(a)Distinguish between Authorized Capital and Called-up Capital
(b) Use the following information to answer the questions that follow: XYZ Limited is a trading company. The following transactions took place in the month of February:
Purchase of goods –
32 suitcases at N3,500 each
42 shirts at N800 each.
Additional information:
(i) The cost of transporting goods to the firm’s premises was #2,500
(ii) Two workers of the firm were paid wages and salaries of 4,500 each.
(iii) Total sales revenue was N180,000. You are required to calculate the: (a) gross profit (b) net profit.
Explanation
(a) The authorized capital is the maximum amount of shares that a company is empowered to issue while caller up capital is the part of the issued capital that the company has asked the subscribers to pay.
(b) Purchases N Sales 180,000
Suitcases 32 x 3500 112,000
Shirts 42 x 800 33,600
145,600
Carriage Inward 2,500
Cost of goods sold 148,100
Cost profit 31.900
180,000 180,000
Wages & Salaries 4500 x 2 9,000 Gross profit 31,900
Net profit 2,9002
31,900 31,900.