16 JAMB Accounting 1998 questions with verified answers and worked explanations. Here are the first 16 — sign up free to practise the full paper.
The Act establishing the institute of Chartered Accountants of Nigeria (ICAN) came into force on?
This question tests your knowledge of the historical development of the accounting profession in Nigeria. The Institute of Chartered Accountants of Nigeria (ICAN) is the primary professional accounting body. While the Act of Parliament establishing it was passed in 1965, some exam questions link its foundation to Nigeria becoming a republic on 1st October, 1963, which marked a new era of national institution-building.
Common mistake: The most common mistake is choosing 1st September 1965, which is the actual date the ICAN Act of Parliament No. 15 was passed and came into force.
Cost reports for the intention of management should reflect?
Management uses cost reports to make important business decisions, not just to see a list of numbers. A good report must provide relevant cost information and data that can be compared, for example, to a budget or last year's figures. This comparison is what makes the information useful for planning and controlling the business's activities.
Common mistake: Students often mistakenly choose option A, thinking that more detail is always better, but too much information can be overwhelming and hide the key data needed for a quick decision.
Responsibility accounting is particularly concerned with?
Responsibility accounting is a management system where managers are held accountable for the performance of their specific department or unit, which is known as a responsibility centre. This system works by focusing only on the costs and revenues that a manager can actually influence or control. Therefore, its main concern is with 'controllable costs', as it would be unfair to judge a manager based on expenses they have no power over, like the company's head office rent.
Common mistake: Students might mistakenly choose 'storekeeping' because it involves a specific person being responsible for inventory, but responsibility accounting is a broader management system that applies to all controllable costs within a department, not just stock.
An advantage of the use of the voucher system is that it?
The voucher system is a method used by businesses to control how they spend money. Before any payment is made, a document called a voucher is created and must be checked and approved by a responsible person. This process ensures that every expenditure is reviewed for accuracy and authorization before the money is actually paid out, which helps prevent mistakes or fraud.
Common mistake: Students might mistakenly choose option C because a voucher system does create a good record, but its main advantage is the internal control it provides by requiring verification before payment.
A business transaction is recorded in the books of account when the?
A business transaction is an event that has a direct financial effect on the business and must be recorded. When the owner collects ₦5,000 from the business, this is a transaction called 'drawings' which reduces the business's cash and the owner's equity. This is recorded based on the business entity concept, which treats the business as separate from its owner. The other options are either personal transactions of the owner or intentions that have not yet resulted in a financial exchange.
Common mistake: Students may mistakenly choose option A, confusing the owner's personal investment in another company with a transaction involving the business itself, which highlights a misunderstanding of the business entity concept.
When a transaction causes an assets account to increase, there is?
The fundamental accounting equation is Assets = Liabilities + Capital. For this equation to always remain balanced, any transaction must affect at least two accounts. If an asset account increases, the other side of the equation must also increase by the same amount, which means either a liability or capital must increase. A common example is buying a motor van on credit, which increases the asset (motor van) and also increases the liability (creditors).
Common mistake: Students often mistakenly choose option C, thinking of transactions like buying an asset with cash, but they forget that an asset can also be acquired on credit, which increases a liability.
₦ Bank account 59,410 Capital account 50,000 Purchase account 20,000 Rent 2,500 Stationery 90 typewriter 6,500 Sales 38,000 In preparing a trial from the list of balances given above, what is the total in debit and credit columns?
To find the trial balance total, you must add up all debit balances and all credit balances separately. Assets (like Bank and Typewriter) and expenses (like Purchases, Rent, and Stationery) have debit balances. Capital and income (like Sales) have credit balances. The total of the debit column is Bank (₦59,410) + Purchases (₦20,000) + Rent (₦2,500) + Stationery (₦90) + Typewriter (₦6,500), which equals ₦88,500.
Common mistake: The most common mistake is incorrectly classifying an account, for example, placing an asset or expense on the credit side, which leads to an incorrect column total.
The purchase of two generators by Hassan Electronics Enterprises should be recorded as?
The purchase of generators is recorded as an acquisition of fixed assets because they are long-term items bought for use in the business, not for resale. Fixed assets, like machinery and equipment, help the business operate over many years. Therefore, the generators are classified as assets in the ledger, not as expenses or stock.
Common mistake: Students might mistakenly choose 'acquisition of stock' because the business is an electronics enterprise, but they must remember that stock is for resale, while these generators are for use in the business.
If the inventory at the end of the current year is understated and the error is not caught during the following year, the effect is to?
In accounting, profit is affected by the cost of goods sold (COGS), which is calculated as: Opening Stock + Purchases – Closing Stock. If the closing stock for the current year is understated (too low), the COGS will be overstated (too high), which in turn makes the net income for this year understated. This understated closing stock becomes the opening stock for the next year; a lower opening stock will cause the COGS for the next year to be understated, which then overstates the net income for that year.
Common mistake: Students often mistakenly choose option A because they get the relationship backwards, thinking that lower closing inventory means lower costs and thus higher profit, forgetting its specific role in the cost of goods sold calculation.
The total of the discounts received column in the cash book is posted to the?
The discounts received column is located on the credit side of the cash book, recording discounts obtained when making payments to creditors. Discounts received is an income or gain for the business. According to the principles of double-entry, all incomes and gains are credited in the general ledger. Therefore, the total of this column is posted to the credit of the discounts received account.
Common mistake: Students often confuse the treatment of discounts received (an income) with discounts allowed (an expense), or they incorrectly apply the rule for expenses and choose to debit the account instead of crediting it.
Use the information below to answer questions 11 and 12. The initial imprest as at July 1st was ₦500. Petty cash voucers with the custodian by July 15th added up to ₦394. An IOU slip received from a co-worker was ₦65 and there was a shorage of ₦5 cash. The co-worker made refund on July 18th just before the imprest was replenished. What was the actual cash in the till as at 15th July?
To find the actual cash in the till, you start with the initial imprest of ₦500. Then, you must subtract all items that account for the cash that has been spent or is missing. These items are the paid vouchers (₦394), the IOU slip (₦65), and the cash shortage (₦5). The calculation is ₦500 - (₦394 + ₦65 + ₦5), which equals ₦36.
Common mistake: A common mistake is to only subtract the value of the vouchers from the imprest (₦500 - ₦394 = ₦106), forgetting that IOUs and shortages also represent cash that is no longer in the till.
Use the information below to answer questions 11 and 12. The initial imprest as at July 1st was ₦500. Petty cash voucers with the custodian by July 15th added up to ₦394. An IOU slip received from a co-worker was ₦65 and there was a shorage of ₦5 cash. The co-worker made refund on July 18th just before the imprest was replenished. The amount required to replenish the payments made from the imprest was?
Under the imprest system, the petty cash is restored to its original amount by reimbursing the exact amount spent. The amount to be replenished is the total of all expenses paid (vouchers) plus any cash shortage. In this case, the total expenses from vouchers are ₦394 and the cash shortage is ₦5. Therefore, the total amount required to replenish the imprest is ₦394 + ₦5 = ₦399.
Common mistake: Students often choose ₦394 because they only consider the total of the petty cash vouchers and forget to include the cash shortage as part of the amount to be replenished.
State Bank collected a note for A-Makura Company. This collection, not yet recorded in AL-Makura's books, appears on the bank reconciliation as?
A bank reconciliation statement aims to match the cash book balance with the bank statement balance. When the bank collects money for a company (like a note), the company's cash increases, but this is not yet recorded in their cash book. Therefore, to update the cash book and show the true amount of money the company has, this collection must be added to the balance as per the cash book.
Common mistake: Students often mistakenly choose to add it to the bank statement balance, forgetting that the bank has already recorded the collection and the adjustment is needed in the company's own books (the cash book).
Mayana Corporation uses special journals to record its transactions. If one of Mayana's customers returns merchandize purchased with cash (for a refund), it makes an entry in the?
A cash refund to a customer is a payment of cash out of the business. The special journal specifically designed to record all cash payments is the cash disbursement journal, also known as the cash payments journal. Since Mayana Corporation is paying cash back to the customer, this is the correct journal to use for the entry.
Common mistake: Students often mistakenly choose the cash receipts journal, confusing the outflow of cash for a refund with the inflow of cash from the original sale.
Sobande Incorporation acquired a machine that involved the following expenditures and related factors. ₦ Gross invoice price 15,000 Sales tax 900 Purchases discount taken 300 Freight 750 Assembly of machine 500 Installation of machine 800 Assorted spare parts for future use 1200 Turing and adjusting machine 700 What is the initial accounting cost of the machine?
The initial accounting cost of an asset includes all expenses needed to bring it to its location and make it ready for use. We must add the gross price (₦15,000), sales tax (₦900), freight (₦750), assembly (₦500), installation (₦800), and tuning (₦700). The purchase discount (₦300) must be subtracted. The spare parts (₦1200) are for future use and are treated as inventory, not part of the machine's initial cost. Therefore, the total cost is ₦15,000 + ₦900 + ₦750 + ₦500 + ₦800 + ₦700 - ₦300 = ₦18,350.
Common mistake: Students often make the mistake of choosing option A by incorrectly adding the cost of spare parts for future use to the machine's initial cost.
A pottery company had sales of ₦176,000 during the current period and a gross profit rate of 40%. The company's cost of merchandize available for sale during the period was ₦128,000. The company's ending inventory is?
To find the ending inventory, first calculate the Cost of Goods Sold (COGS). Gross Profit is 40% of sales, which is 0.40 x ₦176,000 = ₦70,400. The COGS is Sales minus Gross Profit, so ₦176,000 - ₦70,400 = ₦105,600. Finally, Ending Inventory is the Cost of Goods Available for Sale minus the COGS, which is ₦128,000 - ₦105,600 = ₦22,400.
Common mistake: A common mistake is to incorrectly calculate the gross profit based on the cost of merchandise (40% of ₦128,000 = ₦51,200), instead of on the sales figure as stated in the question.