JAMB Accounting 2023 Past Questions & Answers

Branch accounts are prepared by the head office to monitor the activities and performance of its branches. The main goals are to determine the profit or loss of each branch, evaluate the branch manager's performance, and maintain control. Option A is the correct answer because allowing fraud and wastage is a negative outcome that good accounting systems, including branch accounts, are designed to prevent, not a reason for preparing them.

Common mistake: A common mistake is to ignore the word 'except' in the question and choose a correct reason for preparing branch accounts, such as option C, because it is a well-known purpose of branch accounting.

A three-column cash book is designed to record cash, bank, and discount transactions in one place. While a two-column cash book handles cash and bank, the third column is added specifically to record cash discounts (discount allowed and discount received). Therefore, the need to track cash discounts is the reason a business uses a three-column cash book.

Common mistake: Students often mistakenly choose 'trade discount', but trade discounts are deducted from the invoice price and are not recorded in the cash book at all.

In public sector accounting, the government cannot spend money until the budget (Appropriation Bill) is approved. However, at the start of a financial year, the budget might still be under review. A Provisional General Warrant is therefore issued to give temporary authority to spend money and keep government services running until the main budget is officially passed.

Common mistake: Students often mistakenly choose 'annual general warrant' because it sounds like the main authority, but this is only issued *after* the budget is approved, not before.

The Trading Account is prepared to find the gross profit by matching sales revenue against the direct costs of goods sold. Direct costs include opening stock, purchases, and carriage inwards. Carriage outward is the cost of delivering goods to customers, which is a selling and distribution expense, and is therefore charged to the Profit and Loss Account.

Common mistake: Students often confuse carriage inward with carriage outward, incorrectly assuming that all carriage expenses are treated the same way.

To find the sales for the year, you need to prepare a Sales Ledger Control Account. Start with the opening debtors' balance on the debit side (₦4,000). Then, add all items that decrease what debtors owe to the credit side: cash received (₦8,500), discount allowed (₦500), bad debts (₦350), and the closing balance (₦1,500). The total of the credit side is ₦10,850, so the debit side must also be ₦10,850, which means Sales = ₦10,850 - ₦4,000 = ₦6,850.

Common mistake: The most common mistake is including the 'Discount received' of ₦1,000 in the calculation, which is incorrect as it relates to creditors, not debtors.

The accounting equation is the foundation of the double-entry system, showing the relationship between what a business owns and what it owes. It states that a company's total Assets (resources it owns) are financed by either Liabilities (what it owes to outsiders) or Equity (what the owners have invested). Therefore, the correct formula is always Assets = Liabilities + Equity.

Common mistake: Students often get confused and mix up the elements, for instance by choosing option D, which incorrectly adds assets and liabilities together.

Dividends represent the portion of a company's after-tax profit that is paid out to its shareholders as a return on their investment. When a company is profitable, its board of directors can decide to distribute some of these earnings to the owners (shareholders). This distribution is known as a dividend.

Common mistake: Students might mistakenly choose 'bonus' because a bonus issue (free shares) is also a way to reward shareholders, but 'dividends' is the specific term for the portion of profit paid out, usually in cash.

When a partnership is dissolved, a special account called the Realization account is opened to record the sale of assets and settlement of liabilities. The costs incurred during this winding-up process, known as dissolution expenses, are treated as an expense of realization and are therefore debited to the Realization account. Since these expenses are paid with cash, the Cash account is credited to show the reduction in the partnership's money.

Common mistake: Students often mistakenly choose an option involving the Revaluation account, confusing the process of dissolving a partnership with the revaluation of assets that happens during the admission or retirement of a partner.

The question asks which option is not a source of income for a non-profit organization. Non-profit organizations like clubs and societies are not set up to make profit for owners. Their income comes from sources like donations, members' subscriptions or dues, and entrance fees. Ordinary shares, however, are issued by companies to raise capital from investors who become part-owners and expect a share of profits, which is not the purpose of a non-profit organization.

Common mistake: Students might mistakenly choose 'donations' or 'entrance fees', thinking they are not regular income, but they fail to recognize that issuing shares is a practice exclusive to profit-making companies.

A pay-in-slip is the official form filled out at the bank when depositing cash or cheques into an account. It serves as the source document, or evidence, for recording the deposit in the cash book. The bank stamps a copy of the slip and returns it to the depositor as proof of the transaction.

Common mistake: Students often mistakenly choose 'cheque book' because it is related to bank transactions, but it is used for making payments from the bank, not for depositing cash into it.

To find the net profit, you first need to calculate the gross profit. Gross profit is Sales minus the Cost of Goods Sold. The Cost of Goods Sold is Opening Stock (₦2,600) + Purchases (₦4,000) + Carriage Inwards (₦500), which totals ₦7,100. So, Gross Profit is ₦9,000 - ₦7,100 = ₦1,900. Finally, to get the Net Profit, you subtract other expenses like Carriage Outwards (₦500) from the Gross Profit, which results in ₦1,900 - ₦500 = ₦1,400.

Common mistake: A common mistake is to confuse Carriage Inwards (a cost of buying goods) with Carriage Outwards (a cost of selling goods), leading to an incorrect gross profit calculation.

Subscription in advance is income received by an organization, like a club, for a future accounting period. Because the organization has not yet earned this income by providing the service, it is considered an obligation or a debt owed. Since this obligation will be settled within the next twelve months, it is classified as a current liability in the balance sheet.

Common mistake: Students often mistakenly choose 'current asset' because they confuse subscription in advance (income received but not yet earned) with subscription in arrears (income earned but not yet received), which is a current asset.

To find the balance as per the bank statement, you must adjust the cash book balance for items the bank is not yet aware of. Start with the balance as per cash book (₦5,467), then subtract the uncredited cheques (₦4,410) because the bank has not yet recorded this deposit. Finally, add back the unpresented cheques (₦19,404) because this money has not actually left the bank account yet. The calculation is ₦5,467 - ₦4,410 + ₦19,404, which equals ₦20,461.

Common mistake: A common mistake is to reverse the adjustments by adding uncredited cheques and subtracting unpresented cheques, which is the incorrect procedure when starting from the cash book balance to find the bank statement balance.

In the books of the branch, the head office is treated like a supplier or creditor. When the branch receives goods, it is like making a purchase, so the Purchases account is debited to show an increase in goods available for sale. Since the head office is the one that supplied the goods, its account is credited, just as you would credit a regular supplier.

Common mistake: Students might mistakenly choose 'sales' because they associate the movement of goods with sales, but sales are recorded when goods are sold to customers, not when they are received from the head office.

In a partnership, the profit-sharing ratio is based on the agreement between the partners, which can be changed. This change often reflects a partner's contribution to the business. For example, if a partner brings in a valuable new skill (I), the partners might agree to give them a larger share of the profit. Also, when a partner reaches old age (III) and becomes less active, their share might be reduced to reflect their lower contribution.

Common mistake: Students often mistakenly choose option C, including 'health status', because poor health can affect a partner's contribution, but 'skill' and 'old age' are considered more standard and direct reasons for formally changing the profit-sharing agreement.

The Purchase Ledger Control Account, or Creditors Control Account, tracks the total amount owed to suppliers. The credit side shows increases in this liability. Credit purchases (IV) are the primary entry that increases the amount owed, so they are credited. Cash refunds from a supplier (I) are also credited to the supplier's account. A debit note issued (II) is for returns outwards, which reduces the amount owed and is therefore a debit entry, not a credit. Based on the available choices, the correct combination of credit items is cash refunds and purchases.

Common mistake: A common mistake is including 'Debit note issued' (II), forgetting that this represents goods returned to a supplier, which reduces the amount owed and is therefore a debit to the control account.

The correct option is C because the Receipts and Payments account is a summary of the cash book for a not-for-profit organisation. This means it records all cash payments made, including paying off debts (liabilities), and it is essentially a summary of the cash book. However, it does not distinguish between payments for daily running costs (revenue) and payments for long-term assets (capital). Subscriptions in arrears are not included because no cash has been received yet.

Common mistake: Students often mistakenly choose option B because they forget that the Receipts and Payments account only records actual cash received, not money that is still owed (in arrears).

The Consolidated Revenue Fund (CRF) is the main bank account of the government, as required by the Nigerian Constitution. All revenues collected by the government, like taxes and duties, are paid into this fund. All government expenditure for its day-to-day operations is then paid out from this same fund, making it the central account used to service all government activities.

Common mistake: Students often confuse the Consolidated Revenue Fund with a 'reserve' fund, but reserve funds are typically set aside for savings or specific future purposes, not for funding all general government operations.

When cash is paid into the bank, the physical cash held by the business reduces, so the cash balance decreases. This same money now reflects in the business's bank account, causing the bank balance to increase. This transaction is a classic example of a contra entry, where both the cash and bank columns of the cash book are affected.

Common mistake: Students sometimes get confused and choose option A, mixing up which account increases and which one decreases.

A credit note is a source document, which is the evidence used to record a transaction, not a book itself. Subsidiary books, like the sales day book and purchase day book, are the first books where transactions are formally recorded from source documents. The credit note is the proof used to make an entry in the return inward day book, but it is not the book.

Common mistake: Students often confuse the source document (credit note) with the subsidiary book where its details are recorded (return inward day book), thinking they are the same thing.

Salaries in arrears, also known as accrued salaries, are expenses that the business has incurred but has not yet paid for by the end of the accounting period. Because the business owes this money to its staff, it is a debt. Since salaries are typically paid within a short period (less than a year), this debt is classified as a current liability on the balance sheet.

Common mistake: Students might mistakenly choose 'current asset' because they confuse salaries in arrears (money owed by the business) with prepaid expenses (money paid in advance by the business), which are treated as assets.

A profit-making organization, specifically a limited liability company, raises its main capital by selling parts of its ownership to investors. These parts of ownership are called shares, and the money received from selling them forms the company's share capital. The other options like donations and subscriptions are sources of funds for not-for-profit organizations like clubs and charities.

Common mistake: Students often confuse the sources of funds for profit-making entities with those for not-for-profit organizations, incorrectly choosing options like 'donation' or 'subscription' which are used by clubs and charities.

For a regular business, the Profit and Loss Account is used to calculate profit or loss. However, for a non-profit organization like a club or a church, the goal is not to make profit. They prepare an Income and Expenditure Account, which serves the same purpose of matching all income against all expenses for a period to determine if they have a surplus (extra money) or a deficit (shortfall) for the year.

Common mistake: Students often mistakenly choose the Receipts and Payments Account because it is also prepared by non-profit organizations, but it is just a summary of cash transactions, not a measure of performance like the P&L account.

Goodwill is the amount paid to buy a business that is more than the value of its net assets. First, calculate the net assets by adding all assets and subtracting the liabilities: (₦190,000 + ₦170,000 + ₦60,000) - ₦50,000 = ₦370,000. Then, subtract this net asset value from the purchase price (purchase consideration) to find the goodwill: ₦400,000 - ₦370,000 = ₦30,000.

Common mistake: Students often mistakenly calculate net assets by only using fixed assets and ignoring current assets like stock, which leads to selecting option C (₦90,000).

Stock valuation is the process of calculating the value of goods left unsold at the end of an accounting period. Common methods for this include FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and the Base stock method. The 'Standard method' is not a recognized method for valuing stock; it is more closely related to standard costing, which is a different accounting technique used for planning and control. Therefore, the Standard method is the correct answer as it is not a stock valuation method.

Common mistake: Students might mistakenly choose 'Base method' because it is less commonly taught than FIFO and LIFO, making them think it is not a valid method.