2016 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

This is a question on bank reconciliation. To solve, adjust the cashbook balance by subtracting bank charges and direct debit and adding the unpresented cheques. Then, subtract the uncredited cheques from this result.

Capital is determined by subtracting liabilities (loan and creditor) from assets. Capital = Assets – Liabilities = 190,500 – (14,000 + 8,000) = 168,500.

The journal proper helps in recording irregular or non-recurring transactions that cannot be recorded in any other books of original entry. It prevents fraud as it records corrections, opening entries, and adjustments.

Gross profit is calculated as sales minus cost of goods sold (COGS). For department K, COGS = Opening stock + Purchases – Closing stock = 2,500 + 120,000 – 3,000 = #119,500. Therefore, Gross Profit = Sales – COGS = 180,000 – 119,500 = #60,500.

Accounting provides financial information that aids in business decision-making by analyzing the company’s performance and financial position. It helps managers make informed decisions on resource allocation.

The gross profit margin shows the efficiency of a company’s sales relative to the cost of goods sold, indicating how much profit is made after covering the cost of production.

Accounting ratios are used to assess the performance and financial health of a business by comparing financial statement data. They provide insights into profitability, liquidity, and efficiency.

Accrued expenses are a liability that must be paid in future periods and are included in the balance sheet of a company. Other options are operating expenses shown in the income statement.

A bank statement gives a summary of all transactions, including deposits, withdrawals, and other bank-related activities. Cheque book records transactions from the company’s bank account.

Share premium represents the amount received by a company over and above the par value of its shares. It is treated as a capital reserve, not retained earnings.

Overstating revenue expenditure leads to an understatement of net profit because the expenses are inflated, thus reducing the reported profit.

Credit and debit notes are used when there are adjustments in transactions, like when a buyer is overcharged or undercharged, necessitating corrections.

Adjusted capital is calculated by adding the additional capital to the initial capital and subtracting drawings and net loss. Adjusted capital = 35,000 + 10,000 – 3,500 – 2,500 = 39,000.

A receipt is a document that acknowledges the receipt of payment. It serves as proof that a transaction has been completed.

Total income is calculated by adding all income sources: Ticket sales + Donations + Subscription + Sales of new tools = 4,000 + 3,000 + 6,500 + 510 = #13,500.

Single-entry accounting involves recording only personal accounts (i.e., cash and creditors), as opposed to double-entry accounting, which tracks both debit and credit transactions.

Profit = (Closing assets – Opening assets) – Liabilities. Closing assets = 8,800 + 1,600 + 1,000 + 3,000 = 14,400. Opening assets = 13,000. Profit = 14,400 – 13,000 – 1,000 = 2,400.

Amount received on the final call is determined by multiplying the number of shares by the second call value: 450,000 shares × 55k = #247,500.

When goods are sent at cost plus mark-up, the branch is expected to sell the goods at a price that covers the cost and adds a profit margin, but not necessarily at the transfer price.

The income and expenditure account follows an accrual basis, accounting for income and expenses in the period they occur, while the receipts and payments account records cash transactions on a cash basis.

The main sources of revenue for state and local governments are taxes and levies collected within their jurisdiction. These funds are used to finance public services.

The imprest system ensures a fixed amount is given to the petty cashier, who is reimbursed for actual expenses, ensuring control over petty cash usage.

Under the fixed capital method, each partner’s capital account remains fixed, and profits or losses are credited to the current account of each partner.

A cash discount is offered to debtors as an incentive to pay their bills early, typically a percentage of the total amount due.

Capital expenditure includes the costs of purchasing fixed assets and preparing them for use. These expenses are recorded as assets rather than expenses.

Impersonal accounts are divided into real accounts (for assets) and nominal accounts (for income and expenses).

Cash paid is calculated as the change in cash balance plus the cash received: Cash paid = (Closing balance – Opening balance) + Cash received = (15,300 – 12,202) + 40,000 = 43,098.

The cashbook contains records of all cash and cheque transactions, including those from customers, which are summarized in the control account.

Returns outwards represent a reduction in the amount owed to creditors and are therefore recorded as a credit in the creditors ledger control account.

In a single-entry system, the statement of affairs is used to calculate capital by comparing assets with liabilities, similar to a balance sheet.

A not-for-profit organization earns income from subscriptions, fines, and donations. Loans from banks are liabilities, not income.

Prepayment is calculated by subtracting the actual amount paid from the total amount due for the period. Prepayment = #200 × 12 months – #2,800 = #300.

Purchases are typically determined from the purchases day book or the creditors control account.

When stock is withdrawn for personal use, the drawings account is debited, and the stock account is credited to reflect the reduction in inventory.

The provision for bad debts reduces the total amount of sundry debtors. Subtracting the provision from #800,000 gives the net amount of sundry debtors.

The receipts and payments account includes cash transactions, such as accrued expenses and subscriptions due but not yet received, which will be recorded in the next period.

A capital reserve arises when the purchase consideration (price paid) for an asset is less than its net asset value, indicating a favorable acquisition.

A supplementary estimate is a process used to approve additional government expenditure beyond the initial budget, usually due to unforeseen circumstances.

Electronic funds transfer (EFT) allows businesses and individuals to send and receive payments electronically via bank systems or cards.

The accounting cycle involves steps like journalizing, posting, and preparing financial statements. Determining net worth is not part of this cycle.