JAMB Commerce 2000 Past Questions & Answers

Commerce is made up of two main parts: trade (the buying and selling of goods) and aids to trade (services that help trade happen). Merchandising, which is the process of selling goods, is made possible by these aids to trade. The correct option, D, lists banking for financing the goods, insurance for protecting them from risks, and transportation for moving them from place to place, which are all essential services within the scope of commerce.

Common mistake: Students might mistakenly choose option B because it includes 'warehousing', but they should remember that 'production' is an industrial activity, not a commercial one that facilitates trade.

Production in Commerce is the creation of utility, which means making goods and services useful to consumers. This process is not just about manufacturing (form utility), but also includes getting the goods to the right place (place utility) and making them available at the right time (time utility). Option B is the most complete answer because it covers changing the form of goods, moving them, and making them available when needed.

Common mistake: Students often mistakenly choose option C because they limit the definition of production to just manufacturing, forgetting that it also includes the distribution activities that create place and time utility.

Division of labour is the process of breaking down a production task into smaller, specialized jobs for different workers. When workers specialize in one task, they become much faster and more skilled, which directly leads to a large increase in the total quantity of goods produced. This is the most significant and immediate result of applying division of labour.

Common mistake: Students often mistakenly choose option D because division of labour does lead to cost efficiency, but this efficiency is a secondary benefit that results from the primary effect, which is the increased quantity of output.

The abbreviation 'Plc' stands for Public Limited Company. A key feature of this type of company is that it can raise capital by selling its shares to the general public. These shares are then listed and traded on a formal market called the stock exchange, making them publicly available for anyone to buy or sell.

Common mistake: Students might mistakenly choose option A, thinking that shares can be bought directly from the company's office, but for a Plc, shares are formally traded through stockbrokers on the stock exchange.

The number of partners is a merit because having more people allows for more capital to be raised and a wider range of skills to be combined. However, it is also a demerit because a large number of partners can lead to disagreements, conflicts, and slower decision-making. Therefore, the number of partners can be both an advantage and a disadvantage depending on the situation.

Common mistake: Students might mistakenly choose 'Its unlimited nature' because it's a key feature of partnerships, but this is a clear demerit as it puts the partners' personal assets at risk.

A merger is when two companies agree to come together to form a new, single company, meaning both original businesses lose their independence. An acquisition is when one company buys another, so the purchased company loses its independence to the buyer. The key difference lies in how the businesses combine and the resulting power structure, which can be seen as a difference in the 'measure of independence' of the combining units.

Common mistake: Students often mistakenly choose 'trust and cartel' because the difference in independence between them is very clear, as cartels are independent firms while trusts are not.

Government policies are part of the external business environment that influences how businesses operate. The main reason the government creates these rules is not just to help individual companies, but to manage and improve the country's entire economy for the benefit of all citizens. While things like business expansion or spreading out jobs are good outcomes, they are all part of the bigger plan to achieve overall economic health and growth.

Common mistake: Students often mistakenly choose option C because creating an even spread of employment is a well-known specific goal of government policy, but it is just one aspect of the broader, primary objective of improving the general economy.

When a company is liquidated, its assets are sold to pay off its debts and obligations in a specific order. After all creditors, debenture holders, and preference shareholders have been paid, any remaining money or assets belong to the ordinary shareholders. This is because they are the true owners of the company who bear the highest risk, and their reward comes only after all other financial claims are settled, making them the residual owners.

Common mistake: Students often mistakenly choose debenture holders because they are a major source of capital, but they are lenders (creditors) to the company, not owners, and must be paid back before any shareholders.

A bank overdraft is a short-term loan that a business must repay within one year. In accounting, any debt that is due within a year is classified as a current liability. Therefore, a bank overdraft is considered a current liability on a company's balance sheet, representing a debt the business expects to settle in its normal operating cycle.

Common mistake: Students often choose option A because while a bank overdraft does result in an overdrawn account, this is a description of the situation, not its correct financial classification as a current liability.

Paid-up share capital is the actual amount of money that shareholders have paid to the company for the shares they were issued. The balance sheet is a statement of a company's financial position, reflecting the actual assets and liabilities. Therefore, only the capital that has been truly received (paid-up) is included in the calculation of the balance sheet total as part of shareholders' equity.

Common mistake: Students often mistakenly choose 'authorized share capital' because it represents the maximum value of shares a company can issue, but this is just a potential amount, not the actual money the company has received.