JAMB UTME - Principles of Accounts - 2019

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An ordinary share of ₦100 was issued at ₦80, which means it was issued at a discount. A share is said to be issued at a discount when its issue price is lower than its par or face value. In this case, the par value of the share is ₦100, but it was issued at ₦80, which is lower than its face value. Therefore, the difference between the issue price and the par value (₦100 - ₦80 = ₦20) is the discount. On the other hand, if a share is issued at a price higher than its par value, it is said to be issued at a premium. When a share is issued at its face value, it is said to be issued at par. Lastly, a loss is incurred when the selling price of an asset is lower than its purchase price. However, that is not the case in this scenario as there is no information on any selling of the share.

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In a non-profit making organization, the excess of assets over liabilities equals accumulated funds. Accumulated funds, also known as "net assets" or "fund balance", represent the total amount of funds that the organization has accumulated over time from its operations, donations, and other sources, minus any liabilities that it owes. When an organization has more assets than liabilities, it means that it has accumulated more resources than it has used or spent over time, resulting in a positive balance of accumulated funds. This balance can be used by the organization to fund future projects and initiatives or to build up its reserves. It is important to note that in a non-profit organization, accumulated funds are not owned by any individual or group, but rather are dedicated to the organization's mission and objectives. They are held in trust for the benefit of the organization and the people it serves.

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The authorized share capital of Industry Ltd is ₦200,000, which means the maximum amount of money the company can raise from issuing shares is ₦200,000. The company issued 100,000 shares at ₦1 each, so it raised ₦100,000. This means that ₦100,000 of the authorized share capital has been issued. All shareholders paid in full except for two shareholders who owe a total of ₦20,000. This means that the company received a total of ₦80,000 in payment for the issued shares. The unissued capital of the company is the portion of the authorized share capital that has not been issued yet. Since the authorized share capital is ₦200,000, and ₦100,000 has been issued, the unissued capital is ₦100,000. Therefore, the answer is (2) ₦200,000 is the authorized share capital, and ₦100,000 is the unissued capital.

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The item that will not appear in the preparation of a control account is option IV only, which is "Provision for bad debts." A control account is a summary account that provides an overview of the individual accounts that make up a particular category, such as debtors or creditors. The purpose of a control account is to reconcile the total balance of individual accounts with the balance in the control account. In the context of accounts receivable, which is money owed to a company by its customers, the control account typically includes transactions such as sales, cash receipts, discounts, and returns. Bad debts, which are accounts that are unlikely to be paid by customers, are also included in the control account. However, the provision for bad debts is a separate account that is used to estimate the amount of bad debts that are likely to occur in the future, and it is not typically included in the control account. In summary, the provision for bad debts is not included in the preparation of a control account, while bad debts, discounts, and returns are typically included.

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The purpose of a profit and loss (P&L) account is to show the financial performance of a business over a specific period of time, usually a month or a year. It helps to determine the net profit or loss of a company by showing the total revenue earned and the total expenses incurred during the period. The P&L account starts with the gross profit, which is calculated by subtracting the cost of goods sold (COGS) from the total revenue. Gross profit shows the amount of money the company made from its sales before any other expenses are taken into account. Next, the P&L account lists all the expenses incurred by the company during the period, such as wages, rent, utilities, advertising, and other operating costs. These expenses are subtracted from the gross profit to arrive at the net profit or net loss. The net profit or loss is the final result of the P&L account and shows whether the company made a profit or suffered a loss during the period. If the net profit is positive, it means the company had more revenue than expenses and made a profit. If the net profit is negative, it means the company had more expenses than revenue and suffered a loss. In conclusion, the purpose of a P&L account is to determine the net profit or loss of a company by showing the total revenue earned, the total expenses incurred, and the difference between the two.

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Retained profits are an example of revenue reserves. Revenue reserves are profits earned by a company that are not distributed as dividends to its shareholders but are kept in the business as a form of retained earnings. Retained profits are a portion of the company's profits that are not paid out as dividends but are instead reinvested in the company to support its growth, pay off debts or improve its operations. These retained profits can be accumulated over time, allowing a company to build up its reserves and strengthen its financial position. This can be particularly useful during times of economic uncertainty or market downturns, as the company will have more financial flexibility and resources to weather the storm. Therefore, retained profits are a crucial component of a company's overall financial health, and they are an example of revenue reserves.

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Discount received is a reduction in the amount paid for goods or services purchased by a company. This reduction is usually given by a supplier to a customer as an incentive to encourage prompt payment or to build customer loyalty. In accounting, discount received is considered a gain for the company and is therefore credited to the profit and loss account. The profit and loss account is an account that records all revenues and gains on one side, and all expenses and losses on the other side, for a particular period. By recording discount received in the profit and loss account, the company can track and report its total gains for a specific period, and also calculate the net profit or loss for that period. This helps the company to make informed decisions about its operations and financial position, and to meet its reporting requirements. Therefore, the correct answer is option (B) - profit and loss account. Discount received is a gain for the company, and it is credited to the profit and loss account to be recorded as part of the company's total gains and revenues for a specific period.

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The opening cash balance can be found by looking at the Receipts and Payments Account. The "Bal b/f" column represents the balance brought forward from the previous period, which is the opening cash balance. In this case, the opening cash balance is ₦3,650, which is the first entry under "Bal b/f" in the Receipts and Payments Account. Therefore, the correct option is (3) ₦3,650.

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To calculate the Gross Profit on percentage of sale, we need to use the following formula: Gross Profit Percentage = (Gross Profit / Sales) x 100 First, we need to calculate the Gross Profit, which is the difference between the Sales and Cost of Goods Sold: Gross Profit = Sales - Cost of Goods Sold Gross Profit = 233,000 - 170,000 Gross Profit = 63,000 Next, we can calculate the Gross Profit Percentage using the formula above: Gross Profit Percentage = (Gross Profit / Sales) x 100 Gross Profit Percentage = (63,000 / 233,000) x 100 Gross Profit Percentage = 0.2701 x 100 Gross Profit Percentage = 27.01% Therefore, the Gross Profit on percentage of sale is 27.01%, which means that for every ₦1 of sales, Wazobi Ventures earns a Gross Profit of ₦0.27. The closest option to this answer is 27.0%.

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In the preparation of accounting records, the owners of the business and the business concerned are treated as separate legal entities. This means that the business is treated as a distinct entity from its owners, and is recognized as having its own financial position, income, and expenses. This is because the business is a separate legal entity, meaning it has its own legal status and is capable of entering into contracts and owning property. For example, if a business takes out a loan, the debt belongs to the business and not to the individual owners. Similarly, if the business makes a profit, the profit belongs to the business and not directly to the owners. Separating the business from its owners in this way allows for a clear and accurate picture of the financial performance of the business, and enables the owners to assess the success of the business as a whole. It also ensures that the business is held responsible for its financial obligations and liabilities, rather than the individual owners.

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To calculate the value of goodwill, we need to first calculate the average profit for the past 4 years. We can do this by adding up the profits for each year and then dividing by 4: Average profit = (14,000 + 24,000 + 10,000 + 16,000) / 4 = 16,000 Next, we need to calculate 2 years' purchase of the average profit: 2 x 16,000 = 32,000 Therefore, the value of goodwill is ₦32,000. This is because the value of goodwill is determined by the number of years' purchase of the average profit. Among the options given, the correct answer is 32,000.

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Capital expenditures are expenditures made by a company to acquire or improve long-term assets that are expected to provide benefits over several years. Examples of capital expenditures include the purchase of equipment, machinery, property, or buildings. Based on the information provided in the question, the following expenditures are capital expenditures: - Sinking of boreholes - Purchase of a motor car - Purchase of beds The total amount spent on these items is ₦2,900,000 + ₦920,000 + ₦425,000 = ₦4,245,000. Therefore, capital expenditure in this case is ₦4,245,000. In conclusion, capital expenditures are expenditures made to acquire or improve long-term assets that are expected to provide benefits over several years. Based on the information provided, the capital expenditure in this case is ₦4,245,000.

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The statement in a double entry system that records all the transactions of one specific class during a period is called a ledger. A ledger is a book or a collection of accounts in which a business records its financial transactions. It contains all the financial information related to a specific account, such as sales, purchases, expenses, and revenues. In a double entry system, every transaction affects at least two accounts, one being debited and the other credited. These debits and credits are recorded in the ledger in separate columns, which allows for the calculation of the account balance at any given time. For example, a business might have a ledger for its sales transactions, in which all the sales made during a particular period are recorded. Each sale is recorded in the ledger as a debit to the customer's account and a credit to the sales account. At the end of the period, the balance in the sales account represents the total amount of sales made during that period. Overall, the ledger is an important tool in accounting as it provides a detailed record of all financial transactions, allowing businesses to monitor their financial performance and make informed decisions.

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The mark-up in this scenario is ₦6,174. When a company sells goods to its branch, it usually does so at a price that is higher than the cost price, to make a profit. In this case, the invoiced price of the goods sent to the branch is ₦30,870, which includes a markup of 25% on the cost price. To find the cost price, we can use the following formula: Cost price = Invoiced price / (1 + Markup percentage) Plugging in the values, we get: Cost price = ₦30,870 / (1 + 25%) = ₦24,696 Now, to find the markup, we can use the following formula: Markup = Invoiced price - Cost price Plugging in the values, we get: Markup = ₦30,870 - ₦24,696 = ₦6,174 Therefore, the mark-up in this scenario is ₦6,174. This represents the amount that the company has added to the cost price of the goods to arrive at the invoiced price that it charged to its branch.

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The effect of the transaction will be an increase in the assets of the motor vehicle account and a decrease in the assets of the bank account. When you bought the motor vehicle and paid for it by cheque, you transferred ₦60 from your bank account to the account of the seller. This means that the assets of your bank account decreased by ₦60, while the assets of the motor vehicle account increased by ₦60. In other words, the transaction resulted in the transfer of ₦60 worth of value from your bank account to the motor vehicle account. Therefore, there is no increase in liabilities of the bank account because you did not borrow any money to make the purchase. To summarize, the transaction of buying a motor vehicle and paying for it by cheque resulted in an increase in the assets of the motor vehicle account and a decrease in the assets of the bank account.

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The method of stock valuation in which the issue price is obtained by dividing the value of stock in hand by unit of stock in hand is called Weighted Average Price (WAP). WAP is a method of determining the average cost of a stock that a company holds in its inventory. It takes into account the cost of each unit of stock and the number of units held. The total cost of the stock is then divided by the total number of units to determine the average cost per unit. This average cost per unit is then used as the value of the stock for accounting purposes. The WAP method is useful for companies that purchase stocks at different times and different prices, as it provides a more accurate reflection of the value of the stock. It is also useful for companies that sell stock frequently, as it provides a more accurate reflection of the cost of the stock and helps to ensure that the company is not overcharging or undercharging for the stock.

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One of the objectives of maintaining the account of a branch at the head office is to access the performance of the branches. When a company has several branches, it is essential to keep track of the financial performance of each branch to ensure that they are operating efficiently and generating profits. By maintaining the account of each branch at the head office, the management can easily access the financial records of each branch and compare them to identify the profitable and non-profitable branches. The head office can analyze the financial statements of each branch, including the income statement, balance sheet, and cash flow statement, to determine the financial health of the branch. This information can help the head office make informed decisions, such as allocating resources to profitable branches or taking corrective actions to improve the performance of non-profitable branches. In summary, maintaining the account of a branch at the head office allows the management to access the financial performance of each branch, which is essential for making informed decisions and ensuring the profitability of the entire organization.

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Discount received is usually apportioned to each department on the basis of their purchases. The reason for this is that the discount is typically given by the supplier as a percentage of the total value of goods purchased. Therefore, the more a department purchases from the supplier, the more discount they receive. For example, if a department purchases $10,000 worth of goods and the supplier offers a 5% discount, the department would receive a discount of $500. If another department purchases $5,000 worth of goods from the same supplier, they would only receive a discount of $250. By apportioning the discount on the basis of purchases, each department receives a fair share of the discount based on their contribution to the total purchases from the supplier. This helps to ensure that the discount is allocated in a way that reflects the actual purchasing activity of each department.

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The entity concept is a fundamental principle of accounting that assumes that every economic unit, regardless of its legal form of existence, is treated as a separate entity from parties having an economic interest. This means that a business is viewed as a distinct entity separate from its owners, shareholders, creditors, or any other parties with an economic interest in the business. Under the entity concept, the financial transactions of the business are recorded separately from those of the owner or other parties. This enables the business to track its financial performance and position accurately, and to prepare financial statements that are useful for decision-making. For example, if a business owner invests $10,000 of personal funds into the business, the entity concept requires that the transaction be recorded as a liability owed to the owner by the business. Similarly, if the business borrows $5,000 from a bank, the loan is recorded as a liability owed to the bank by the business. By treating the business as a separate entity, the entity concept enables stakeholders to evaluate the financial performance of the business without confusion or distortion caused by mixing personal transactions with business transactions.

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Distribution expenses are not charged to manufacturing account. Manufacturing account is a record of all the costs incurred during the production process of goods. It includes direct expenses such as raw materials, direct labor (factory wages) and direct expenses incurred in the production process. On the other hand, distribution expenses refer to the costs incurred in the distribution of finished goods to the customers, such as transportation, packaging, and marketing expenses. These costs are not considered a part of the production process and hence are not charged to the manufacturing account. Instead, they are recorded in the selling and administrative expenses account.

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The advantage of double-entry bookkeeping is that it ensures the accuracy of financial records and provides a complete picture of a company's financial transactions. Double-entry bookkeeping is a method of recording financial transactions that involves recording every transaction in at least two accounts, with one account debited and the other credited. This ensures that the total debits always equal the total credits, which means that the books are always in balance. By using double-entry bookkeeping, companies can ensure that their financial records are accurate and complete. They can also quickly identify errors and discrepancies in their records, which can help them to make better financial decisions. In addition, double-entry bookkeeping provides a complete picture of a company's financial transactions. It shows how every transaction affects both sides of the accounting equation (i.e., assets = liabilities + equity), which helps companies to understand the impact of their transactions on their financial position. In summary, the advantage of double-entry bookkeeping is that it ensures the accuracy and completeness of financial records, helps companies to quickly identify errors and discrepancies, and provides a complete picture of a company's financial transactions. It is not related to options such as increasing assets or disbursing cash.

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In a partnership, when no agreement is made by the partners, the default provisions of the Partnership Act of the relevant country take effect. These provisions dictate the terms of the partnership, including how profits and losses are to be shared, how interest is to be charged on capital and drawings, and whether partners are entitled to receive salaries. In this context, the statement "the following provisions take place except" is not clear as it suggests that there are several provisions, and one of them does not take effect. However, the options given do not constitute provisions that are part of the default provisions of the Partnership Act. Therefore, the statement is incomplete, and we cannot provide a definitive answer. However, we can say that the default provisions of the Partnership Act are in place to provide a framework for partnerships where there is no agreement between the partners. These provisions may vary from country to country and may be different depending on the legal jurisdiction. Overall, it is always recommended for partners to have a partnership agreement in place that outlines the terms and conditions of the partnership, as this can help avoid potential conflicts and ensure that all partners are on the same page.

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Accounting standards are issued at the international level by the International Accounting Standards Board (IASB). The IASB is an independent organization that sets accounting standards, known as International Financial Reporting Standards (IFRS), for companies to follow when preparing their financial statements. These standards help ensure that financial information is transparent and comparable across different companies and countries. The IASB operates under the oversight of the IFRS Foundation, which provides funding and governance. The Standards Advisory Council and Standing Interpretations Committee are both bodies that provide advice and guidance to the IASB, but they do not have the authority to issue accounting standards. In summary, the IASB is the organization responsible for setting international accounting standards, which are designed to promote transparency and comparability in financial reporting by companies around the world.

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To solve this problem, we need to calculate the total profit and then divide it between A and B in the agreed ratio of 3:2. To calculate the total profit, we need to find the difference between the total revenue and the total expenses: Total revenue = Sales + Advert + Wages = ₦3200 + ₦3278 + ₦516 = ₦6994 Total expenses = Purchases = ₦2600 Total profit = Total revenue - Total expenses = ₦6994 - ₦2600 = ₦4394 Now, to divide the profit between A and B in the agreed ratio of 3:2, we need to use the following formula: A's share = (3 / 5) x Total profit B's share = (2 / 5) x Total profit Substituting the values, we get: A's share = (3 / 5) x ₦4394 = ₦2636.40 B's share = (2 / 5) x ₦4394 = ₦1758.60 Therefore, the profit that A will receive is ₦2636.40, and the profit that B will receive is ₦1758.60. Now, let's calculate the settlement amount by adding the profit to the original amount A paid to B: Settlement amount for B = Original amount paid by A + B's share of profit Settlement amount for B = ₦2000 + ₦1758.60 = ₦3758.60 Therefore, the answer is option (C) ₦993.

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To calculate the net profit as a percentage of expenses, we need to first determine the total expenses of the company for the year. We can do this by adding up all of the overhead expenses: admin expenses + selling expenses + other overhead expenses. Total expenses = ₦16,800 + ₦15,000 + ₦6,200 = ₦38,000 Next, we can calculate the net profit as a percentage of expenses by dividing the net profit by the total expenses and multiplying by 100. Net profit as a percentage of expenses = (Net profit / Total expenses) x 100 = (₦25,000 / ₦38,000) x 100 = 65.79% Therefore, the correct answer is 65.79%, which is option (D). This means that for every ₦1 spent on expenses, the company earned a net profit of approximately ₦0.66. It's important to note that this percentage does not take into account the cost of goods sold, which is a separate expense and is already deducted from the sales figure.

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The cost of goods for department B is 2800. To find the cost of goods, we need to subtract the total expenses from the total sales. First, we need to calculate the total expenses by determining the expenses to be shared in the ratio of sales, which is 1500 + 2000 + 50100 = 71600. Then, we can find the total sales for department B, which is 3000 + 5000 = 8000. Finally, we can subtract the total expenses from the total sales: 8000 - 71600 = 2800. This is the cost of goods for department B.

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To calculate the gross profit, we need to subtract the cost of goods sold (COGS) from the total revenue (sales). COGS represents the cost of the products that were sold during the period, and it is calculated as: COGS = Opening stock + Purchases - Closing stock In this case, the values are: COGS = ₦20,000 + ₦70,000 - ₦15,000 = ₦75,000 Total revenue (sales) is given as ₦100,000. Therefore, the gross profit can be calculated as: Gross profit = Total revenue - COGS = ₦100,000 - ₦75,000 = ₦25,000 Hence, the answer is option (D) ₦25,000.