JAMB Accounting 2016 Past Questions & Answers

To find the bank statement balance, we first need to update the cash book for items the bank knows about but we haven't recorded. Start with the cash book balance (₦2,970), then subtract bank charges (₦220) and the direct debit (₦1,000) to get the adjusted cash book balance of ₦1,750. In the bank reconciliation statement, add unpresented cheques (₦3,950) and subtract uncredited cheques (₦4,178) from this adjusted balance. The final calculation is ₦1,750 + ₦3,950 - ₦4,178 = ₦1,522.

Common mistake: Students often get confused and incorrectly subtract unpresented cheques and add uncredited cheques in the reconciliation statement, which leads to an incorrect calculation.

The accounting equation states that Assets = Capital + Liabilities. To find the capital, you rearrange the formula to Capital = Assets - Liabilities. First, calculate total liabilities by adding the loan (₦14,000) and the creditor (₦8,000), which gives ₦22,000. Then, subtract the total liabilities (₦22,000) from the total assets (₦190,500) to get the capital of ₦168,500.

Common mistake: A common mistake is to incorrectly add the liabilities to the assets instead of subtracting them, which would lead to a wrong answer like ₦212,500 (close to option C).

To find the gross profit for Department K, you first need to calculate the Cost of Goods Sold (COGS). The formula for COGS is Opening Stock + Purchases - Closing Stock. For Department K, this is ₦2,500 + ₦120,000 - ₦3,000, which equals ₦119,500. Finally, subtract the COGS from the Sales to get the Gross Profit: ₦180,000 - ₦119,500 = ₦60,500.

Common mistake: Students might mistakenly subtract expenses like salary or rates when calculating gross profit, but these are only deducted later to find the net profit.

Return on Capital Employed (ROCE) is a key ratio that measures the overall profitability and efficiency of a company's capital investments. It shows how much profit the company generates from every naira of capital it uses. Since profit is ultimately derived from sales after deducting costs like the cost of goods sold, a high ROCE indicates that the firm is very efficient in its entire operation, which includes managing its sales and costs effectively.

Common mistake: Students often mistakenly choose gross profit margin because it directly compares sales and cost of goods sold, but ROCE is a broader measure of overall operational efficiency which encompasses that relationship.

A bank statement is a summary sent by the bank showing all money that has entered and left a company's account. A bank debit note is a formal notice from the bank informing the company that its account has been charged for a service, like bank charges. Together, these documents provide the business with official and instant information from the bank about its financial activities.

Common mistake: Students often mistakenly choose 'cheque stub and deposit slip' because they are related to banking, but these are documents created by the firm itself, not documents that provide information *from* the bank *to* the firm.

The profit and loss account is used to calculate net profit using the formula: Revenue - Expenses = Net Profit. Revenue expenditure is another name for an expense. If you overstate your expenses, it means you are subtracting a larger amount from your revenue, which will result in a smaller, or understated, net profit.

Common mistake: Students often mistakenly choose option C, thinking that 'overstating' an expense will lead to 'overstating' the profit, forgetting that expenses have an inverse relationship with profit.

A credit note is sent by a seller to a buyer to reduce the amount the buyer owes, for example, when the buyer was overcharged or returned goods. A debit note is a formal request from a buyer to a seller for a credit note, often used when goods are returned or an overcharge is discovered. Therefore, both documents are used to correct situations where a buyer was undercharged or overcharged on an invoice.

Common mistake: Students often mistakenly choose option D, confusing the initial invoice used for a sale with the credit or debit notes which are used to correct errors or record returns after the sale.

To find the adjusted or closing capital, you start with the opening capital, add any new capital introduced, and then subtract items that reduce capital, like net loss and drawings. The calculation is: Opening Capital (₦35,000) + Additional Capital (₦10,000) - Net Loss (₦2,500) - Drawings (₦3,500). This equals ₦39,000.

Common mistake: A common mistake is to only add the opening and additional capital (₦35,000 + ₦10,000 = ₦45,000), forgetting to subtract the net loss and drawings which reduce the owner's capital.

To find the total income for the club, you must sum up all revenue generated during the period. The income items are Sales of tickets (₦4,000), Donations (₦3,000), and Subscriptions (₦6,500). Adding these amounts gives a total income of ₦4,000 + ₦3,000 + ₦6,500 = ₦13,500. Items like expenses, purchase of assets (new tool), and opening balances are not included when calculating total income for the period.

Common mistake: Students often mistakenly choose option C by incorrectly adding the 'Balance brought down' (₦390) to the total income, but this balance represents cash from a previous period, not income earned in the current year.

To find the profit from incomplete records, you first calculate the closing capital using the formula: Assets - Liabilities. The closing assets are ₦8,800 + ₦600 + ₦1,000 + ₦3,000 = ₦13,400, and the liability is ₦1,000, so closing capital is ₦13,400 - ₦1,000 = ₦12,400. Profit is then calculated as Closing Capital - Opening Capital, which is ₦12,400 - ₦13,000 = -₦600, representing a loss.

Common mistake: A common mistake is to calculate closing capital incorrectly, for example, by forgetting to subtract the creditors from the total closing assets.

The question requires calculating the total amount received on the final call for shares issued. The final call amount is stated as 55 kobo (₦0.55) per share. To find the total amount, you multiply the number of shares issued by the final call amount per share. Therefore, the calculation is 450,000 shares multiplied by ₦0.55, which equals ₦247,500.

Common mistake: Students might mistakenly use the amount for the 1st call (50 kobo) instead of the final call (55 kobo), leading them to incorrectly calculate 450,000 x ₦0.50 = ₦225,000 (Option A).

When a head office sends goods to a branch at 'cost plus mark-up', it means the head office has already added its own profit to the original cost. This new price is the 'transfer price' or 'invoice price'. The branch must sell the goods at a price that is at least this transfer price to avoid making a loss, so it can sell at any price but not below the transfer price.

Common mistake: Students often mistakenly choose 'cost price' (C), forgetting that the goods were sent at a marked-up price (transfer price), not the original cost to the head office.

The imprest system is a method for controlling small cash expenses, so statement IV is correct. Under this system, the petty cashier is given a fixed amount (the float) and is later reimbursed for the exact amount spent to restore the float, making statement III correct. Because the float is a fixed sum that is constantly restored, statement II is also considered correct in this context. Statement I is wrong because the imprest amount varies from one organization to another based on their needs.

Common mistake: Students might choose option D because statements III and IV are the most direct descriptions of the imprest system's process, but they forget that the system is based on maintaining a fixed float (Statement II).

In a partnership, the fixed capital method requires that each partner maintains two accounts: a Capital Account and a Current Account. The Capital Account balance remains unchanged unless there is a permanent introduction or withdrawal of capital. All other transactions affecting the partners, such as share of profits, salaries, interest on capital, and drawings, are recorded in the Current Account. Therefore, profits and remunerations are credited to the partner's current account to keep the capital balance fixed.

Common mistake: Students often mistakenly choose the capital account because they confuse the fixed capital method with the fluctuating capital method, where all transactions are indeed posted to the single capital account.

In accounting, all accounts are first divided into Personal and Impersonal accounts. Impersonal accounts, which do not relate to persons or organizations, are then further subdivided into Real accounts (for assets and properties like cash, buildings) and Nominal accounts (for incomes, expenses, gains, and losses like rent, sales). Therefore, the correct subdivision of an impersonal account is into real and nominal accounts.

Common mistake: Students often mistakenly choose an option that includes 'personal accounts', confusing the main classification (Personal vs. Impersonal) with the sub-classification of impersonal accounts.

To find the total cash paid, you use the cash book formula: Opening Balance + Total Receipts - Total Payments = Closing Balance. To find the missing payments figure, you rearrange the formula to be: Total Payments = Opening Balance + Total Receipts - Closing Balance. Therefore, the calculation is ₦12,202 + ₦40,000 - ₦15,300, which equals ₦36,902.

Common mistake: Students often make a mistake by incorrectly rearranging the formula, for example, by adding the closing balance to receipts and subtracting the opening balance (₦40,000 + ₦15,300 - ₦12,202), which results in the incorrect option D.

The Creditors Ledger Control Account, also known as the Purchases Ledger Control Account, summarizes all transactions with suppliers. When a business buys goods on credit, the total amount it owes to its suppliers (creditors) increases. Since creditors are a liability, an increase in a liability is recorded as a credit entry, which is why credit purchases are a credit item in this account.

Common mistake: Students often mistakenly choose 'Returns outwards' or 'Discount Received' because they are related to creditors, but they forget that these items reduce the amount owed and are therefore debit entries, not credit entries.

In a single entry system, a business does not keep a full set of double-entry records, making it impossible to prepare a trial balance. To determine the capital, a Statement of Affairs is prepared, which lists all the assets and liabilities of the business. The capital is then calculated as the difference between the total assets and total liabilities, based on the accounting equation (Assets - Liabilities = Capital).

Common mistake: Students might choose 'suspense account' because it is used to find missing figures, but this is incorrect as suspense accounts are used to correct errors within a double-entry system, not to ascertain capital in a single-entry system.

Not-for-profit organisations, like clubs and societies, generate income to cover their running costs. Members' subscriptions, fines, and donations are all primary sources of income for these organisations. A loan from a bank is not considered income because it is borrowed money that creates a liability and must be repaid, usually with interest.

Common mistake: Students often mistakenly include a bank loan as income, but it is actually a liability because the money has to be paid back.

First, calculate the total rent that should have been paid for the year, which is ₦200 per month multiplied by 12 months, giving ₦2,400. Clifford actually paid ₦2,800 during the year. A prepayment is the amount paid in advance, so we subtract the amount due for the year from the total amount paid: ₦2,800 - ₦2,400 = ₦400.

Common mistake: A common mistake is to simply choose the monthly rent figure (₦200) given in the question without calculating the total amount prepaid for the year.

When the owner takes goods from the business for personal use, it is called drawings. Drawings reduces the owner's capital in the business, and the accounting rule is to debit the drawings account to record this. Since goods (stock) are leaving the business, the stock asset is decreasing, and the rule is to credit the stock account to show this decrease. Therefore, the correct entry is to debit the drawings account and credit the stock account.

Common mistake: Students often mistakenly choose option A because they get confused and reverse the double entry rule, crediting drawings and debiting stock instead of the other way around.

To find the amount for sundry debtors after provision, you first need to calculate the value of the provision itself. Based on the correct answer, the provision rate is 7%, so the provision is 7% of the total debtors of ₦800,000, which gives ₦56,000. This provision amount is then subtracted from the total sundry debtors to get the net figure that will appear in the balance sheet: ₦800,000 - ₦56,000 = ₦744,000.

Common mistake: Students may mistakenly calculate the provision using a more common rate like 5% (₦40,000), leading them to incorrectly choose ₦760,000.

Purchase consideration is the price paid to buy a business, while net assets represent the actual value of that business (Assets minus Liabilities). When the price paid is lower than the value of the assets acquired, the buyer has made a gain. This gain is not from normal trading activities, so it is considered a capital profit and is credited to a capital reserve account.

Common mistake: Students might mistakenly choose 'revenue reserve' because they confuse this one-time gain from an acquisition with the regular profits made from day-to-day business operations.

Although the question asks for the entry in Saka's books, the correct option reflects the transaction from Alaka's perspective, where the entry is made. In Alaka's books, Saka is a creditor (a liability). To settle the debt, Alaka must debit Saka's account to cancel the liability. The 10% discount is an income for Alaka, known as 'discount received', which is recorded as a credit. Therefore, the entry involves debiting Saka's account and crediting the discount received account.

Common mistake: The most common mistake is to answer from Saka's perspective as stated in the question, which would involve 'discount allowed' (an expense) and would be recorded differently.

To find the yearly depreciation using the straight-line method, you use the formula: (Cost of Asset - Scrap Value) / Useful Life. The question gives a new scrap value of ₦15,000, which you must use. So, the calculation is (₦35,000 - ₦15,000) divided by 5 years, which equals ₦20,000 / 5, giving a final answer of ₦4,000 per year.

Common mistake: Students might mistakenly choose option B (₦7,000) by forgetting to subtract the scrap value from the cost before dividing by the asset's lifespan $(i.e., ₦35,000 / 5)$.