Principles Of Accounts 2019 Jamb Examination

Cost of Goods Sold (COGS) represents the direct costs attributable to the production or purchase of the goods sold by a company. In a departmental setup, the total COGS is the sum of the direct costs for all departments. Direct costs include opening stock, purchases, and direct wages.

Step 1: Calculate COGS for Dept A:\[ \text{COGS}_A = \text{Opening Stock} + \text{Purchases} + \text{Wages} \]\[ \text{COGS}_A = 100 + 1,500 + 50 = 1,650 \]Step 2: Calculate COGS for Dept B:\[ \text{COGS}_B = 800 + 2,000 + 100 = 2,900 \]Step 3: Calculate Total COGS:\[ \text{Total COGS} = 1,650 + 2,900 = 4,550 \]Note: While the provided JAMB options appear to have a typographical error in the source material (often listing much higher values), the mathematically correct derived value from the provided table is ₦4,550.

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

Step 1: Calculate Cost of Goods Sold:\[ \text{COGS} = \text{Opening Stock} + \text{Purchases} - \text{Closing Stock} \]\[ \text{COGS} = 20,000 + 70,000 - 15,000 = 75,000 \]Step 2: Calculate Gross Profit:\[ \text{Gross Profit} = \text{Sales} - \text{COGS} \]\[ \text{Gross Profit} = 100,000 - 75,000 = 25,000 \]

In corporate finance, shares can be issued in three ways relative to their face value (par value):
1. At Par: Issued exactly at the face value.
2. At Premium: Issued at a price higher than the face value.
3. At Discount: Issued at a price lower than the face value.

Since the nominal value is ₦100 and the issue price is ₦80, the shares have been issued for ₦20 less than their face value, which is a classic example of an issue at a discount.

A 'Right Issue' is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders the 'right' to purchase these shares at a specific price (usually at a discount to the current market price) in proportion to their existing holdings. This allows shareholders to maintain their percentage of ownership in the company. In contrast, a bonus issue is a free distribution of shares to existing members.

The 'Average Profit' method for valuing goodwill involves determining the average maintainable profit of a business over a period and multiplying it by a specific number of years (the purchase factor).



Step 1: Calculate Total Profit:\[ \text{Total} = 14,000 + 24,000 + 10,000 + 16,000 = 64,000 \]Step 2: Calculate Average Profit over 4 years:\[ \text{Average} = \frac{64,000}{4} = 16,000 \]Step 3: Calculate Goodwill (2 years purchase):\[ \text{Goodwill} = \text{Average Profit} \times 2 \]\[ \text{Goodwill} = 16,000 \times 2 = 32,000 \]

In the absence of a formal partnership deed, the provisions of the Partnership Act apply. According to these rules: 1) Profits and losses must be shared equally among partners; 2) No interest is allowed on capital contributed by partners; 3) No interest is charged on drawings; and 4) No partner is entitled to a salary for participating in the business. Therefore, the statement 'There is interest on capital' is incorrect because the law explicitly states that interest on capital is not allowed unless an agreement specifically provides for it.

According to the Partnership Act, when a partner provides a loan or an advance to the firm beyond the amount of capital they agreed to subscribe, they are entitled to receive interest on that loan. In cases where the partnership deed is silent or non-existent, the statutory rate of interest fixed by law is 5% per annum. This is treated as a charge against profit, meaning it must be paid even if the firm makes a loss.

Non-profit organisations, such as clubs or charities, do not have 'owners' in the traditional sense and therefore do not use the term 'Capital'. Instead, the net worth of the organisation—calculated by subtracting total liabilities from total assets—is referred to as the Accumulated Fund. This fund represents the total of all surpluses (and deficits) gathered since the organisation began its operations.

While these two accounts differ in their basis (one is cash-based and the other is accrual-based), they share a common purpose: they are both primary financial statements prepared by non-trading or non-profit-making concerns (clubs, societies, etc.) to report on their financial activities. The Receipts and Payments account summarises the cash book, while the Income and Expenditure account determines the surplus or deficit for the period.

The Accumulated Fund is calculated using the accounting equation: \[ \text{Accumulated Fund} = \text{Total Assets} - \text{Total Liabilities} \]Step 1: Identify Assets:
Equipment: ₦10,000
Motor Vehicle: ₦15,000
Subscription in Arrears (income due but not yet received): ₦3,500\[ \text{Total Assets} = 10,000 + 15,000 + 3,500 = 28,500 \]Step 2: Identify Liabilities:
Loan: ₦4,500
Creditors: ₦3,000
Subscription in Advance (unearned income): ₦150\[ \text{Total Liabilities} = 4,500 + 3,000 + 150 = 7,650 \]Step 3: Calculate Accumulated Fund:\[ \text{Accumulated Fund} = 28,500 - 7,650 = 20,850 \]