JAMB UTME - Principles of Accounts - 2012

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The LIFO (Last-In, First-Out) method has an advantage over the FIFO (First-In, First-Out) method in that stocks are valued at current prices. In the LIFO method, the last items received into inventory are the first items sold. As a result, the cost of goods sold is based on the most recent cost of the inventory items. This means that the value of the remaining inventory on the balance sheet is based on the earlier, lower costs of the items. In contrast, the FIFO method assumes that the first items received into inventory are the first items sold. As a result, the cost of goods sold is based on the earlier, lower costs of the inventory items. This means that the value of the remaining inventory on the balance sheet is based on the more recent, higher costs of the items. Thus, the LIFO method has an advantage over FIFO in that it values the inventory at current prices. This can be beneficial during periods of inflation when inventory costs are rising because it can result in a lower taxable income for the business. However, it can also lead to lower reported profits and can make it more difficult to determine the true cost of goods sold.

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Cash can be drawn from the bank using an ATM card or a bank teller. An ATM (Automated Teller Machine) card allows you to withdraw cash from a machine that is connected to your bank account. You simply insert the card into the machine, enter your pin, and select the amount you want to withdraw. A bank teller is a person who works at a bank and can assist you in withdrawing cash from your account by completing the transaction for you. You will need to provide identification and explain the amount you wish to withdraw. A credit card and a recharge card are not typically used to withdraw cash from a bank account. A credit card is used to make purchases and can also be used to withdraw cash, but this will result in a cash advance and you will be charged a fee. A recharge card is used to add credit to a mobile phone or other type of service, and cannot be used to withdraw cash from a bank account.

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Returns inwards refer to the goods returned by customers to the business. When a customer returns goods, the business will need to reduce the amount of sales made on credit to that customer. In the sales ledger control account, returns inwards are credited, and sales returns are debited. This means that the sales ledger control account is reduced by the amount of returns inwards, and the sales returns account is increased by the same amount. The reason for this is that returns inwards represent a reduction in the amount owed by customers (i.e., a reduction in the accounts receivable balance), and sales returns represent an increase in the amount of goods returned to inventory. Therefore, the returns inwards are credited (reducing the accounts receivable balance), and the sales returns are debited (increasing the inventory balance). To summarize, the correct answer is: credited and sales returns debited.

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To calculate the sales value, we need to use the following formula: Sales = Receipts from customers + Closing debtors balance - Opening debtors balance Plugging in the values from the cash book extract, we get: Sales = 16,400 + 7,600 - 6,500 Sales = ₦17,500 Therefore, the sales value is ₦17,500. The formula for calculating sales takes into account the amount of cash received from customers as well as the change in the amount owed by debtors to the company. The opening and closing balances of debtors are also taken into consideration. The resulting figure represents the total sales made during the period.

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The power to appoint the Auditor General of the Federation is vested in the President. This means that the President has the authority and responsibility to choose who will hold the position of Auditor General. The Auditor General is an important official who is responsible for auditing the accounts of the federal government and ensuring that public funds are being used properly. The President makes this appointment after consulting with the National Assembly.

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The record in Jide's book would be to "purchases #12,000 and credit Ibrahim #12,000." This is because Jide purchased 10 bags of sugar from Ibrahim, which means Jide incurred a cost of #12,000 for the goods purchased. Therefore, Jide needs to record this transaction as a purchase of goods, which is an expense. To record the expense, Jide needs to debit the "Purchases" account, which represents the cost of the goods purchased. At the same time, Jide needs to credit Ibrahim's account for the same amount, which represents the payment made to the supplier. In summary, Jide's book should show a debit of #12,000 to Purchases and a credit of #12,000 to Ibrahim.

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The correct entry would be "motor van and credit cash." This means that the account for "motor van" is debited (increased) and the account for "cash" is credited (decreased) to reflect the purchase of the motor van using cash. In simple terms, when Akirika buys a motor van for his business using cash, the amount of cash he has decreases and the value of his assets (represented by the motor van) increases. Therefore, the accounts involved in the transaction are "motor van" and "cash." The account for "motor van" is debited to reflect the increase in assets, while the account for "cash" is credited to reflect the decrease in cash.

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When converting a partnership into a limited liability company, the necessary accounts to be opened in the books of the company are the Business Purchase Account, Vendor Account, and Ordinary Share Capital Account. The Business Purchase Account is used to record the value of the assets and liabilities of the partnership that are transferred to the limited liability company. This account is debited for the total value of the assets transferred and credited for the total value of the liabilities transferred. The Vendor Account is used to record the amount owed to the partners for their share of the assets transferred to the company. This account is credited for the amount of the partner's capital contribution, which is the value of their share of the assets transferred. The Ordinary Share Capital Account is used to record the value of the shares issued to the shareholders of the limited liability company. This account is credited for the total value of the shares issued to the shareholders. In summary, when converting a partnership into a limited liability company, the necessary accounts to be opened in the books of the company are the Business Purchase Account, Vendor Account, and Ordinary Share Capital Account. The Business Purchase Account is used to record the assets and liabilities transferred from the partnership, the Vendor Account is used to record the amount owed to the partners, and the Ordinary Share Capital Account is used to record the value of the shares issued to the shareholders.

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The investment at cost of a company is disclosed under the balance sheet. The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific moment in time. It lists all of the company's assets, liabilities, and equity in a clear and organized manner. The investment at cost is usually listed under the "Investments" section of the balance sheet, and it represents the amount of money the company has invested in other companies or assets. By disclosing the investment at cost in the balance sheet, investors and stakeholders can get a clear picture of the company's financial position and see how much money it has invested in other entities.

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To determine the number of times stock was turned over during the period, we need to calculate the inventory turnover ratio. This ratio tells us how many times the company sold and replaced its inventory during the year. The formula for inventory turnover ratio is: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Cost of Goods Sold (COGS) = Beginning Inventory + Purchases - Ending Inventory Average Inventory = (Beginning Inventory + Ending Inventory) / 2 Using the information given in the question: COGS = 25,120 + 44,880 - 27,840 = 42,160 Average Inventory = (25,120 + 27,840) / 2 = 26,480 Therefore, the inventory turnover ratio = 42,160 / 26,480 = 1.59 (rounded to two decimal places) This means that the company turned over its stock 1.59 times during the year. Rounding to the nearest whole number, the answer is 2. Therefore, the answer is. The company turned over its stock 2 times during the year.

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To calculate the net profit, we need to use the following formula: Net Profit = Net Sales - Cost of Goods Sold - Rent Expenses Using the information given in the question, we can plug in the values: Net Profit = 370,000 - 230,000 - 35,000 Net Profit = 105,000 Therefore, the net profit is ₦105,000. Explanation: The net profit is the amount left after deducting all expenses from the revenue. In this case, we subtracted the cost of goods sold (which is the cost of the goods that were sold during the period) and rent expenses (which is the cost of renting the store or office) from the net sales (which is the total revenue earned). The result is the net profit, which represents the amount of money the business has earned after paying all expenses.

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The basis upon which assets of an organization are valued is the historical concept. This concept states that the value of an asset is based on its original cost or purchase price. In other words, when an asset is acquired by an organization, its value is recorded in the financial statements at the cost at which it was acquired. For example, if a company purchases a computer for $1,000, the computer's value will be recorded in the financial statements at $1,000. Even if the market value of the computer increases or decreases over time, the historical cost will still be used to value the asset. The historical concept is important because it provides a reliable and consistent way to value assets over time. It also helps ensure that financial statements accurately reflect the value of an organization's assets at the time they were acquired, which is essential for making informed financial decisions.

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The Purchasers Ledger Control Account can also be referred to as the Creditors Ledger. This account is used to keep track of the amounts owed to the business by its suppliers or creditors. The Purchasers Ledger Control Account or Creditors Ledger is an important accounting tool that allows a business to monitor its outstanding debts and ensure that it is paying its suppliers on time. This ledger contains details of all the transactions related to purchases made by the business on credit and is used to record payments made to suppliers. In summary, the Purchasers Ledger Control Account is also known as the Creditors Ledger and is used to keep track of the amounts owed to the business by its suppliers or creditors.

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In the head office ledger, the value of goods sent to the branch are debited to the head office current account. This is because when goods are sent from the head office to a branch, the head office is effectively sending assets (the goods) to the branch. In a double entry system of accounting, when assets are transferred from one entity to another, the entity sending the assets would debit its own assets account, and the entity receiving the assets would credit its own assets account. In this case, the head office is sending goods to the branch, so it would debit its own assets account (i.e., debiting the head office current account), and the branch would credit its own assets account (i.e., crediting the branch current account). So, in summary, in the head office ledger, the value of goods sent to the branch are debited to the head office current account.

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Capital is the amount of money that an individual or a company has invested in a business, which represents the ownership interest. It can be calculated by subtracting liabilities from assets. In this case, the assets are: - Fixtures: #30,000 - Debtors: #7,000 - Stock: #8,000 - Goodwill: #10,000 Total assets: #30,000 + #7,000 + #8,000 + #10,000 = #55,000 Liabilities are amounts owed to others, in this case: - Creditors: #3,000 Total liabilities: #3,000 Capital = Total assets - Total liabilities Capital = #55,000 - #3,000 Capital = #52,000 Therefore, the capital is #52,000.

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The prime cost is the sum of direct materials cost and direct labor cost. Direct materials cost is the cost of the raw materials used to produce a product, while direct labor cost is the cost of the labor used to produce the product. Factory overhead cost is the indirect costs of production and does not include direct materials or direct labor costs. Therefore, to calculate the prime cost, we need to subtract the factory overhead cost from the total production cost: Prime cost = Total production cost - Factory overhead cost Prime cost = #360,000 - #56,000 Prime cost = #304,000 So, the value of prime cost is #304,000.

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In manufacturing accounts, finance expenses are charged to the profit and loss account. The profit and loss account is a financial statement that shows a company's revenues, costs, and expenses during a specific period of time, such as a year. Finance expenses are a type of expense that a company incurs to finance its operations, such as interest paid on loans or overdrafts. These expenses are subtracted from the company's revenues to determine its net income or loss. Therefore, finance expenses are included in the profit and loss account as they directly affect the company's profitability.

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To find the gross profit, we need to subtract the cost of goods sold from the net sales. From the information provided, we can see that the net sales is ₦370,000 and the cost of goods sold is ₦230,000. Therefore, the gross profit can be calculated as: Gross profit = Net sales - Cost of goods sold Gross profit = ₦370,000 - ₦230,000 Gross profit = ₦140,000 Therefore, the gross profit is ₦140,000.

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In a three-column cash book, dishonored cheques will be shown in the bank column (debit). The three-column cash book is a record-keeping tool used to track cash transactions in a business. The three columns in the cash book are typically labeled as cash, bank, and discount/interest. When a cheque that was deposited into the bank account is returned due to insufficient funds, it is considered to be dishonored. In this case, the bank column (debit) would be used to reflect the decrease in the company's bank balance, as the amount of the dishonored cheque would be subtracted from the total bank balance. This helps to accurately track the company's cash flow and financial position.

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A trademark is an item of special assets. A trademark is a unique symbol, design, or phrase that is used to identify a brand or product. It is a type of intangible asset, meaning that it has value but it is not a physical object. For example, the Nike swoosh or the Coca-Cola logo are trademarks that are valuable to the companies that own them. Fixed assets are physical objects such as buildings, machinery, and equipment that a company uses in its business operations. They are long-term assets that are not intended to be sold or consumed in the short term. Current assets are assets that are expected to be converted into cash or used up within one year. Examples of current assets include cash, accounts receivable, and inventory. Gratuity is a sum of money that an employer may choose to give to an employee as a token of appreciation for their service. It is not considered an asset because it is a liability, meaning that the employer has a legal obligation to pay it.

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