document that authorizes a government official, usually a financial officer, to spend a specific amount of money from a particular fund or budget. In this context, the Minister issues a warrant to give authority to a specific officer to spend money for a specific purpose. This ensures that government spending is properly authorized and regulated, and helps prevent fraud or misuse of public funds. Therefore, among the options given, the correct answer is "warrant".

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The officer that is charged with the responsibility of carrying out investigations on the book of accounts to show the true and fair view is the Auditor General. The Auditor General is an independent officer responsible for auditing and reporting on the financial statements of government entities and other organizations to ensure that their financial records are accurate and comply with relevant laws and regulations. Their main task is to review the financial records of an organization and provide an opinion on whether the financial statements represent a true and fair view of the organization's financial position, performance, and cash flows. This helps to enhance transparency, accountability, and good governance in public and private organizations.

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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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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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One of the objectives of maintaining the account of a branch at the head office is to access the performance of the branches. When a company has several branches, it is essential to keep track of the financial performance of each branch to ensure that they are operating efficiently and generating profits. By maintaining the account of each branch at the head office, the management can easily access the financial records of each branch and compare them to identify the profitable and non-profitable branches. The head office can analyze the financial statements of each branch, including the income statement, balance sheet, and cash flow statement, to determine the financial health of the branch. This information can help the head office make informed decisions, such as allocating resources to profitable branches or taking corrective actions to improve the performance of non-profitable branches. In summary, maintaining the account of a branch at the head office allows the management to access the financial performance of each branch, which is essential for making informed decisions and ensuring the profitability of the entire organization.

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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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The entry to record the purchase of goods for resale on credit costing ₦150,000 from Tosanwumi International on 30th September 20X8 is: Debit: Purchase Account ₦150,000 Credit: Tosanwumi International Account ₦150,000 This means that the Purchase Account is debited with the value of the goods purchased on credit, while the Tosanwumi International Account is credited for the same amount, representing the amount owed to the supplier. The Purchase Account is a nominal account that is used to record the cost of goods purchased for resale or for use in the business. The Tosanwumi International Account is a personal account, specifically a creditor account, used to record the amount owed to Tosanwumi International for the goods purchased on credit. This entry follows the double-entry bookkeeping system, which requires that every transaction has equal debits and credits. The debit entry represents the increase in expenses, while the credit entry represents the increase in liabilities, specifically accounts payable to the supplier.

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The cost of goods for department B is 2800. To find the cost of goods, we need to subtract the total expenses from the total sales. First, we need to calculate the total expenses by determining the expenses to be shared in the ratio of sales, which is 1500 + 2000 + 50100 = 71600. Then, we can find the total sales for department B, which is 3000 + 5000 = 8000. Finally, we can subtract the total expenses from the total sales: 8000 - 71600 = 2800. This is the cost of goods for department B.

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