JAMB Accounting 2015 Past Questions & Answers

To find the closing capital, we use the accounting equation: Capital = Assets - Liabilities. First, calculate the total closing assets: Cash in hand (₦1,200) + Cash at bank (₦2,500) + Debtors (₦10,000) + Stock (₦20,500) + Furnishing (₦4,000) = ₦38,200. Then, subtract the closing liabilities (Creditors ₦17,000) from the total assets. Therefore, closing capital is ₦38,200 - ₦17,000 = ₦21,200.

Common mistake: A common mistake is to select the total closing assets (₦38,200) as the answer, forgetting to subtract the closing liabilities to determine the owner's capital.

The income and expenditure account is prepared by not-for-profit organisations, like clubs, to calculate their surplus or deficit for a period. This is done by matching all incomes against all expenditures, following the accrual concept. This function is identical to that of a profit and loss account in a for-profit business, which matches revenues and expenses to determine net profit or loss.

Common mistake: Students often mistakenly choose 'a cash book' because they confuse the income and expenditure account with the receipts and payments account, which is a summary of cash transactions.

To find the total purchases, you must first calculate the credit purchases and add them to the given cash purchases. Credit purchases are found using the creditors' control account formula: Payments to creditors + Closing creditors - Opening creditors. This gives ₦53,000 + ₦2,000 - ₦4,000 = ₦51,000 for credit purchases. Finally, add the cash purchases to get the total: ₦51,000 + ₦3,000 = ₦54,000.

Common mistake: Students often mix up the treatment of opening and closing creditors, incorrectly adding the opening balance and subtracting the closing balance, which leads to the wrong answer of ₦55,000.

A revenue expense refers to the day-to-day costs of running a business, like paying for rent or salaries. These expenses are necessary to generate sales and earn income for the current period. Therefore, an expense is considered revenue in nature because it directly helps the business earn its operating income.

Common mistake: Students often mistakenly choose option D, confusing revenue expenditure (for daily operations) with capital expenditure (for adding to or improving fixed assets).

A memorandum entry is an informal note made in a subsidiary book purely for information or as a reminder. It is not part of the formal accounting records because it does not have a corresponding debit and credit entry, and therefore does not follow the double-entry principle. For instance, a note about goods sent to a customer 'on approval' is a memorandum entry, as no sale has occurred yet.

Common mistake: Students often mistakenly choose 'contra entry' because it's a special type of entry, but a contra entry is actually a core part of the double-entry system, representing a transaction with both a debit and a credit within the same cash book.

To calculate the total wage expense for the profit and loss account, start with the cash paid during the period (₦15,000). You must then add the wages that are owed but not yet paid at the end of the period (closing accrual of ₦2,000). Since the question does not give a value for wages outstanding at the beginning, we assume it is zero. Therefore, the total expense is ₦15,000 + ₦2,000 = ₦17,000.

Common mistake: Students often mistakenly subtract the closing outstanding wages from the cash paid (₦15,000 - ₦2,000 = ₦13,000), forgetting that closing accruals represent an expense incurred for the period and must be added.

The average method is correct because it smooths out price fluctuations. It calculates a weighted average cost for all inventory, so the cost of goods sold is not heavily affected by whether prices are rising or falling. This provides a more stable and moderate valuation compared to other methods in changing price conditions.

Common mistake: Students often mistakenly choose FIFO because it is a widely taught method, but they forget that it can overstate profits during rising prices and understate them during falling prices, unlike the smoothing effect of the average method.

The acid test ratio, also known as the quick ratio, measures a company's ability to pay its current liabilities without relying on the sale of stock. The formula is (Current Assets - Stock) / Current Liabilities, which simplifies to (Debtors + Bank) / Creditors. In this case, it is (₦18,750 + ₦4,000) / ₦3,750 = ₦22,750 / ₦3,750 = 6, giving a ratio of 6:1.

Common mistake: Students might mistakenly calculate the current ratio by including stock in the numerator, instead of the acid-test ratio which specifically excludes stock.

This question is about the allotment of shares when a company's share offer is oversubscribed (more applications are received than shares available). In such cases, shares are often issued on a pro-rata basis. Although the ratio is not given, the correct answer implies that for every 5 shares an investor applied for, they were issued 2. Therefore, for an application of 50,000 units, the shares allotted would be $(2/5)$ * 50,000 = 20,000 shares.

Common mistake: Students might get confused because the question does not state the pro-rata basis of allotment, leading them to guess an answer instead of working backwards from the options to find the implied ratio.

To find Osinbajo's share of profit, we first prepare the Profit and Loss Appropriation Account. Start with the net profit of ₦80,000, then subtract total salaries (₦10,000 + ₦15,000 = ₦25,000) and total interest on capital $(5$. The remaining profit is ₦80,000 - ₦25,000 - ₦5,500 = ₦49,500. Osinbajo's share is 60% of this remaining profit, which is 0.60 x ₦49,500 = ₦29,700.

Common mistake: The most common mistake is choosing option B, which is the total remaining profit to be shared between both partners, not Osinbajo's individual portion of it.