Principles Of Accounts 2018 Jamb Examination

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. It is calculated by subtracting the Cost of Goods Sold (COGS) from Net Sales revenue.

A control account is a summary account in the General Ledger that checks the mathematical accuracy of a subsidiary ledger. By comparing the balance of the control account to the total of the individual accounts in the subsidiary ledger, accountants can quickly identify if an error has occurred and which ledger it is located in.

The primary objective of financial accounting reports is to provide useful financial information to external users, such as investors and creditors, regarding the entity's economic resources (assets), claims against those resources (liabilities and equity), and the changes in those resources and claims.

Prime cost is the total of all direct manufacturing costs and includes costs that can be directly traced to the production of each unit.

Prime Cost = Direct Materials + Direct Labour + Direct Expenses

Prime Cost = 2,500 + 5,000 + 1,000 = 8,500

The closing balance of the Sales Ledger Control Account is calculated by adding credit sales to the opening balance and subtracting items that reduce the amount debtors owe.
Closing Balance = Opening Balance + Credit Sales - Discounts Allowed - Returns Inwards
= 6,000 + 10,000 - 1,000 - 2,000 = 13,000

The closing balance of the Purchase Ledger Control Account is calculated by adding credit purchases to the opening balance and subtracting items that reduce the amount owed to creditors.
Closing Balance = Opening Balance + Credit Purchases - Returns Outwards =  4,000 + 25,000 - 6,000 = 23,000

Indirect materials are materials used in the production process that cannot be conveniently or economically traced to a specific unit of product. Lubricating oil and spare parts are necessary for the machines to function, but they do not become a physical part of the finished goods.

Incomplete records (single entry) lack the dual effect required to prepare full financial statements. To ascertain true profit or loss and financial position, these records must be converted into a 'double entry' system by identifying missing figures through various ledger accounts and a statement of affairs.

Ordinary shareholders are the equity owners of a company and usually possess voting rights at general meetings. Preference shareholders, while having a 'preferential' right to dividends and asset distribution during liquidation, generally do not have voting rights unless their dividends are in arrears.

The Receipts and Payments account is a summary of actual cash transactions (cash basis). It records only the cash actually received and cash actually paid. Accrued amounts (owing) are ignored.
Calculation:\[ \text{Total Receipts} = 10,000 + 30,000 = 40,000 \]\[ \text{Total Payments} = 6,000 \]\[ \text{Balance} = 40,000 - 6,000 = 34,000 \]