2014 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

Bookkeeping focuses on recording financial transactions, while accounting involves interpreting the recorded data. Bookkeeping handles the raw data entry, and accounting analyzes this data to create reports, which help in decision-making. Option C is incorrect because interpretation is a role of accounting, not bookkeeping.

The realization concept suggests that revenue is recognized when a transaction is finalized, regardless of when cash is received. Other options like matching refer to expenses and revenues being matched in the same period, while going concern assumes continuity of the business.

The error in Sulieman’s account can be corrected by debiting his account and crediting the bank account, where the transaction should have been reflected. Other options such as suspense account would not be applicable here.

The cash book is used to record cash transactions, and since the payment for the vehicles was made in cash, the corresponding credit would be made there. Sales and purchases day books are used for credit transactions.

An error of omission occurs when a transaction is entirely omitted from the records, thus affecting the accuracy of the trial balance. Errors of commission or transposition usually result in discrepancies that still balance out in the trial balance.

Ledgers are generally classified into personal, general, and private categories. Sales and purchases accounts are part of the ledger but are not primary categories.

The ledger and subsidiary books are where transactions from source documents are recorded. Prepayments and accruals are recorded in these books but are not themselves considered source documents.

When a cheque is issued, it reduces the business’s cash account (credit) and records the payment to the recipient (debit). The drawer is the issuer of the cheque, so debiting it would be incorrect.

The discount offered is 12.5% on #22,800, resulting in a deduction of #2,850. Therefore, the cash amount to be credited is #19,950. Other options result in incorrect amounts as they do not apply the correct discount.

The imprest system ensures proper accountability as each expense must be justified, and the petty cash is replenished up to the imprest amount regularly. This system also reduces the workload of the chief cashier.

The petty cash book records transactions on both debit and credit sides. Expenses reduce the cash balance (credit), while replenishments increase it (debit). Options A and B are incorrect because both sides are used.

The imprest system ensures branches account for all expenses before they receive additional cash. Credit sales and separate accountants may help manage finances, but they do not prevent fraud effectively.

Cash sales and cash receipts are recorded on the debit side as they increase the cash balance, while cash payments are on the credit side. Cash purchases are not included on the debit side.

Direct deposits made into the bank account are sometimes not immediately recorded in the company’s cash book, but they are credited in the bank statement. Standing orders and other transactions don’t fit this scenario.

The trading account’s purpose is to calculate the gross profit by subtracting the cost of goods sold from sales revenue. Net profit is shown in the profit and loss account, not the trading account.

A 5% discount on #9,000 results in a reduction of #450, so the amount to be paid is #8,550. Other options either don’t apply the discount or are miscalculated.

Depreciation is calculated by dividing the depreciable amount (#600,000 – #50,000 = #550,000) by the useful life (5 years). This gives #110,000 per year. For two years, depreciation is #220,000.

The value of current assets is calculated by adding stock (#4,500), cash (#4,956), prepaid expenses (#290), and debtors (#905), which totals #10,651. Other figures include incorrect additions.

The current liabilities are creditors (#7,940) and accrual expenses (#323), which together amount to #8,263. Prepaid expenses reduce liabilities, not increase them.

Gross profit is calculated as sales minus the cost of goods sold. Net profit, on the other hand, deducts other expenses such as operating costs.

Under FIFO, the oldest goods are sold first. For 300 books sold, the cost is #1,000 per book, totaling #300,000. The remaining goods are valued using the most recent cost price.

Under LIFO, the most recent purchases are sold first. Totaling the cost of purchases and sales gives #1,160,500 for goods available. Other figures miscalculate or apply incorrect methods.

Control accounts help in locating errors in the various accounts by summarizing ledger balances. They do not affect asset distribution or bank transactions directly.

The cash book serves as both a day book and ledger, recording cash transactions and summarizing them in the accounts. Other books have specific functions like recording sales or returns.

The sales ledger control account is derived from the total debtors’ account, which represents all the amounts owed to the business. Other options are unrelated to this account.

Subscription in arrears represents money owed to the club and is therefore classified as a current asset. Other options misclassify this item.

The total subscription is calculated by adding the accrued subscription (#18,900) and the received (#38,570), minus any received in advance (#16,400). The correct amount is #41,070.

Subscriptions received in advance are considered liabilities. The amount received in advance is #16,400, which will be shown in the balance sheet.

The value of stock is determined by the formula: stock (opening) + purchases – sales returns + gross profit – closing stock. The answer is #12,500.

When no specific basis of apportionment exists, expenses are apportioned equally across departments. Profit basis or material availability is not a common apportionment method.

Carriage outwards is apportioned based on turnover, as it relates to the cost of selling goods. Carriage inwards and returns do not depend on turnover.

If the selling price is #100,000 and includes a 25% mark-up, the cost of the goods is #80,000. Other options either do not apply the correct mark-up or are incorrectly calculated.

The cost price is #80,000, based on the mark-up applied in the previous question. Other options reflect incorrect calculations of the mark-up.

The loading is written off by debiting the consignment account and crediting the goods sent to the branch. No returns or extra expenses are involved.

Control accounts ensure that totals match and help locate discrepancies in ledgers. They do not influence managerial decisions directly.

Errors of omission do affect the trial balance, as a missing entry can cause an imbalance. Other errors mentioned typically don’t cause imbalance.

A major characteristic of a limited liability company is that the owners are only liable up to the amount of their investment, protecting personal assets.

Loans from family members are not a typical source of capital for a limited liability company, unlike retained profits or equity shares.

The management prepares budgets to ensure effective planning and control. Shareholders don’t typically have direct involvement in budget preparation.

Double-entry bookkeeping involves recording each transaction twice, once as a debit and once as a credit, to maintain balance in the accounts.