Principles Of Accounts 2015 Jamb Examination

When a head office transfers goods to a branch at 'cost plus mark-up', it is setting a transfer price (invoice price). This is intended to be the minimum selling price for the branch to ensure the company's overall profit margin is met. While the branch may have some flexibility to sell higher in some systems, generally, the transfer price acts as the mandated selling price or the floor price.

The main difference is the accounting basis used. Receipts and Payments accounts are strictly cash-based (like a cash book). Income and Expenditure accounts use the 'accrual basis', meaning they record income earned and expenses incurred during the period, regardless of whether the actual cash has been exchanged. This includes adjustments for accruals, prepayments, and non-cash items like depreciation.

In Nigeria's federal structure, while states and local governments generate some internal revenue (IGR) through taxes and levies, the bulk of their funding comes from the Federation Account. This is known as 'statutory allocation,' which is the constitutionally mandated sharing of national revenue (primarily from oil and customs) among the three tiers of government based on an agreed formula.

The imprest system is defined by its reimbursement mechanism: the petty cashier is given an initial 'float,' and at the end of the period, they are reimbursed with the exact amount spent (Statement 3). This cycle allows management to maintain strict control over small expenditures (Statement 4). Statement 1 is false because each business sets its own float size, and Statement 2 is slightly inaccurate because the sum received isn't 'fixed'—it varies to match the actual expenses incurred.

Under the Fixed Capital Method, a partner's Capital Account remains unchanged unless new capital is introduced or permanent withdrawals are made. All daily or yearly transactions—such as share of profits, interest on capital, salaries, and drawings—are recorded in a separate 'Current Account.' This distinction helps show the long-term investment (Capital) versus the temporary earnings and withdrawals (Current).

A cash discount is a financial incentive offered by a seller to a buyer to encourage the prompt payment of an invoice. For example, '2/10, n/30' means the buyer gets a 2% discount if they pay within 10 days; otherwise, the full amount is due in 30 days. This differs from a trade discount, which is a reduction in the catalog price given at the time of purchase (usually for bulk orders).

Capital expenditure (CAPEX) refers to money spent by a business to acquire, maintain, or improve fixed assets like buildings, machinery, or vehicles. Crucially, any cost necessary to get the asset ready for use (like installation fees, legal costs for land purchase, or carriage inwards on a machine) is also capitalized as part of the asset's cost on the balance sheet.

In the classification of accounts, all accounts are either Personal or Impersonal. Impersonal accounts are further split into: (1) Real Accounts, which deal with tangible and intangible assets (e.g., Land, Machinery, Goodwill), and (2) Nominal Accounts, which deal with income, expenses, gains, and losses (e.g., Rent, Sales, Salaries).

The movement of cash can be calculated using the formula:

Opening Balance + Cash Received − Cash Paid = Closing Balance

12,202 + 40,000 − Cash Paid = 15,300
52,202 − Cash Paid = 15,300
Cash Paid = 52,202 − 15,300 = 36,902

The Sales Ledger Control Account summarizes the transactions with all credit customers. To find the total cash and cheques actually received from these debtors during a period, the accountant looks at the 'Bank' or 'Cash' columns in the Cashbook, where every receipt of payment is originally recorded.