Principles Of Accounts 2008 Jamb Examination

To calculate depreciation (e.g., using the straight-line method), you need three specific variables: the Historical Cost of the asset, its Salvage (Residual) Value (what it's worth at the end of its life), and its Useful Life (the number of years it will be used). Market value is generally ignored in periodic depreciation as it fluctuates due to external factors rather than usage.

In the Simple Average Method, you average the unit prices of the batches received during the period, ignoring the quantities. Here, we had three receipts with prices N60, N68, and N80.\[ \text{Simple Average Price} = \frac{60 + 68 + 80}{3} = \frac{208}{3} \approx 69.33 \]However, if the question implies the average of the *remaining* batches after issues, or specifically the last two receipts (Aug 6 and Aug 20):\[ \frac{68 + 80}{2} = 74 \]In many exam contexts, N74 is the intended 'simple average' price applied to the final inventory.

FIFO (First-In, First-Out) assumes the oldest stock is sold first.
1. Total units received: 20 + 20 + 40 = 80 units.
2. Total units issued: 16 + 48 = 64 units.
3. Units remaining: 80 - 64 = 16 units.
Since we use FIFO, the remaining 16 units must come from the latest batch (Aug 20), which was purchased at N80 per unit.\[ \text{Value} = 16 \text{ units} \times N80 = 1,280 \]

During inflation, prices are rising. FIFO (First-In, First-Out) assumes the cheaper, older stock is sold first. This leaves the most recently purchased (and more expensive) stock in the warehouse. Consequently, FIFO results in a higher closing stock value on the balance sheet compared to LIFO, which would value stock at old, lower prices.

Control accounts serve as an internal check. By comparing the balance of the control account (Total Debtors or Total Creditors) with the sum of the individual ledger balances, a bookkeeper can quickly detect errors (such as transposition errors or omissions) and locate where irregularities have occurred in the ledger system.

The Creditors Ledger Control Account (or Purchases Ledger Control Account) represents the total amount a business owes its suppliers. Since it is a liability account, it has a normal credit balance. * Purchases (on credit): This increases the amount owed to creditors, so it is recorded on the Credit side. * Purchases returns, Bills payable (accepted), and Cash payments: These all reduce the liability and are recorded on the Debit side.

Discount allowed is a reduction in price given to debtors (customers) to encourage early payment. Debtors are tracked in the Sales Ledger Control Account. Since debtors are assets (debit balance), any transaction that reduces what they owe—like a discount—must be recorded on the Credit side of that account.

To find the opening capital, we apply the accounting equation as of December 31, 2005: \[ \text{Capital} = \text{Total Assets} - \text{Total Liabilities} \] \[ \text{Total Assets (2005)} = 7,800 (\text{Fixed}) + 12,100 (\text{Current}) = 19,900 \] \[ \text{Total Liabilities (2005)} = 4,700 \] \[ \text{Capital} = 19,900 - 4,700 = 15,200 \]

We use the comparison of capitals method to find the profit: 1. Opening Capital (2005): N15,200 (calculated in the previous question). 2. Closing Capital (2006): \[ \text{Assets} (6,600 + 17,800) - \text{Liabilities} (3,800) = 24,400 - 3,800 = 20,600 \] 3. Net Profit Formula: \[ \text{Net Profit} = \text{Closing Capital} - \text{Opening Capital} + \text{Drawings} \] \[ \text{Net Profit} = 20,600 - 15,200 + 5,200 = 10,600 \]

This is a simple ratio allocation problem. 1. Total Floor Space: \( 200 + 300 = 500 \text{ sqm} \). 2. Manufacturing Share: \( \frac{200}{500} \) or \( 40\% \). 3. Calculation: \[ \text{Rent} = \frac{200}{500} \times 20,000 = 0.4 \times 20,000 = 8,000 \]