JAMB Accounting 2000 Past Questions & Answers

To find the amount owed, start with the initial debt (₦13,600), add the new credit purchase (₦69,000), and subtract the payment made (₦51,600). Since a cheque of ₦3,000 was returned (dishonoured), you must add this amount back to what is owed because the payment did not go through. Finally, subtract the discount granted by the creditor (₦1,500), which gives a final balance of ₦32,500.

Common mistake: Students often mistakenly forget to add back the value of the dishonoured cheque, leading them to incorrectly choose option D (₦29,500).

When a debt is confirmed to be uncollectible, it is treated as an expense for the business. According to double-entry principles, an increase in an expense is recorded with a debit, so the Bad Debt account is debited. At the same time, the debtor's account, which is an asset, must be reduced to show that the money is no longer owed. To reduce an asset, you credit the account. Therefore, you debit the Bad Debt account and credit the Debtor's account.

Common mistake: Students often confuse the process of writing off a confirmed bad debt with creating a provision for doubtful debts, leading them to incorrectly choose options that involve the 'provision for bad debt' account.

Bank reconciliation involves updating the cash book to match items already recorded by the bank. Direct payments are amounts paid directly into the company's bank account by customers, which the business may not know about until seeing the bank statement. To update the records, these receipts must be added (debited) to the cash book to reflect the increase in money.

Common mistake: Students often mistakenly choose unpresented or uncredited cheques, confusing items used to prepare the bank reconciliation statement itself with items used to update the cash book balance.

To find the net profit, first calculate the gross profit, which is Sales minus Cost of Sales (₦20,000 - ₦10,000 = ₦10,000). Next, you must adjust the operating expenses by removing the prepaid amount, as it is an expense for a future period (₦2,500 - ₦500 = ₦2,000). Finally, subtract the correct expenses for the period from the gross profit to get the net profit (₦10,000 - ₦2,000 = ₦8,000).

Common mistake: The most common mistake is to forget to adjust for the prepaid expense and instead subtract the full operating expense from the gross profit (₦10,000 - ₦2,500 = ₦7,500), leading to the incorrect option D.

The gross profit margin shows the percentage of profit made on sales before deducting other expenses. First, calculate the gross profit, which is Sales minus Cost of Sales (₦20,000 - ₦10,000 = ₦10,000). Then, apply the formula for gross profit margin: (Gross Profit / Sales) x 100. This results in (₦10,000 / ₦20,000) x 100, which equals 50%.

Common mistake: Students often mistakenly calculate the gross profit mark-up by dividing the gross profit by the cost of sales (₦10,000 ÷ ₦10,000), which gives 100% (Option A).

Bookkeeping is the process of recording a company's financial transactions in an organised way. The main purpose of doing this is to provide the necessary data to prepare the financial statements. These statements, particularly the Statement of Financial Position (Balance Sheet), are used to determine the financial health and position of the business at a specific point in time.

Common mistake: Students might choose option A because bookkeeping records are used for managerial decisions, but this is a secondary objective; the primary goal is to ascertain the overall financial position for all stakeholders, not just for routine management tasks.

Intangible assets are non-physical assets that have value to a business. Goodwill, which represents the good reputation and customer loyalty of a company, is a perfect example of an asset that cannot be seen or touched but contributes to the business's worth. The other options are incorrect because motor vehicles are tangible assets, trade debtors are current assets, and trade creditors are current liabilities.

Common mistake: Students often mistakenly choose 'motor vehicles' because it is a non-current asset, but they forget that it is a tangible (physical) asset, not an intangible one.

A cheque stub, also known as a cheque counterfoil, is the part of a cheque book that is left behind after a cheque is torn out. It is used to record the details of the payment made, such as the date, the payee's name, and the amount. This makes it the primary source document for the payer to ascertain and record the amount paid out of their current account.

Common mistake: Students often mistakenly choose 'cheque', but the cheque itself is given to the payee, while the cheque stub is the record kept by the person making the payment.

First, calculate the closing value of Premises. The total accumulated depreciation is the opening balance (₦9,000) plus the current year's charge (10% of cost ₦90,000 = ₦9,000), which equals ₦18,000. The net book value of Premises is ₦72,000 (₦90,000 - ₦18,000). Next, calculate the net value of Debtors by subtracting the new 5% provision (5% of ₦35,000 = ₦1,750), which gives ₦33,250. Finally, add the net value of both assets (₦72,000 + ₦33,250) to get the total asset value of ₦105,250.

Common mistake: A common mistake is forgetting to add the current year's depreciation to the opening accumulated depreciation, which leads to an incorrect and higher asset value.

A single column cash book is the simplest type, used to record only cash coming in and cash going out. Since the petty trader does not have a bank account ('no banking facility'), there is no need for the extra columns for bank transactions or discounts that you find in other cash books. Therefore, the single column cash book is the most convenient and appropriate choice for this situation.

Common mistake: Students might mistakenly choose the three-column cash book because it is the most comprehensive, but they forget that its bank and discount columns are useless without a bank account.