Principles Of Accounts 2019 Jamb Examination

To determine the total credit purchases for the period, we must reconstruct the Total Creditors Control Account. The amount of purchases is found by taking the total payments made to creditors, adding the amount still owed at the end of the period, and subtracting the amount that was already owed at the beginning of the period.

The calculation is as follows:\[ \text{Purchases} = \text{Payments} + \text{Closing Creditors} - \text{Opening Creditors} \]\[ \text{Purchases} = 12,250 + 830 - 550 \]\[ \text{Purchases} = 13,080 - 550 = 12,530 \]

The Balance Sheet (or Statement of Financial Position) is a snapshot of a business's financial standing at a specific point in time, usually the last day of the accounting year. Therefore, it must reflect the closing balances of all assets and liabilities. The 'Creditors at end' represents the total amount still owed to suppliers as of the balance sheet date. Consequently, ₦830 is the figure that will be reported under Current Liabilities.

The basic principle of measuring profit through the capital comparison method is that an increase in net assets (capital) over a period indicates a profit, while a decrease indicates a loss. If the opening capital is greater than the closing capital, it means the value of the owner's investment has diminished during the period. Following the formula:\[ \text{Profit/Loss} = \text{Closing Capital} - \text{Opening Capital} \]If Opening Capital > Closing Capital, the result is a negative number, which represents a financial loss for the business.

The manufacturing account is a functional account used by businesses that make their own goods rather than just buying and selling finished products. Its primary objective is to calculate the total 'Cost of Production'—which is the total cost incurred to manufacture the products during the period. This figure is then transferred to the Trading Account to be used in calculating the cost of goods sold and gross profit. It includes prime costs (direct materials, direct labour, direct expenses) and factory overheads.

A manufacturing account only contains costs that are directly related to the production process inside the factory. This includes raw materials (direct materials), factory wages (direct or indirect labour), and factory-related overheads. Distribution expenses, such as carriage outwards, advertising, and delivery van costs, are related to the selling and distribution function of the business, not the manufacturing function. Therefore, distribution expenses are charged to the Profit and Loss Account as an operating expense rather than to the manufacturing account.

In accounting, depreciation is the systematic allocation of the cost of a tangible asset over its useful life. Most fixed assets like machinery, motor vehicles, and buildings (premises) have a limited useful life due to wear and tear or obsolescence. Land, however, is unique because it is considered to have an infinite useful life; it does not wear out or get used up over time. In fact, land typically appreciates (increases in value) rather than depreciates. Therefore, land is not subject to depreciation in financial statements.

In public sector accounting, the Auditor General is the supreme audit authority. This officer is constitutionally mandated to audit the accounts of all offices and courts of the federation or state. Their primary responsibility is to investigate the books of accounts and financial statements to ensure that they reflect a 'true and fair view' of the government's financial position and that public funds are spent according to the law. While the Accountant General prepares the accounts, the Auditor General independently examines them.

A warrant is a formal legal document issued by the Minister of Finance (or a relevant authority) that empowers the Accountant General to release funds and authorises specific officers to incur expenditure from the public funds. Without a signed warrant, no money can be withdrawn from the Consolidated Revenue Fund, even if the expenditure was approved in the annual budget. It acts as the final 'go-ahead' for government spending.

When a company operates multiple branches, the head office often maintains centralised accounting records to monitor and evaluate the efficiency of each branch. By keeping these accounts, the head office can compare the profitability, sales volume, and expense management of different locations. This 'assessment of performance' helps management decide whether to expand, restructure, or close specific branches based on their financial contribution to the overall organisation.

The term 'mark-up' refers to the profit added to the cost price, while 'margin' refers to the profit as a percentage of the selling (invoiced) price. In this case, the goods are invoiced at cost plus 25%.\[ \text{Cost Price} = 100\% \]\[ \text{Mark-up} = 25\% \]\[ \text{Invoiced Price} = 125\% \]To find the mark-up (the profit component) from the invoiced price, we use the following calculation:\[ \text{Mark-up Amount} = \frac{\text{Mark-up Rate}}{100 + \text{Mark-up Rate}} \times \text{Invoiced Price} \]\[ \text{Mark-up Amount} = \frac{25}{125} \times 30,870 \]\[ \text{Mark-up Amount} = \frac{1}{5} \times 30,870 = 6,174 \]Therefore, the mark-up added to the cost of the goods sent to the branch is ₦6,174.