JAMB Accounting 1999 Past Questions & Answers

The accrual concept is a fundamental accounting principle which states that transactions should be recorded in the period they occur, not necessarily when cash is exchanged. This means revenue is recognized and recorded when it is earned (e.g., when goods are sold or services are provided), regardless of whether the customer has paid yet. This provides a more accurate picture of a company's performance for a period than just looking at cash movements.

Common mistake: Students often confuse the accrual concept with cash accounting, leading them to incorrectly choose option C, which states that revenue is recognized only when cash is received.

The fundamental role of accounting is to provide structured financial information that helps in decision-making. A key part of this is measuring the performance of a business, usually by calculating its profit or loss for a specific period. This measurement shows whether the business is operating successfully and achieving its financial goals.

Common mistake: Students often confuse accounting with auditing, so they may incorrectly choose 'detect fraud', which is a primary function of an auditor, not the basic role of an accountant.

The Structural Adjustment Programme (SAP) was a major economic policy in Nigeria during the 1980s that led to widespread privatization and commercialization of government-owned enterprises. This shift from public to private ownership created a new demand for more robust, transparent, and investor-focused financial reporting. Consequently, accounting theories and standards in Nigeria had to evolve to meet the needs of this new market-driven economy.

Common mistake: Students might mistakenly choose option A, 'dynamics of commercialization and privatization policies', because these are direct consequences of SAP, but SAP itself was the broader, foundational economic program that necessitated these changes in the first place.

A bookkeeping error is an unintentional mistake made when recording financial transactions. This could be an oversight or an incorrect entry that was not done on purpose. The correct option D highlights that errors are 'not intended', which distinguishes them from fraud, which is a deliberate and intentional act to deceive.

Common mistake: Students often confuse an error with fraud, choosing option A which describes a deliberate manipulation of records, not an unintentional mistake.

In accounting, when the owner takes cash for personal use, it is called 'drawings'. Drawings reduce the owner's capital in the business, and a reduction in capital is recorded with a debit entry. Since cash, which is an asset, is leaving the business, the cash account must be decreased, and a decrease in an asset is recorded with a credit entry. Therefore, you debit the Drawings account and credit the Cash account.

Common mistake: Students often mistakenly choose option A, confusing the rules by thinking that since cash is being taken out, the cash account should be debited, but the opposite is true for a business asset.

The basic unifying concept in accounting is the accounting equation, which states that Assets = Liabilities + Equity. Creditors are a form of liability (money owed to others). If the creditors' account is zero, it means the business has no liabilities, so the equation becomes Assets = 0 + Equity, which simplifies to Assets = Equity. Therefore, the assets are equal to the owners' equity.

Common mistake: Students might mistakenly choose option D if they forget that the accounting equation must always balance, meaning total assets must always equal the sum of liabilities and equity, never be less.

The sales day book is a book of original entry used to record all credit sales. A source document provides the original evidence for a transaction. When a business sells goods on credit, it issues an invoice to the customer, which details the quantity and price of the goods sold. This invoice is then used as the source of information to make an entry in the sales day book.

Common mistake: Students may confuse an invoice with a credit advice (or credit note), but a credit note is the source document for the sales returns day book, not the sales day book.

To find the cash paid out, you use the cash book formula: Opening Balance + Receipts - Payments = Closing Balance. First, add the opening balance to the total cash received, which is ₦7,600 + ₦18,000 = ₦25,600. This is the total cash that was available during the period. To find the amount paid out, subtract the closing balance from this total: ₦25,600 - ₦9,200 = ₦16,400.

Common mistake: Students often make the mistake of forgetting to add the opening balance to the receipts before subtracting the closing balance, leading them to incorrectly calculate ₦18,000 - ₦9,200.

In a three-column cash book, the discount columns are treated as memorandum columns and are not balanced against each other. The total of the 'discount allowed' column is an expense and is posted to the debit side of the Discount Allowed account in the general ledger. The total of the 'discount received' column is an income and is posted to the credit side of the Discount Received account, and both accounts then appear in the trial balance.

Common mistake: Students often mistakenly choose option B, thinking that the discount columns should be balanced like the cash and bank columns, but they are memorandum columns whose totals are posted separately to the general ledger.

A bank reconciliation statement is prepared to match the cash book balance with the bank statement balance. When finding the adjusted balance, items the bank is not yet aware of (like outstanding cheques or deposits in transit) are used to adjust the bank statement. However, bank service charges have already been recorded by the bank, so they are already in the bank statement. These charges are used to update the company's cash book, not to adjust the bank statement balance.

Common mistake: Students often get confused and choose 'Outstanding cheques' because it is a major reconciliation item, but they forget that it is used to adjust the bank statement balance, while bank charges are used to adjust the cash book balance.