JAMB UTME - Principles of Accounts - 2013

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A vegetable seller would typically adopt the FIFO (first-in, first-out) stock valuation method in valuing its products. The FIFO method assumes that the first items (or vegetables) that are purchased or produced are the first ones to be sold. In other words, the oldest inventory is sold first, while the newest inventory remains in stock. For a vegetable seller, this method makes sense because the vegetables are perishable goods that have a limited shelf life. Using the FIFO method ensures that the older vegetables are sold first, reducing the risk of spoilage and waste. Under the FIFO method, the cost of goods sold is calculated based on the cost of the oldest inventory that was sold during the accounting period. The cost of the remaining inventory is based on the cost of the most recent inventory purchases. For example, if a vegetable seller purchased 100 units of carrots at $1 per unit, and then later purchased 100 units at $1.50 per unit, the cost of the first 100 units sold would be $1 each, while the cost of the remaining 100 units in inventory would be $1.50 each. Overall, the FIFO method provides a good representation of the cost of goods sold and the value of the remaining inventory for a vegetable seller.

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In manufacturing account, work-in-progress (WIP) refers to products that are partially completed but not yet sold. At the end of the year, the value of WIP is determined by adding up the cost of materials, labor, and overhead incurred in the production process up to that point. The correct treatment of WIP in the manufacturing account depends on whether it has been completed or not. If the WIP has been completed, its cost will be included in the cost of goods completed during the year, and thus will be added to the cost of goods completed. On the other hand, if the WIP is not yet completed, it will not be included in the cost of goods completed during the year, but instead will be deducted from the cost of goods completed during the following year. Therefore, the answer to the question would be "deducted from the cost of goods completed during this year" if the WIP is not yet completed, and "added to the cost of goods completed" if the WIP is completed. The WIP value is not stated separately in the profit and loss account or the prime cost section.

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The total credit sales for a period can be extracted from the "sales day book". A sales day book is a record of all sales transactions that a business makes on credit. It contains information such as the date of the sale, the customer's name, the invoice number, the amount of the sale, and whether the sale was made on credit or in cash. By totaling the credit sales column in the sales day book, you can determine the total amount of credit sales for a given period. The other options mentioned are not directly related to credit sales: - The cash book records all cash transactions, whether they are sales or other transactions such as expenses or payments received. - The petty cash book is used to record small, incidental expenses that are paid for in cash. - Returns inwards refer to goods that are returned by customers for credit or a refund, but they do not provide information about total credit sales.

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The difference between the cost of production and the transferred price when goods are sold at cost plus mark-up sale is called the "manufacturing profit." To put it simply, the manufacturing profit is the amount of money a company makes by selling a product for more than it costs to produce. This profit includes all the expenses that go into making the product, such as materials, labor, and overhead costs, as well as an additional amount (the mark-up) that the company adds to cover its other expenses and generate a profit. So, when goods produced are transferred at cost plus mark-up sale, the difference between the cost and the transferred price is the manufacturing profit.

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The amount paid by a new partner to compensate the old partners for the reputation they have built up is called goodwill. Goodwill is an intangible asset that represents the value of a business beyond its tangible assets and liabilities. When a new partner joins a partnership, they benefit from the reputation and goodwill that the business has established over time. In recognition of this, the new partner pays a sum of money to compensate the old partners for their contribution to the goodwill of the business. Goodwill is usually calculated as a percentage of the business's total value, and is considered an important factor in determining the price of a business. So, the correct option for the given scenario is "goodwill".

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A supplementary budget is an instrument that allows public officers to increase expenditure within a year. It is used when the original budget is not enough to cover all the necessary expenses, and more funds are needed to meet the demands of a particular situation or project. A supplementary budget is a document that outlines the additional funds needed and the reasons for the increase. This document is then presented to the relevant authorities for approval, allowing for the adjustment of the budget accordingly. This process ensures that the public sector can operate effectively and efficiently, with the necessary resources available to carry out their duties.

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Prime cost refers to the direct costs involved in producing a product or delivering a service. It includes the costs of the raw materials, direct labor, and direct expenses necessary to create the product. In this case, the prime cost would consist of: - Direct materials (1) - Direct labor (11) - Direct expenses (111) Therefore, the prime cost would consist of items 1, 11, and 111. Factory expenses (1V) are indirect expenses, not included in the prime cost.

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The closing capital can be calculated by adding the opening capital and the capital introduced, and then subtracting the profit for the year and the cash drawings. Starting with the opening capital of #1,500, we add the capital introduced of ₦500, which gives us #2,000. Next, we add the profit for the year of ₦800, which gives us #2,800. Finally, we subtract the cash drawings of ₦250, which gives us a closing capital of #2,550. Therefore, the closing capital is #2,550.

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A control account is a type of ledger account that is used to summarize the total amount of transactions recorded in subsidiary ledger accounts. In the context of cash and cheques received from customers, the total amount in the control account would be derived from the cash book. The cash book is a record of all cash receipts and payments made by a business, including cash sales and cash purchases. Each time a customer pays with cash or a cheque, the transaction would be recorded in the cash book. The total of all cash and cheque receipts in the cash book would then be used to update the control account, which provides an overall summary of the business's cash position. So, the total cash and cheques received from customers in a control account is derived from the cash book.

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The correct answer is: Subscriptions received in advance. Receipts and payment account is a summary of cash and bank transactions made by an organization during a specific period. It records all the cash and bank receipts and payments made by an organization and shows the opening and closing balances of cash and bank balances. Subscriptions received in advance are accounted for in receipts and payment account. Subscriptions refer to the fees or charges paid by the members of an organization for their membership. When a member pays the subscription fees in advance, it is recorded as an advance payment in the receipts and payment account. For example, if a member pays the subscription fees for the next year in advance, it will be recorded as a receipt in the current year's receipts and payment account. The subscription received in advance will be treated as a liability until the period for which the subscription was paid arrives, and the subscription can be considered earned. On the other hand, subscriptions due but not yet received are not accounted for in receipts and payment account as they represent outstanding payments and not cash or bank transactions made by the organization. Accrued expenses on annual dances and depreciation of the clubhouse are not recorded in the receipts and payment account because they do not involve cash or bank transactions. Accrued expenses represent expenses that have been incurred but not yet paid, while depreciation is a non-cash expense that represents the decrease in value of an asset over time.

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The Accountant-General of the Federation is responsible for the compilation of the annual financial statement of the Federal Government of Nigeria. The Accountant-General of the Federation is the chief accounting officer of the Nigerian government and is responsible for overseeing the financial management of the country's resources. One of the key duties of the Accountant-General is to prepare and present the annual financial statements of the Federal Government to the National Assembly. These financial statements provide a comprehensive report on the financial performance of the government over the course of the fiscal year. Additionally, the Accountant-General is responsible for managing the financial operations of the federal ministries, departments, and agencies, ensuring compliance with financial regulations, and promoting accountability and transparency in government financial management. However, it is not the responsibility of the Accountant-General to supervise auditing personnel or to interpret rules and regulations affecting the private sector. Overall, the Accountant-General of the Federation plays a critical role in ensuring that the financial resources of Nigeria are managed in a responsible and effective manner, and that the government remains accountable to its citizens for its financial performance.

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When the purchase consideration (i.e., the price paid by the buyer to acquire the business) is lower than the net asset value (i.e., the total value of the assets minus the liabilities), it means that the buyer has gained the advantage of paying less than the actual value of the business. In other words, the buyer has acquired the business at a bargain price, which can provide several advantages. Firstly, the buyer can benefit from an immediate increase in the value of the business, as the assets can be revalued at the higher fair value, and the buyer can enjoy the appreciation in value. Secondly, the buyer can benefit from the extra cash or capital, which can be used to finance other investments or repay debts. Finally, the buyer can also benefit from the reduced risk associated with the acquisition, as the lower purchase price means a lower financial burden and a more favorable return on investment. Therefore, the answer to the question is "capital reserve," which refers to the amount of extra capital generated from the bargain purchase. This capital reserve can be used to finance future investments or pay dividends to the shareholders, which can lead to long-term growth and prosperity for the company.

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The straight line method of depreciation is a way to calculate the value that an asset loses each year over its useful life. To do this, you subtract the asset's scrap value (the amount it can be sold for at the end of its life) from its original cost, and then divide the result by the number of years it is expected to last. In this case, the original cost of the machine was #35,000 and its scrap value was estimated to be #9,000. However, the scrap value is now #15,000, so we'll use that instead. 35,000 - 15,000 = 20,000 20,000 ÷ 5 years = 4,000 So the yearly depreciation of the machine using the straight line method is #4,000.

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Double-entry accounting is a system in which every transaction is recorded in two accounts, with equal and opposite entries. This helps ensure the accuracy and completeness of the financial records. In this case, the double entry for July 31, when the business paid Agromachinex #6,000 owing, would be: - Debit Agromachinex account - Credit Cash account The debit to the Agromachinex account reflects the payment made to settle the debt owed to them, and the credit to the Cash account represents the reduction of the business's cash balance as a result of the payment. Therefore, the double entry for July 31 would be debit Agromachinex and credit cash.

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The capital expenditure is the purchase of office machinery. Capital expenditures are investments in assets that a company expects to use for the long term, and that have a useful life beyond the current accounting period. They are typically significant investments that a business makes to expand or improve its operations, and are capitalized on the balance sheet rather than being expensed immediately. In the given options, the maintenance of office machines and the purchase of office stationery are examples of revenue expenditures, which are the costs of running a business day-to-day and are expensed immediately. Carriage inwards is also a revenue expenditure that refers to the cost of transporting goods purchased from suppliers to the business's location. On the other hand, the purchase of office machinery is a capital expenditure as it is a significant investment that is expected to provide a benefit for multiple accounting periods. It is not expensed immediately but is instead recorded as an asset on the balance sheet and depreciated over its useful life. Therefore, of the given options, only the purchase of office machinery qualifies as a capital expenditure.

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The addition of prime cost, indirect cost, and opening work-in-progress less the closing work-in-progress will result in the cost of goods manufactured. The prime cost includes all the direct costs involved in manufacturing a product, such as the cost of raw materials and direct labor. The indirect costs, on the other hand, include all the overhead costs associated with manufacturing a product, such as rent, utilities, and insurance. The opening work-in-progress represents the value of the partially completed goods at the beginning of the production process, while the closing work-in-progress represents the value of the partially completed goods at the end of the production process. When we add the prime cost and indirect cost to the opening work-in-progress, we get the total cost of goods that were available for sale or manufacturing during the period. Then, by subtracting the closing work-in-progress from this total, we get the cost of goods that were actually manufactured during the period. Therefore, the result of the addition of prime cost, indirect cost, and opening work-in-progress less the closing work-in-progress will give us the cost of goods manufactured. This cost represents the total cost incurred by the company to produce the goods that were completed and ready for sale during the period.

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A partnership's internal regulations are typically set out by a deed. A deed is a legal document that records an agreement between two or more parties. In the context of a partnership, a deed is used to outline the rights and obligations of the partners, as well as the rules governing the partnership's operations. The deed typically includes information such as the name of the partnership, the names of the partners, the purpose of the partnership, the amount of capital contributed by each partner, the distribution of profits and losses, and the procedures for admitting new partners or terminating the partnership. The deed is a binding legal agreement, and all partners are required to abide by its terms. So, the correct option for the given scenario is "a deed".

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When the debit side total of an account "t", it means that the account has a debit balance. This means that the total of all the debits recorded in the account is greater than the total of all the credits recorded in the account. In other words, the account has more debits than credits. A debit balance in an account can have different meanings depending on the type of account. For example, in a bank account, a debit balance indicates that the account has been overdrawn, meaning the account holder has withdrawn more money than they have available in the account. On the other hand, in an asset account such as a cash account, a debit balance is normal and indicates that the account has a positive balance of assets, such as cash on hand. In summary, a debit balance in an account means that the total of all debits recorded in the account is greater than the total of all credits recorded in the account, and this can have different implications depending on the type of account.

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The distributable profit available to shareholders at the end of each year is the total profit less the creditors balance. This means that the amount of profit that a company has made in a year after all expenses have been paid, and the amount that the company owes to its creditors, such as suppliers or loans, has been subtracted. The remaining amount is the distributable profit, which can be given to shareholders as dividends. It's important to keep in mind that the distributable profit is not the same as the amount of money actually distributed to shareholders, as the company may choose to retain some of the profit for future use.

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When a debenture is issued at a value above its nominal value, it means that the company is receiving more money for each debenture than its face value. In this case, the debenture is said to be issued at a premium. A premium is an amount by which the price of a security, such as a bond or stock, exceeds its face value. This means that the company is effectively selling the debenture for more than it is worth, which can be seen as a sign of investor confidence in the company's future prospects. In summary, a debenture issued at a value above its nominal value is said to be issued at a premium.

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The major source document that enables an employer to calculate employee wages is the "record of number of hours worked." This record is a document that tracks the number of hours each employee has worked during a specific pay period. It typically includes information such as the employee's name, date of hire, hourly rate, and the number of hours worked each day. By using this record, the employer can accurately calculate each employee's gross pay, which is the total amount of money earned before any deductions are taken out. The employer can then subtract any applicable deductions, such as taxes or insurance premiums, to arrive at the employee's net pay, which is the amount of money the employee will receive on their paycheck. Overall, the record of number of hours worked is a crucial document that allows employers to accurately calculate and pay their employees' wages.

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To calculate the yearly depreciation using the straight-line method, you need to subtract the scrap value from the cost of the machine and then divide the result by the machine's estimated lifespan. In this case, the cost of the machine is #35,000, and the scrap value is #9,000. Therefore, the depreciable cost of the machine is #35,000 - #9,000 = #26,000. The machine's estimated lifespan is 5 years, so you divide the depreciable cost of the machine by 5 to get the yearly depreciation. #26,000 ÷ 5 = #5,200 Therefore, the yearly depreciation using the straight-line method would be #5,200.

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The expense that relates to the profit and loss account of a manufacturing firm is the Administrative overhead. Direct materials and direct labor are costs that are directly associated with the production of goods and are considered part of the cost of goods sold. Work-in-progress refers to goods that are in the process of being manufactured and are also considered part of the cost of goods sold. Administrative overhead, on the other hand, refers to expenses that are not directly related to the production of goods, but rather to the general administrative functions of the business, such as salaries, rent, utilities, and office supplies. These expenses are considered operating expenses and are subtracted from the revenue in the profit and loss account to arrive at the net income. Therefore, of the options provided, Administrative overhead is the expense that relates to the profit and loss account of a manufacturing firm.

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To calculate the gross profit, we need to subtract the cost of goods sold (COGS) from the total sales revenue. First, we need to calculate the COGS: Opening stock + Purchases + Carriage inwards - Closing stock = COGS ₦28,000 + ₦128,000 + ₦4,000 - ₦10,000 = ₦150,000 Next, we can calculate the gross profit: Sales - COGS = Gross profit ₦232,000 - ₦150,000 = ₦82,000 Therefore, the gross profit for this business is ₦82,000. Gross profit is a measure of how much profit a business makes after deducting the cost of goods sold. In this case, the business had sales revenue of ₦232,000, but it cost them ₦150,000 to produce the goods that they sold. Therefore, they made a gross profit of ₦82,000. This money can be used to pay for other expenses, such as salaries, rent, and utilities, or reinvested in the business for growth.