Principles Of Accounts 2018 Jamb Examination

Capital employed represents the total amount of capital used for the acquisition of profits by a firm. It is the total value of all assets used by the business, which can be calculated using the following formula:\[ \text{Capital Employed} = \text{Total Assets} - \text{Current Liabilities} \]From the provided statement of financial position:
Total Assets = Non-current assets (Plant and equipment) + Current assets (Stock + Receivables)
Total Assets = 10,000 + (7,000 + 5,000) = 10,000 + 12,000 = 22,000
Current Liabilities = Payables = 7,000.
Applying the values to the formula:
Capital Employed = 22,000 - 7,000 = 15,000
 

In departmental accounting, expenses are charged to the specific department that directly benefits from the expenditure or is responsible for the activity. Advertising is a primary tool used to promote products and stimulate demand, which falls under the direct jurisdiction of the sales and marketing functions. Therefore, advertising costs are charged to the sales department to reflect the true cost of generating the revenue associated with that department. The production department focuses on manufacturing costs, while administration covers general overheads not tied to specific sales activities.

The acid test ratio, or quick ratio, measures a company's ability to meet its short-term obligations with its most liquid assets. It excludes stock (inventory) because stock is considered less liquid. The formula is:\[ \text{Acid Test Ratio} = \frac{\text{Current Assets} - \text{Stock}}{\text{Current Liabilities}} \]Step 1: Identify Quick Assets (Current Assets - Stock)\[ \text{Quick Assets} = \text{Debtors} + \text{Cash}\]\[ = 6,000 + 8,000 = 14,000 \]Step 2: Identify Current Liabilities\[ \text{Current Liabilities} = \text{Creditors} + \text{Accrued Wages} \]\[= 9,000 + 5,000 = 14,000 \]Step 3: Calculate the ratio\[ \text{Ratio} = \frac{14,000}{14,000} = 1 \]Therefore, the ratio is 1:1, indicating the firm has exactly ₦1 of liquid assets for every ₦1 of short-term debt.

When a Head Office sends goods to a branch at 'cost plus mark-up', it is using the invoice price (or transfer price) system. The mark-up is added to the cost to determine the price at which the branch is expected to sell the goods to the public. The branch must sell at this transfer price or higher to ensure the head office's profit objectives are met. Selling below this price would result in a shortage in the branch account unless specifically authorised, as the branch is held accountable for the stock at its full invoice value.

The Auditor General is the constitutional officer responsible for the external audit of public accounts. Unlike the Accountant General, who is the chief accounting officer and is responsible for preparing financial statements and managing the treasury, the Auditor General's role is to scrutinise these records. They ensure that all public expenditures have been made for the purposes intended by the legislature and that they adhere to financial regulations and approved guidelines. This provides a system of checks and balances in government spending.

Average stock is the calculating the addition of stock at the beginning and at the end of the financial period and dividing the value by two.  It is the average value of products kept for sale during an accounting period.

 Therefore:
  Average stock = opening stock + closing stock/2
  = 32000 + 9000/2
  = 41000/2
  =₦ 20500

Cost of Goods Sold (COGS) is the total cost involved in producing or purchasing the products that were sold during the period. The formula is:\[ \text{COGS} = \text{Opening Stock} + \text{Net Purchases} + \text{Carriage Inwards} - \text{Closing Stock} \]From the table:
1. Opening Stock = 32,000
2. Net Purchases = Purchases (40,000) - Returns (2,000) = 38,000
3. Carriage Inwards = 1,000
4. Closing Stock = 9,000
Step-by-step calculation:\[ \text{Cost of Goods Available} = 32,000 + 38,000 + 1,000 = 71,000 \]\[ \text{Cost of Goods Sold} = 71,000 - 9,000 = 62,000 \]The figure is also explicitly listed as the final line item on the left side of the provided trading account.

When a company issues shares, it may request payment in instalments (calls). 'Call in arrears' (also known as unpaid calls) refers to the situation where a shareholder fails to pay the amount requested by the company by the specified deadline. This amount remains a debt owed by the shareholder to the company. In contrast, 'Call in advance' occurs when a shareholder pays more than what has been officially called up, and 'Forfeiture' is the actual penalty of cancelling the shares due to the non-payment of these calls.

When a new partner is admitted, goodwill may be raised and then written off (not retained). The process involves two steps:
1. Raising Goodwill: Debit Goodwill Account and Credit Old Partners' Capital Accounts in their old profit-sharing ratio.
2. Writing Off Goodwill (Not Retaining): Debit all Partners' Capital Accounts (including the new partner) in their new profit-sharing ratio and Credit Goodwill Account.
Since the question asks for the entry to 'write off' or not retain the goodwill, we must debit the Partners' Capital Accounts to reduce their equity by the share of goodwill and credit the Goodwill account to remove it from the statement of financial position.

Trading, Profit and Loss Account For the Month Ended 31/1/95

Sales		8,200
Cost of Sales
Purchases	15,000
Less: Closing Stock	(10,000)
Cost of Sales		5,000
Gross Profit		3,200
Gross Profit b/d		3,200
Sales Commission	500
Rent	1,000	(1,500)
Net Profit		1,700

Workings

Rent paid for 12 months	12,000
Rent for one month (12,000 × 1/12)	(1,000)
Prepaid Rent	11,000

Balance Sheet as at 31/1/95

Non-Current Assets
Furnishing	10,000
Ceiling Fan	1,500	11,500
Current Assets
Cash	9,200
Inventory	10,000
Prepaid Rent	11,000	30,200
Total Assets		41,700
Capital	40,000
Add: Net Profit	1,700	41,700