JAMB Accounting 2020 Past Questions & Answers

A partnership is a legal agreement between specific individuals, and its existence is tied to the composition of its members. When a new partner is admitted, the original agreement among the old partners becomes invalid and must be ended, which is known as dissolution. A new partnership agreement is then created to include the new person, legally forming a new partnership.

Common mistake: Students might confuse major operational changes like changing the office location with fundamental changes to the partnership agreement, but only events affecting the partners themselves (like admission, retirement, or death) cause a dissolution.

Source documents are the original papers that provide evidence that a business transaction has taken place. A sales invoice is proof of goods sold on credit, while a debit note is used to inform a customer of an amount owed, for example, due to an undercharge. Both are original records used to enter transactions into the books of account, making them source documents.

Common mistake: Students often mistakenly choose options C or D because they confuse books of original entry, like the cashbook, with source documents, which are the initial evidence of the transaction.

This question tests the 'business entity concept', which is a fundamental principle in accounting. This concept states that for accounting purposes, the business is treated as a completely separate entity from its owner(s). This is why an owner's personal transactions must be kept separate from the business's records, and any money taken by the owner for personal use is recorded as drawings.

Common mistake: Students often mistakenly choose 'the same person' because in a small business like a sole proprietorship, the owner and the business seem like one entity, but they forget that accounting rules require them to be treated separately.

To prepare a trial balance, you must separate accounts into debit and credit balances based on their normal balance. Assets (Bank, Typewriter) and expenses (Purchases, Rent, Stationery) have debit balances, while capital and income (Sales) have credit balances. The total of the debit items (₦59,410 + ₦20,000 + ₦2,500 + ₦90 + ₦6,500) is ₦88,500, which must equal the total of the credit items (₦50,000 + ₦38,500).

Common mistake: Students often make the mistake of debiting the Capital account instead of crediting it, which leads them to incorrectly calculate the debit total as ₦138,500 (Option A).

To find the closing stock, you need to use the formula for the cost of goods sold. The formula is: Cost of Goods Sold = Opening Stock + Purchases + Carriage Inwards - Closing Stock. By rearranging the formula to find closing stock, we get: Closing Stock = (Opening Stock + Purchases + Carriage Inwards) - Cost of Goods Sold. Substituting the figures gives: (₦98,800 + ₦706,000 + ₦17,500) - ₦740,700 = ₦822,300 - ₦740,700 = ₦81,600.

Common mistake: The most common mistake is getting confused by the extra information like net profit and capital balances, which are not needed to calculate the closing stock using the cost of goods sold formula.

To find the Gross Profit, you must work backwards from the Net Profit. The formula is: Net Profit = Gross Profit - Expenses + Other Income. Rearranging this, Gross Profit = Net Profit + Expenses - Other Income. Using the figures provided, this is ₦121,600 (Net Profit) + ₦526,000 (Expenses) - ₦9,650 (Discount Received), which equals ₦637,950.

Common mistake: A common mistake is to add the expenses to the net profit but forget to subtract the 'other income' (discount received), which would incorrectly result in ₦647,600 (Option C).

A trial balance is designed to check if total debits equal total credits. In the correct option, sales of ₦3000 (a credit entry) and purchases of ₦2000 (a debit entry) were omitted. Since the value of the omitted credit (₦3000) is different from the value of the omitted debit (₦2000), the two sides of the trial balance will not be equal, thus affecting the total.

Common mistake: Students often mistakenly choose option D, because while it is an error of omission, the equal omission of a debit (purchases ₦2000) and a credit (sales ₦2000) means the trial balance will still balance, hiding the error.

First, calculate the total price of the rice, which is 10 bags multiplied by N500, giving N5,000. A trade discount is deducted from the list price but is not recorded in the accounts, so we find 5% of N5,000 (N250) and subtract it to get the invoice price of N4,750. The cash discount, which is the 'discount received' recorded in the cash book, is then calculated on this new price. Therefore, 12% of N4,750 gives N570, which is the correct amount.

Common mistake: Students often make the mistake of calculating the cash discount on the original total price (N5,000) instead of first deducting the trade discount to get the correct invoice price (N4,750).

The cost of goods sold is calculated using the formula: Opening Stock + Purchases + Direct Costs - Closing Stock. In this question, the wages of bakery staff is a direct cost of production and must be included in the calculation. Therefore, the cost of goods sold is ₦800 (Opening Stock) + ₦2,450 (Purchases) + ₦675 (Wages) - ₦940 (Closing Stock), which equals ₦2,985.

Common mistake: Students often calculate the cost of goods available for sale (Opening Stock + Purchases + Direct Costs) but forget to subtract the closing stock, leading to an incorrect higher value.

A sales ledger control account summarises all the individual customer (debtor) accounts and normally has a debit balance. A provision for bad debts is an amount set aside for debts that are not expected to be paid, which reduces the total value of the debtors. To reduce an asset account like the sales ledger control account, you must make a credit entry, which is why the provision is found on the credit side.

Common mistake: Students often mistakenly choose the debit side, confusing the entry in the control account with the debit entry made in the profit and loss account to record the expense.