JAMB Accounting 2002 Past Questions & Answers

Bad debt is an expense a business incurs when a customer cannot pay what they owe. At the end of the accounting year, all nominal accounts, which include expenses and incomes, must be closed off. These accounts are closed by transferring their balances to the Profit and Loss account to calculate the net profit or loss for the period.

Common mistake: Students often mistakenly choose 'provision for bad debt account' because they confuse the actual bad debts written off during the year with the provision, which is an estimate for future doubtful debts.

To determine the cost of goods sold, you add the opening stock, purchases, and any direct costs, then subtract the closing stock. In this case, the wages of bakery staff are a direct cost of production. The calculation is: Opening Stock (₦800) + Purchases (₦2450) + Wages (₦675) - Closing Stock (₦940), which equals ₦2985. Carriage outwards and administrative salaries are indirect expenses and are not included in this calculation.

Common mistake: Students often mistakenly choose option D by calculating the cost of goods available for sale (Opening Stock + Purchases + Direct Expenses) but forget to subtract the closing stock.

The imprest system requires that the amount spent from the petty cash float is reimbursed to restore the original imprest amount. First, calculate the total expenses: Stationery (₦350) + Cleaning material (₦335) + General expenses (₦265) = ₦950. This total expense of ₦950 is the exact amount that must be received to bring the petty cash balance back to the original imprest of ₦1380.

Common mistake: A common mistake is to calculate the closing balance (₦1380 - ₦950 = ₦430) instead of the reimbursement amount, which is always equal to the total expenses for the period.

To find the net income, you must subtract the total expenses from the revenue. First, calculate the missing miscellaneous expenses, which is 10% of the revenue shown in the image (10% of ₦820,000 = ₦82,000). Next, add all the expenses together: ₦20,000 + ₦15,000 + ₦120,000 + ₦82,000 gives a total of ₦237,000. Finally, subtract the total expenses from the revenue to get the net income: ₦820,000 - ₦237,000 = ₦583,000.

Common mistake: A common mistake is to forget to calculate the miscellaneous expense based on the revenue, and instead only sum the expenses already listed in the income statement.

A memorandum entry is an informal note made in a book of original entry for record-keeping or informational purposes only. Unlike other entries, it does not have a corresponding debit and credit, meaning it does not form part of the double-entry system. It's simply a reminder and does not affect the balances in the ledger accounts.

Common mistake: Students may confuse this with 'single entry', but single entry refers to a complete, alternative bookkeeping method, not a specific type of note within the double-entry framework.

A bank reconciliation statement is prepared to compare the bank entries in the cash book with the entries in the bank statement. This process helps to identify items like bank charges or uncredited cheques that have not been recorded in the cash book. By making the necessary adjustments, the bank reconciliation ensures that the cash book is updated and correct.

Common mistake: Students often mistakenly choose option A, thinking that a bank reconciliation can detect all missing cash, but it can only verify cash that has been recorded in the cash book first.

Nominal accounts are used to record expenses, losses, incomes, and gains. Wages is an expense for paying workers and rent is an expense for using a building, making them both nominal accounts. On the other hand, Fixtures and Machinery are physical assets the business owns, so they are classified as real accounts, not nominal accounts.

Common mistake: Students often mistakenly choose option B, confusing nominal accounts (which are for expenses and incomes) with real accounts (which are for assets like fixtures and machinery).

Current assets are resources that a business expects to convert to cash or use up within one year. From the list provided, the current assets are Stock (₦8,100), Debtors (₦1,809), Cash balances (₦9,911), and Prepaid expenses (₦580). To find the total value, you simply add these amounts together: ₦8,100 + ₦1,809 + ₦9,911 + ₦580 = ₦20,400.

Common mistake: Students often mistakenly choose option D by forgetting to include Prepaid expenses (₦580) in their calculation of current assets.

The accounting equation states that Assets = Capital + Liabilities, so to find capital, we use the formula Capital = Assets - Liabilities. First, sum all assets: Debtors (₦46,000) + Stock (₦20,000) + Motor vehicle (₦120,000) + Building (₦70,000) + Bank (₦25,000) = ₦281,000. Next, sum all liabilities: Creditors (₦50,000) + Loan (₦100,000) + Accrued wages (₦30,000) = ₦180,000. Finally, subtract total liabilities from total assets to get the capital: ₦281,000 - ₦180,000 = ₦101,000.

Common mistake: A common mistake is incorrectly classifying an item, for example, adding a liability like 'Loan' to the assets total or subtracting an asset like 'Debtors' from the liabilities.

To find the total liabilities, you need to identify and sum up all the amounts the company owes to others. From the list, the liabilities are Creditors (₦50,000), Loan (₦100,000), and Accrued wages (₦30,000). Adding these amounts together gives ₦50,000 + ₦100,000 + ₦30,000, which equals ₦180,000.

Common mistake: A common mistake is to confuse assets with liabilities, for example, by incorrectly adding Debtors (an asset) to the total liabilities.