Principles Of Accounts 2022 Jamb Examination

In corporate accounting, the Profit and Loss Appropriation Account is specifically designed to show how the company's net profit is allocated. It acts as a bridge between the profit and loss account and the balance sheet. Dividends (both interim and proposed), transfers to general reserves, and write-offs of intangible assets like goodwill are all recorded in the appropriation account. This ensures that the actual distribution of profit to shareholders is kept separate from the calculation of the profit itself.

Working capital is a measure of a company's liquidity and short-term financial health. It is calculated by subtracting current liabilities from current assets.
Step 1: Identify Current Assets (CA)\[\text{CA} = \text{Trade Debtors} + \text{Cash at Bank} + \text{Cash in Hand}\]\[\text{CA} = 350,000 + 25,000 + 5,500 = \text{₦}380,500\]Step 2: Identify Current Liabilities (CL)\[\text{CL} = \text{Trade Creditors} + \text{Bank Overdraft}\]\[\text{CL} = 116,500 + 7,500 = \text{₦}124,000\]Step 3: Calculate Working Capital\[\text{Working Capital} = \text{CA} - \text{CL}\]\[\text{Working Capital} = 380,500 - 124,000 = \text{₦}256,500\]Note: Fixed assets like building, fixtures, and motor van are excluded from this calculation.

Control accounts serve several important internal control functions, such as helping to locate arithmetic errors in the subsidiary ledgers, making fraud more difficult by separating duties, and assisting in the discovery of missing figures for incomplete records. However, a control account's primary focus is on the accuracy of debtor and creditor balances. It does not directly help to 'determine profit and loss', which is the function of the trading and profit and loss accounts. While the data from control accounts (like total sales and purchases) eventually feeds into the profit calculation, the account itself is a tool for accuracy and balance checking rather than performance measurement.

In a manufacturing environment, total production cost is divided into direct costs and indirect costs. Direct costs (Prime Cost) are those that can be specifically traced to a unit of production. Factory overheads, on the other hand, include costs like factory rent, indirect wages of supervisors, and factory lighting that are necessary for the manufacturing process but cannot be directly linked to a single specific product. Therefore, they are classified as indirect manufacturing costs or 'indirect costs'.

Shareholders are the owners of a company, as they provide the capital through the purchase of shares. While the Board of Directors is responsible for high-level strategy and the Management handles day-to-day operations, the ultimate power rests with the shareholders. This control is exercised through voting rights at General Meetings, where they can appoint or remove directors and approve major corporate changes. Under corporate law, the company is ultimately accountable to its shareholders as the providers of risk capital.

In government accounting, a 'Vote Book' is a crucial memorandum book used to monitor and control expenditures against the amounts authorized in the budget (the 'vote'). It is maintained by an officer in charge of a department to ensure that the total amount spent and the commitments made (liabilities) do not exceed the amount allocated for that specific expenditure head. Each transaction is recorded to show the balance available for future use, preventing overspending and ensuring financial discipline within the public sector. Unlike a sales day book or a standard cash book, its primary function is budgetary control rather than just recording historical transactions.

The relationship between profit and the value of goods can be expressed in two primary ways: mark-up and margin. Mark-up is the profit expressed as a percentage or fraction of the cost price (cost of goods sold). It represents the amount added to the cost to arrive at the selling price. On the other hand, margin is the profit expressed in relation to the selling price or turnover. Since the question specifically identifies the relationship with the cost of goods sold, the correct term is mark-up. \[\text{Mark-up} = \frac{\text{Gross Profit}}{\text{Cost of Goods Sold}} \times 100\]

Receipt voucher are document used to acknowledge the receipt of public revenue.

Following the principle of double-entry bookkeeping, every transaction affects at least two accounts. When goods are sold on credit, the business is increasing its assets in the form of a debt owed by the customer. In accounting rules, an increase in an asset is recorded by debiting the account. Therefore, the Account Receivable (or the specific customer's account) is debited to show the value received by the buyer from the business. Correspondingly, the Sales Account is credited to record the revenue earned.

Preference shareholders are entitled to a fixed dividend rate based on the nominal (par) value of their shares. To calculate the dividend payable, we multiply the total value of the preference shares by the dividend percentage provided. \[\text{Total Number of Preference Shares} = 150,000\]\[\text{Nominal Value per Share} = \text{₦}1\]\[\text{Total Preference Share Capital} = 150,000 \times 1 = \text{₦}150,000\]\[\text{Dividend Rate} = 5\%\]\[\text{Dividend Payable} = \frac{5}{100} \times 150,000\]\[\text{Dividend Payable} = 0.05 \times 150,000 = \text{₦}7,500\]This fixed amount is paid out of the profit for the year before ordinary shareholders receive their dividends.