JAMB UTME - Principles of Accounts - 2018

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The amount paid by the new partner on admission as compensation for the reputation built up by old partners is called "Goodwill". Goodwill is an intangible asset that represents the value of a business beyond its tangible assets such as property, equipment, and inventory. It takes into account things like the business's reputation, customer relationships, and brand recognition. When a new partner joins a business, they may pay for a share of the goodwill to compensate the existing partners for the value they've built up in the business. In simpler terms, goodwill is like the good reputation of a business and the new partner pays for a share of this reputation when they join the business.

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In reconciling the branch and head office accounts, remittance in transit in the branch books is treated as a debit entry. Remittance in transit refers to funds that have been sent from the branch to the head office, but have not yet been recorded in the head office's books. When reconciling the accounts, this amount is recorded as a debit in the branch's books because the branch has already sent the funds, but they have not yet been received and recorded by the head office. The debit entry in the branch's books serves to reduce the branch's cash balance, while the corresponding credit entry in the head office's books, when it is eventually recorded, will increase the head office's cash balance. This treatment of remittance in transit as a debit entry is a common practice in accounting and helps to ensure that the accounts are reconciled accurately and that the cash balances in both the branch and head office are correctly reflected.

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The office responsible for ascertaining whether all public expenditures and appropriations are in line with approved guidelines is the Auditor General. The Auditor General is an independent body that audits and reports on the government's financial statements, ensuring that public expenditures are legal and authorized, and are within budgeted amounts. The Auditor General is responsible for reviewing and examining all financial records of the government, ensuring that financial transactions are recorded accurately, and that financial reporting is transparent and in compliance with the applicable laws and regulations. The Auditor General is usually appointed by the government, and the office is independent of any particular government department. This independence ensures that the Auditor General can operate impartially and without undue influence from any particular government agency. The Auditor General is a vital part of ensuring the accountability and transparency of government finances and plays a critical role in maintaining public trust in government institutions.

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To find the cost of goods sold (COGS) for the Ede branch, we need to calculate the cost of goods available for sale and then subtract the ending inventory. The cost of goods available for sale is the sum of the stock at the beginning of the year and the goods sent to the branch during the year: 400 (stock at the beginning of the year) + 8000 (goods sent to the branch) = 8400 To calculate the COGS, we need to subtract the ending inventory from the cost of goods available for sale. The ending inventory is the stock at the end of the year: 8400 - 720 (stock at the end of the year) = 7680 Next, we need to adjust the COGS for any returns to the head office. The returns are given as 340, so we subtract this from the calculated COGS: 7680 - 340 = 7340 Finally, we need to calculate the gross profit by subtracting the COGS from the cash sales: 9160 - 7340 = 1820 Therefore, the answer is ₦1820, which represents the gross profit for the Ede branch.

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In order to make the cash book balance equal to the bank statement, it is usually necessary to add the amount of "unpresented cheques". This is because unpresented cheques represent the cheques that have been issued by the organization, but have not yet been presented to the bank for payment. As a result, these cheques are not reflected in the bank statement, but are recorded in the organization's cash book as a deduction from its cash balance. To reconcile the cash book balance with the bank statement, the organization needs to identify the unpresented cheques and add them to the cash book balance. This adjustment will increase the cash book balance to reflect the total amount of funds the organization actually has, even if they haven't yet been withdrawn from the bank. The other answer options, such as uncredited cheques, direct payments by bank, and bank charges, would typically require adjustments to be made to the cash book balance, but these adjustments would not necessarily involve adding amounts to the balance. For example, uncredited cheques may need to be deducted from the cash book balance, while bank charges may need to be added as a deduction. Direct payments by bank may also require adjustments to both the cash book and bank statement balances.

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The excess of sales over cost of goods sold is called "gross profit". Gross profit represents the amount of money that a company earns from selling its products or services, minus the direct costs associated with producing those products or services. For example, if a company sells a product for $100 and it costs $60 to produce that product, the company's gross profit would be $40. This means that for every product sold, the company earns $40 that can be used to cover other expenses like salaries, rent, and marketing. It's important to note that gross profit is different from net profit. Net profit is the total amount of money a company earns after all of its expenses, including indirect costs like overhead and taxes, have been subtracted from its revenue. Gross profit, on the other hand, only takes into account the direct costs associated with producing and selling products or services.

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Advertising expenses incurred on a product in a business organization should be charged to the Sales department. The purpose of advertising is to promote a product or service to potential customers, which makes it an important part of the sales process. By generating interest in the product, advertising can help to increase sales and revenue. Therefore, advertising expenses are considered a selling expense and should be charged to the Sales department. This department is responsible for the promotion and sale of the product, and as such, it is appropriate to allocate the cost of advertising to this department. The Production department is responsible for manufacturing the product, while the Purchase department is responsible for acquiring the materials and supplies needed for production. Neither of these departments is directly involved in the sales process, which means that it would not be appropriate to charge advertising expenses to them. Finally, the Administration department is responsible for managing the overall operations of the business, including finance, human resources, and legal affairs. While advertising is an important part of running a successful business, it is not typically considered to be an administrative expense.

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The inventory costing method that is not a recognized method is "LILA." This is because "LILA" is not a common inventory costing method used in accounting practices, and it is not a recognized acronym or abbreviation for any known costing method. In contrast, FIFO, LIFO, and the average cost method are all well-known and widely used inventory costing methods in accounting. FIFO stands for "First-In, First-Out," and it means that the first items added to inventory are the first ones sold, while the newer items are sold later. LIFO stands for "Last-In, First-Out," and it means that the most recent items added to inventory are the first ones sold, while older items are sold later. The average cost method takes the average cost of all items in inventory and uses that cost to calculate the value of goods sold and the value of ending inventory. In summary, while FIFO, LIFO, and the average cost method are all recognized inventory costing methods, "LILA" is not a commonly used or recognized inventory costing method.

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The accounting entries used to record a cheque issued by a business are to credit the Cash Book and debit the Drawer's account. When a business issues a cheque, it reduces the balance of cash held by the business, and this reduction in cash is recorded by debiting the Drawer's account. At the same time, the cheque creates a liability for the business, which is recorded by crediting the Cash Book. In other words, when the cheque is issued, the business is reducing its own cash balance and creating a debt or liability that will be paid in the future. Therefore, the Cash Book is credited to reflect the creation of the liability, while the Drawer's account is debited to show the reduction in the business's cash balance.

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The accumulated fund of a non-trading concern can equally be referred to as the "surplus fund". This is because the surplus fund represents the excess of the organization's total assets over its total liabilities and any other committed funds. Non-trading concerns, such as non-profit organizations, do not operate for the purpose of making a profit for its members or shareholders. Instead, any surplus generated is used to further the organization's objectives or to invest in its activities in the future. The surplus fund can be seen as a reserve that the organization can draw on when needed. The other answer options, such as members equity, share capital, and general fund, are not necessarily applicable to non-trading concerns, and do not specifically refer to the accumulated fund. For example, share capital typically refers to the funds raised by a company through the sale of shares, while members equity typically refers to the ownership interest of the members in a company.

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When a bill is negotiated to a bank, it is said to be "discounted". Negotiating a bill means transferring ownership of the bill from the original holder to the bank. In exchange for this transfer, the bank pays the holder an amount that is less than the face value of the bill, usually with a fee for providing this service. This process is known as "discounting the bill" because the holder receives a discounted value for the bill. So, when a bill is negotiated to a bank, it is said to be "discounted" because the holder receives a discounted value for the bill in exchange for transferring ownership to the bank.

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Transfers from the head office to branches are best carried out at cost plus mark-up. This is because cost plus mark-up allows the head office to recover the cost of producing the goods, and also make a profit to cover its own overheads and expenses. Selling price and market price may not be the best options because they do not take into account the actual cost of producing the goods, which could lead to overcharging or undercharging the branches. In contrast, cost plus mark-up ensures that the branches receive the goods at a fair price, while also allowing the head office to cover its own costs and make a profit. Overall, this method promotes transparency and fairness in the transfer process.

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Peak pricing is not a transfer pricing method in departmental accounting. Transfer pricing is the process of determining the price at which goods or services are exchanged between different departments or divisions within a company. Cost based transfer price is a method where the transfer price is set based on the cost of producing the goods or services being transferred. Market based transfer pricing is a method where the transfer price is set based on the market price for the goods or services being transferred. Dual pricing system is a method where two different transfer prices are set for the same goods or services, depending on the context in which they are being transferred. Peak pricing is a pricing strategy where prices are increased during periods of high demand, such as holidays or special events. It is not a transfer pricing method.

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If the purchase price of a company exceeds the net assets, the excess amount is debited to the "goodwill account." Goodwill represents the value of a company's reputation, brand, customer relationships, and other intangible assets that are not included in the net assets of a company. When one company acquires another company for a price that exceeds the net assets of the acquired company, the difference between the purchase price and the net assets is attributed to the value of goodwill. Therefore, the excess amount is debited to the goodwill account to record the value of the intangible assets acquired in the transaction. This helps the acquiring company to reflect the true value of the acquired company's intangible assets on their balance sheet.

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The cost of rent can be apportioned to all departments on the basis of the space occupied by each department. For example, if a company has three departments and Department A occupies 40% of the total office space, Department B occupies 30%, and Department C occupies 30%, then the cost of rent can be apportioned accordingly. If the total cost of rent is $10,000 per month, then Department A would be responsible for $4,000 (i.e., 40% of $10,000), Department B would be responsible for $3,000 (i.e., 30% of $10,000), and Department C would be responsible for $3,000 (i.e., 30% of $10,000). This method of apportionment is fair because each department is responsible for the amount of space it occupies and therefore the amount of rent it incurs. Using other criteria such as the number of employees, stock value or wages, may not accurately reflect the actual amount of space used by each department and could lead to unfair distribution of rent expenses.

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To determine the total value of the assets after the transactions, we need to add up all the values of the assets and also add the values of the transactions that increased the value of the assets, then we will subtract the values of the transactions that reduced the value of the assets. From the information given in the question, the total value of the assets before the transactions is ₦40,000. Now let's calculate the effect of each transaction: (i) Rent for shop ₦12,000 paid for the year: This is a prepaid expense, so we need to deduct ₦12,000 from the cash in hand and add it to the value of furnishing. Therefore, the value of the assets after this transaction is: Cash in hand = ₦28,500 - ₦12,000 = ₦16,500 Furnishing = ₦10,000 + ₦12,000 = ₦22,000 (ii) Total purchases ₦15,000: This is an increase in the value of the stock of goods left. Therefore, the value of the assets after this transaction is: Stock of goods left = ₦10,000 + ₦15,000 = ₦25,000 (iii) Total sales ₦8,200: This is a decrease in the value of the stock of goods left and an increase in the cash in hand. Therefore, the value of the assets after this transaction is: Stock of goods left = ₦25,000 - ₦8,200 = ₦16,800 Cash in hand = ₦16,500 + ₦8,200 = ₦24,700 (iv) Stock of goods left ₦10,000: This is the value of the stock of goods left after the purchases and sales. Therefore, the value of the assets after this transaction is: Stock of goods left = ₦16,800 - ₦10,000 = ₦6,800 (v) Paid sales boy ₦500: This is a decrease in the cash in hand. Therefore, the value of the assets after this transaction is: Cash in hand = ₦24,700 - ₦500 = ₦24,200 Finally, we add up all the values of the assets to get the total value of the assets after the transactions: Total value of assets = ₦22,000 + ₦1,500 + ₦6,800 + ₦24,200 Total value of assets = ₦54,500 Therefore, the option that represents the total value of the assets after the transactions is ₦41,700.

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Based on the given information, the term that best describes the scenario is "merger". A merger is a business consolidation that involves the combination of two or more companies into a single new entity. In this case, Bala Ltd acquired the business of Bello Ltd, which means that Bello Ltd is no longer operating as a separate company. Instead, Bello Ltd's assets, liabilities, and operations have been merged with those of Bala Ltd to form a single new entity. It's important to note that a merger can take many forms, and the specific legal and financial details of the transaction can vary. However, the key idea is that two or more companies combine to form a new, larger entity.

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The total credit sales for a period can be extracted from the Sales Day Book. The Sales Day Book is a book of prime entry used to record all credit sales made by a business during a particular period. It typically contains information such as the date of the sale, the name of the customer, the amount of the sale, and any relevant invoice or reference numbers. Since credit sales involve selling goods or services on credit, they are not immediately paid for at the time of sale. Instead, the customer is given a certain amount of time, usually 30 to 90 days, to pay for the goods or services. As a result, credit sales do not result in an immediate inflow of cash, but they do represent revenue earned by the business. Therefore, to determine the total credit sales for a given period, we can simply add up all the credit sales recorded in the Sales Day Book for that period. This figure represents the total amount of revenue earned by the business from credit sales during that period, and is an important indicator of the business's financial performance. In summary, the Sales Day Book is used to record all credit sales made by a business, and the total credit sales for a period can be extracted from this book by adding up all the credit sales recorded during that period.

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A partnership deed is a legal document that outlines the terms and conditions agreed upon by partners in a partnership. It is designed to provide clarity and prevent disputes between partners. The partnership deed typically specifies how profits or losses are to be shared between the partners. This includes the percentage of profits or losses that each partner is entitled to receive, and how they are to be distributed. The deed may also specify the capital that each partner is required to contribute annually, as well as any conditions that must be met in order for additional capital to be contributed. While the partnership deed may address how salaries are paid to partners, it typically does not specify how salaries are paid to employees. This is because employees are not typically considered partners in a partnership. Finally, the partnership deed may outline the profit that the partnership aims to earn annually, but this is not always the case. Some partnerships may not have a specific profit goal, while others may have more ambitious targets. In summary, the partnership deed typically specifies how profits or losses are to be shared and the capital to be contributed annually. It may also include other provisions that are important to the partners, such as how the partnership will be managed and what happens in the event of a partner's death or retirement.

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The gross profit margin is a measure of the profitability of a business, and it is calculated by dividing the gross profit by the revenue and expressing the result as a percentage. The gross profit is the difference between the revenue and the cost of goods sold, which is the direct cost of producing the goods or services that the business sells. In the information provided, the revenue or sales is N20,000, and the cost of sales is N10,000. Therefore, the gross profit can be calculated as follows: Gross profit = Revenue - Cost of sales = N20,000 - N10,000 = N10,000 The gross profit margin can be calculated by dividing the gross profit by the revenue and expressing the result as a percentage: Gross profit margin = (Gross profit / Revenue) x 100% = (N10,000 / N20,000) x 100% = 50% Therefore, the gross profit margin is 50%, which means that for every Naira of revenue generated, the business earns 50 kobo in gross profit. This indicates that the business has a healthy gross profit margin and is able to cover its direct costs of production while making a reasonable profit.

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In the head office ledger, the value of goods sent to the branch are debited to the branch current account. When a company sends goods from the head office to the branch, this is known as a branch transfer. The value of these goods should be recorded in the head office ledger as a debit to the branch current account. This is because the head office is effectively lending the goods to the branch, and the branch will need to repay the head office for these goods at a later date. The branch current account is a type of account in the head office ledger that is used to track the transactions between the head office and the branch. All transactions relating to the branch, such as branch transfers, expenses paid by the head office on behalf of the branch, and cash sent to the branch, are recorded in the branch current account. Therefore, when the head office sends goods to the branch, the value of these goods is recorded as a debit to the branch current account in the head office ledger. This means that the branch owes the head office for the goods received, and the head office can use this information to track the balance owed by the branch. In summary, the value of goods sent to the branch from the head office is debited to the branch current account in the head office ledger, as this account is used to track all transactions between the head office and the branch.