Principles Of Accounts 2012 Jamb Examination

When goodwill is written off (removed from the books), it represents a reduction in the firm's intangible value that must be borne by the partners. This process is carried out by debiting the partners' capital accounts and crediting the goodwill account. To ensure equity and fairness, the write-off must be performed using the current profit and loss sharing ratio. This ensures that the impact of the reduction in asset value is distributed among the partners in the same proportion as they share the gains and losses of the business operation.

When a new partner is admitted and goodwill is brought into the books, the Goodwill account (an asset) must be debited to show its creation. Simultaneously, because the new partner (Mary) is bringing in capital and providing her share of the business's intangible value, her capital account is credited with the sum of her cash contribution and the goodwill value. The entry is: \[ (\text{Dr}) \; \text{Goodwill Account} \; \#15,000 \] \[ (\text{Dr}) \; \text{Cash/Bank Account} \; \#20,000 \] \[ (\text{Cr}) \; \text{Mary's Capital Account} \; \#35,000 \] This reflects that Mary's total stake in the business is valued at the cash she introduced plus the goodwill recognized at her entry.

When a company acquires a partnership, it must record the acquisition through three primary accounts. The Business Purchase Account is used to record the total purchase price and the assets/liabilities taken over. The Vendor Account (or Partnership Realization Account) acts as a temporary personal account to show the amount owed to the partners for their business. Finally, the Ordinary Share Capital Account is opened to record the shares issued as payment to the partners for the purchase of their business. These three accounts facilitate the transition from a partnership structure to a corporate one.

The process of company formation (incorporation) requires the submission of several statutory documents to the Corporate Affairs Commission (CAC) or Registrar of Companies. The Memorandum of Association (I) outlines the company's external relationship and objectives, while the Articles of Association (II) set out the internal rules and regulations. Additionally, other Incorporation documents (III)—which include the statement of nominal capital, the notice of registered office, and the particulars of directors—must all be submitted together to obtain the Certificate of Incorporation.

When a company receives more applications for shares than it offered, it is called oversubscription. The money initially received is debited to the Cash/Bank account and credited to the Application and Allotment account. When the company decides to reject certain applications and refund the money, the original entry must be reversed for those specific amounts. This means the Application and Allotment account is debited (to reduce the liability/temporary holding) and the Cash/Bank account is credited (to show the outflow of funds back to the applicants).

An investment represents an asset owned by the company with the expectation of generating future income or capital appreciation. Since it is an asset, it must be disclosed in the Balance Sheet (Statement of Financial Position). According to the historical cost principle, these investments are typically recorded at their original purchase price (cost) and classified as either current or non-current assets depending on the company's intention to hold or sell them within the financial year.

The acid test ratio (or quick ratio) measures a company's ability to meet its short-term liabilities with its most liquid assets, excluding stock (inventory).

Step 1: Calculate Quick Assets (Current Assets - Stock)\[ \text{Quick Assets} = \text{Trade Debtors} + \text{Prepaid Expenses} \]\[ \text{Quick Assets} = 24,000 + 700 = 24,700 \]Step 2: Calculate Current Liabilities\[ \text{Current Liabilities} = \text{Trade Creditors} + \text{Accrued Expenses} \]\[ \text{Current Liabilities} = 12,250 + 350 = 12,600 \]Step 3: Calculate the Ratio\[ \text{Acid Test Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}} \]\[ \text{Acid Test Ratio} = \frac{24,700}{12,600} \approx 1.96 \]The ratio is expressed as \(1.96:1\).

Stock turnover ratio indicates how many times a company has sold and replaced its inventory during a specific period.

Step 1: Calculate Cost of Goods Sold (COGS)\[ \text{COGS} = \text{Opening Stock} + \text{Purchases} - \text{Closing Stock} \]\[ \text{COGS} = 25,120 + 44,880 - 27,840 = 42,160 \]Step 2: Calculate Average Stock\[ \text{Average Stock} = \frac{\text{Opening Stock} + \text{Closing Stock}}{2} \]\[ \text{Average Stock} = \frac{25,120 + 27,840}{2} = 26,480 \]Step 3: Calculate Turnover Ratio\[ \text{Stock Turnover} = \frac{\text{COGS}}{\text{Average Stock}} \]\[ \text{Stock Turnover} = \frac{42,160}{26,480} \approx 1.59 \]Rounding to the nearest whole number gives 2 times.

In the Nigerian fiscal system, revenue sources are divided between the three tiers of government. Tariffs (Customs and Excise Duties) are collected by the Federal Government on imported and exported goods and are paid into the Federation Account for distribution among the federal, state, and local governments. In contrast, market fees, bicycle licences, and property rates are local revenue sources typically collected and utilized by Local Government Authorities.

In government accounting, the Vote Book (also known as the Departmental Expenditure Allocation Book) is the primary record used to monitor and control the expenditure of a ministry or department. It records the total amount of money allocated (voted) by the legislature for specific purposes and tracks every expenditure made against that allocation. Its main purpose is to prevent overspending by showing the 'balance' of funds remaining in the budget at any given time.