2011 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

Accounting evolved as a tool for financial record-keeping. Option B is correct because accounting is a product of financial development, reflecting the need for better systems to manage economic transactions.

The trial balance categorizes accounts to ensure mathematical accuracy. Option C is correct because income is credited, reflecting earnings, and liabilities are debited to show obligations.

Double entry guarantees that every transaction is recorded with equal debits and credits, ensuring mathematical accuracy in the trial balance.

Balancing accounts involves deducting, adding, and recording differences methodically. Option D lists the correct order: deduct smaller side, add up both sides, and take the difference to balance.

Adding all given values shows the trial balance totals N4,250. The trial balance sums up all debits and credits for accuracy.

A journal records transactions in chronological order. Option A is correct as journals use six columns for comprehensive record-keeping, including dates, particulars, and amounts.

Suspense accounts temporarily hold discrepancies in trial balances, ensuring all entries align before final adjustments.

The trade discount of 10% reduces the initial price to N360. A 15% cash discount on N360 reduces it further to N306.

The trade discount reduces the price to N360. A 15% cash discount on this figure equals N54.

Timing discrepancies occur because bank statements and cash books are updated at different times. This includes cheques issued but not yet cleared.

Cheque clearing is the process by which banks settle payments from one account to another.

Interest for overdrawn balances is added to the adjusted cash book balance to accurately reflect the account.

Current liabilities are short-term obligations. Here, creditors (iii) and bank loans (v) are current liabilities.

Current assets include items like cash or goods readily convertible to cash. Here, stock (i) and cash at bank (iv) are current assets.

Administrative expenses relate to the management of the firm. Taxes are considered administrative costs.

FIFO (First-In, First-Out) results in higher profits during declining prices because older, cheaper inventory is sold first.

Sales revenue is recorded on the credit side of a trading account as it represents income earned by the business.

Total units purchased were 600, and units sold were 460. The remaining stock as of July 30 is 140 units.

Using FIFO, the first 160 units sold are valued at N95 each. The remaining 40 units are from the N90 stock.

Real accounts pertain to tangible or intangible assets. Plants and machinery are physical, tangible assets, making them real accounts.

Control accounting ensures that transactions recorded in books of original entry are accurate and assist in reconciliation.

Gross profit margin is 20% of sales (N10,600). Therefore, cost of goods sold is N10,600 – N2,120 (gross profit), equaling N8,480.

Rent (N200) and depreciation (N500) are deducted from gross profit (N2,120), leaving a net profit of N1,420.

Prime costs include direct materials, labor, and expenses that can be directly attributed to goods being produced.

Indirect costs, such as administrative expenses or factory maintenance, support the production process but are not part of the product itself.

Work-in-progress refers to goods partially finished but not yet ready for sale.

Not-for-profit organizations are primarily formed to improve the welfare of members, focusing on communal or charitable objectives rather than generating profit.

Subscriptions paid in advance represent future income and are treated as liabilities on the balance sheet of a club until earned.

In not-for-profit organizations, the capital is typically called the accumulated fund, reflecting funds accumulated over time for their activities.

Departmental accounts are prepared to determine the contribution of each department to the overall profitability, helping in performance analysis.

In partnership liquidation, a realization account is used to record the sale of assets and settlement of liabilities.

The cost method is applied when goods are sent to the branch without invoices or source documents, often used for perishable goods or when prices cannot be predetermined.

Goods transferred from head office to branch are debited to the branch stock account and credited to the goods sent to branch account.

When goods are transferred to a branch, two accounts are typically used: the branch stock account and the goods sent to branch account.

Goods invoiced to a branch can be sent using various pricing methods such as cost price, selling price, or a fixed percentage of selling price.

The partnership deed outlines the agreement between partners, including the profit and loss sharing ratio, which is the primary aspect of their agreement.

Kemi’s capital is N10,000, and the interest rate is 5%. Therefore, Kemi’s interest on capital is N10,000 * 5% = N500.

Keme’s drawings are N2,000, and the interest rate is 10%. Therefore, the interest on Keme’s drawings is N2,000 * 10% = N200.

A revaluation account is used when a new partner is admitted to a partnership to reflect changes in asset values and the adjustment of goodwill.

Goodwill in a partnership is typically determined based on the capital contributions of the partners, among other factors like business reputation and customer relations.

The founders of a company are known as promoters, as they are responsible for its formation and initial setup.

All government receipts are paid into the Consolidated Revenue Fund, which is the main fund for managing the government’s income.

Petroleum income tax is the largest revenue earner for Nigeria, as oil is a major part of the country’s economy.

The share premium is the difference between the market value and the nominal value of the shares. In this case, it is (N5.50 – N2.00) * 120,000 = N420,000.

The Accountant-General is a signatory to the federal government account, overseeing government financial management.

The chief accounting officer of a local government is the Treasurer, who manages financial records and transactions.

The Minister of Finance signs the general warrant for the release of money from the consolidated revenue fund.

Average stock is typically calculated by taking the sum of the opening and closing stock and dividing by two. This question requires stock values to be provided for a precise answer.