Principles Of Accounts 2020 Jamb Examination

In corporate finance and accounting, securities like shares or debentures can be issued in three ways: at par, at a discount, or at a premium. The nominal value, also known as the face value, is the value stated on the security certificate. When a company is performing exceptionally well or market interest rates are lower than the debenture's coupon rate, the company may issue the debenture at a price higher than its nominal value. This excess amount over the face value is specifically referred to as a 'premium'. For example, if a debenture with a nominal value of ₦100 is sold for ₦110, the ₦10 difference is the premium. Margin and mark-up are terms more commonly associated with trading profits and cost-plus pricing rather than the issuance of capital instruments.

A standing order is a specific type of banking instruction used to automate recurring payments. It is an order given by a bank account holder (the customer) to their bank, authorizing the bank to pay a fixed amount of money at regular intervals (e.g., monthly or annually) to a specified recipient's account. Unlike a direct debit, where the recipient (payee) initiates the collection of funds based on permission from the payer, a standing order is completely controlled by the customer. The customer sets the amount, the frequency, and the duration of the payments, and can cancel the instruction at any time by notifying their bank. It is commonly used for fixed expenses like rent, insurance premiums, or regular savings transfers.

A control account acts as a summary of a subsidiary ledger, ensuring that the total of individual balances matches the total recorded in the general ledger. The Sales Ledger specifically contains the individual accounts of all trade debtors (customers who bought goods on credit). Therefore, the Sales Ledger Control Account is often referred to as the 'Total Debtors Control Account'. Its balance is derived by aggregating the totals from the books of original entry that affect debtors—primarily the Sales Day Book (for credit sales), the Sales Returns Day Book (for returns), and the Cash Book (for payments received and discounts allowed). Summing these individual debtor balances provides the total figure that must reconcile with the control account balance to verify the accuracy of the bookkeeping process.

In manufacturing accounts, the goal is to determine the total cost incurred in producing finished goods during a specific period. The process follows a structured calculation:
First, Prime Cost is determined by adding direct materials, direct labour, and direct expenses. To this, factory overheads (indirect costs) are added to reach the total factory cost. However, because some items may be partially completed at the start and end of the period, adjustments for 'Work-in-Progress' (WIP) are necessary. The formula is:\[\text{Cost of Goods Manufactured} = \text{Prime Cost} + \text{Factory Overheads} + \text{Opening WIP} - \text{Closing WIP}\]This final figure represents the value of goods that have completed the production process and are ready to be transferred to the trading account as finished goods. Cost of goods sold, by contrast, would also include adjustments for opening and closing finished goods inventory.

In accordance with the Constitution of the Federal Republic of Nigeria, the Auditor General for the Federation is appointed by the President. This appointment is made based on the recommendation of the Federal Civil Service Commission and is subject to confirmation by the Senate. The Auditor General plays a critical role in the management of public funds, as the office is responsible for auditing the accounts of all federal ministries, departments, and agencies. To ensure independence and transparency, once appointed, the Auditor General cannot be easily removed by the executive; removal typically requires an address supported by a two-thirds majority of the Senate on grounds of misconduct or inability to discharge the functions of the office.

In double-entry bookkeeping, the trial balance serves as a summary of all ledger balances to verify mathematical accuracy. Accounts are categorised based on their natural balances. Following the expanded accounting equation, assets and expenses carry natural debit balances because they represent the application of funds. Conversely, liabilities, equity, and income (revenue) carry natural credit balances because they represent the sources of funds. Therefore, when extracting balances to the trial balance, both income accounts and liability accounts are recorded in the credit column. This ensures that the total debits (what the business has and uses) equal the total credits (where the money came from).

A partnership is a relationship between persons carrying on a business in common with a view to profit. To prevent disputes and ensure smooth operation, the partners usually draw up a formal legal document known as a Partnership Deed (or Articles of Partnership). This document outlines the rules governing the internal management, such as the profit-sharing ratio, interest on capital, partners' salaries, and procedures for the admission or retirement of partners. While a partnership can exist based on an oral agreement or the Partnership Act, the 'deed' is the specific instrument used to customize the financial and administrative affairs of the firm to the partners' specific needs.

When a new partner is admitted, the total profit of the firm is treated as a whole (1). To find the new ratios, we first deduct the new partner's share and then distribute the remaining portion between the old partners according to their existing ratio.
Step 1: Calculate the remaining share after Kemi's admission.\[\text{Remaining Share} = 1 - \frac{1}{5} = \frac{4}{5}\]Step 2: Distribute the remaining share between Kola and Sunday. Since they shared equally (1:1), each gets half of the remainder.\[\text{Kola's new share} = \frac{1}{2} \times \frac{4}{5} = \frac{2}{5}\]\[\text{Sunday's new share} = \frac{1}{2} \times \frac{4}{5} = \frac{2}{5}\]Step 3: State the final ratio for Kola, Sunday, and Kemi.\[\text{Ratio} = \frac{2}{5} : \frac{2}{5} : \frac{1}{5}\]This results in a new profit-sharing ratio of 2:2:1.

The convention of conservatism, also known as the prudence concept, is a fundamental principle in accounting that dictates a cautious approach to financial reporting. It suggests that when an accountant is faced with two possible values for a transaction, they should choose the one that is least likely to overstate assets or income and least likely to understate liabilities or expenses. The core mantra is: 'Anticipate no profit, but provide for all possible losses.' Examples of this convention in practice include valuing closing stock at the lower of cost or net realisable value and creating provisions for doubtful debts. This ensures that the financial statements provide a realistic, if not slightly pessimistic, view of the company's financial health, preventing the payment of dividends out of capital.

Rent is typically allocated to departments based on the floor space they occupy. To solve this, we must express the space of all departments in relation to one variable (Department M) to establish a ratio.
Let the space occupied by M be \(x\).
Department L occupies twice the space of M: \(L = 2x\).
Department O occupies half the space of M: \(O = 0.5x\).
The total ratio is:\[L : M : O = 2x : 1x : 0.5x\]To simplify, multiply the entire ratio by 2:\[4 : 2 : 1\]Sum of the ratio parts:\[4 + 2 + 1 = 7\]Now, allocate the total rent of ₦70,000 to Department M using its portion (2):\[\text{Rent for M} = \frac{2}{7} \times 70,000\]\[\text{Rent for M} = 2 \times 10,000 = \text{₦}20,000\]