Principles Of Accounts 2008 Jamb Examination

Cost of raw materials consumed is calculated by adjusting purchases for the change in stock levels: \[ \text{Opening Stock} + \text{Purchases} - \text{Closing Stock} \] \[ 10,000 + 160,000 - 14,000 = 156,000 \]

Prime Cost is the sum of all direct manufacturing costs. \[ \text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Wages} + \text{Direct Expenses (Royalties)} \] \[ \text{Raw Materials Consumed} = 156,000 \text{ (calculated in previous question)} \] \[ \text{Prime Cost} = 156,000 + 420,000 + 3,000 = 579,000 \]

A Receipt and Payment account is a summary of cash and bank transactions for a non-profit organization. It is essentially a summarized Cash Book. However, because it records the *actual cash paid*, it includes amounts paid for future periods (Prepayments) or received for past periods. It does not include non-cash items like depreciation or accrual items like debtors/creditors in its main body (though it might show cash paid/received from them). Among the options, "prepayment" refers to the cash flow aspect of paying in advance, which is captured by the R&P account.

To find the income for the year, we adjust the cash received to reflect only what belongs to the current period: \[ \text{Cash Received} = 7,000 \] \[ \text{Less: Arrears at start (payment for last year)} = (2,000) \] \[ \text{Add: Advance at start (payment meant for this year)} = 1,500 \] \[ \text{Add: Arrears at end (earned but not yet paid)} = 3,000 \] \[ \text{Total Income} = 7,000 - 2,000 + 1,500 + 3,000 = 9,500 \]

While documentation and monitoring are helpful, the core purpose of departmental accounting is performance evaluation. By separating income and expenses for different sections, management can identify which departments are highly profitable and which are struggling, allowing for better strategic decisions regarding resource allocation.

In branch accounting, the head office may dispatch goods to its branches using different pricing strategies depending on the level of control and secrecy desired. The three standard methods are:
1. Cost Price: Goods are sent at the actual price the head office paid.
2. Selling Price: Goods are sent at the price the branch is expected to sell them to customers.
3. Cost plus a fixed percentage (Mark-up): Goods are sent at cost plus a specific profit margin.

Option (iv) is not a standard accounting term for branch charging.

When a head office supplies goods to its own branch, it's an internal transfer, not a sale to an external customer. The head office typically charges the branch at a price that allows the branch to then sell the goods at a profit margin, while also covering the head office's cost. This internal price is often referred to as a company price or transfer price.

Interest on drawings is a charge levied by the partnership on partners for the money they withdraw for personal use. It is calculated by applying the agreed-upon interest rate to the amount withdrawn by the specific partner.

Calculation for G:\[ \text{Interest on Drawings} = \text{Drawings of G} \times \text{Interest Rate} \]\[ \text{Interest on Drawings} = 2,000 \times 5\% \]\[ \text{Interest on Drawings} = 2,000 \times 0.05 = 100 \]

Interest on drawings is an expense to the partner and an income to the firm. To record this, the partner's stake in the business must be reduced. Following the double-entry rule, we debit the Partner's Capital (or Current) Account and credit the Profit and Loss Appropriation Account.

When a partnership dissolves, all asset accounts are first closed to the Realisation Account. If a partner decides to keep an asset instead of it being sold to an outsider, that partner is essentially receiving a portion of their final settlement in the form of that asset. Therefore, we debit the Partner's Capital Account (to show they 'owe' the business for that asset) and credit the Realisation Account (to record the disposal of the asset from the firm's perspective).