2018 JAMB ACCOUNTING PAST QUESTIONS AND ANSWERS

Capital employed represents the total amount of long-term capital used in a business. It is calculated as total assets minus current liabilities (22,000 – 7,000 = 15,000). This matches the capital figure shown in equity. The other options are incorrect as they represent different elements: 7,000 is payables, 10,000 is plant value, and 22,000 is total assets/liabilities.

Advertising expenses are directly related to selling and promoting products, making them a sales department responsibility. Production deals with manufacturing, purchasing with procurement, and administration with general management. The sales department manages marketing and advertising activities to drive revenue.

The acid test ratio = (Current Assets – Stock) ÷ Current Liabilities. Current Assets (excluding stock) = Debtors + Cash = 14,000. Current Liabilities = Creditors + Accrued wages = 14,000. Therefore, 14,000/14,000 = 1:1. The other ratios don’t reflect the correct calculation.

When goods are transferred at cost plus markup, branches must sell above the transfer price to ensure profitability. The branch can’t sell below the transfer price as this would result in a loss. While they have some pricing flexibility, they must maintain a minimum price level equal to the transfer price plus required profit margin.

The Auditor General is responsible for ensuring public expenditures comply with approved guidelines. This role involves independent oversight of government spending and ensuring accountability. The Accountant General manages accounts, Finance Minister sets policy, and Permanent Secretary handles administrative duties.

Cost of goods available = Opening Stock + Net Purchases + Carriage Inwards. Net Purchases = 40,000 – 2,000 = 38,000. Therefore, 32,000 + 38,000 + 1,000 = 71,000. Cost of goods available must include all costs related to getting goods ready for sale.

Cost of Goods Sold = Cost of Goods Available – Closing Stock. From previous calculation, Cost of Goods Available is 71,000. Closing stock is 9,000. Therefore, 71,000 – 9,000 = 62,000.

Calls in arrears represents unpaid share capital that was due for payment. This differs from calls in advance (prepaid calls), forfeiture (cancellation of shares), and regular shares. It represents a debt owed by shareholders to the company.

When goodwill is not retained, it should be debited to partners’ capital accounts and credited to goodwill account, effectively writing it off. This ensures the goodwill value is distributed among existing partners before being removed from the books.

To find the new balance sheet total, adjust for all transactions: Original total (40,000) + Purchases (15,000) + Stock (10,000) – Rent (12,000) – Sales boy payment (500) – Sales (8,200) = 48,500. This reflects all changes in assets and liabilities.

When goods are sent to a branch, the head office debits the branch current account and credits goods sent to branch account. This entry ensures proper tracking of inventory movement between head office and branches while maintaining accurate branch accounts.

When purchase price exceeds net assets, the excess represents goodwill – an intangible asset reflecting the business’s established reputation and customer base. This amount is debited to goodwill account to balance the books and recognize the premium paid above net asset value.

The gross profit from branch adjustment account is transferred to the branch profit and loss account. This follows the accounting principle of matching revenues with expenses in the same period to determine net profit or loss.

When Ade (3 parts) retires, their share is divided between Tony (2 parts) and Rose (1 part) in their existing ratio of 2:1. Tony gets 2/3 of Ade’s share and Rose gets 1/3, resulting in a new ratio of 2:1.

Calls in advance represent money received early from shareholders for future call payments. This creates a liability for the company until the call is actually due, hence it’s treated as a current liability in the balance sheet.

Adjustments ensure the matching principle is followed by recording income earned and expenses incurred in the correct accounting period, regardless of when cash changes hands. This provides accurate financial information for decision-making.

Single branch is not a recognized classification of branches. Branches are typically categorized as dependent (controlled by head office), independent (autonomous), or foreign (overseas operations). Single branch is not a standard classification term.

Remittance in transit appears as a debit entry in branch books because the branch has sent money but the head office hasn’t received it yet. This ensures proper tracking of funds in transit between branch and head office.

Partners’ drawings are not deducted when calculating partnership profit/loss. Drawings represent distributions of already-determined profits. All other operating expenses, including interest and salaries, are deducted to arrive at net profit.

Calculate: Opening cash (28,500) – Rent (12,000) – Purchases (15,000) – Sales boy payment (500) + Sales (8,200) = 9,200. This represents the net effect of all cash transactions on the original balance.

Goodwill represents the payment made by new partners to compensate existing partners for the established reputation and earning capacity of the business. It differs from bonus (extra payment), premium (additional amount), or commission (sales-based payment).

Cost of Sales = Opening Stock + Goods Sent – Returns – Closing Stock = 400 + 8000 – 340 – 720 = 7340. Sales = 9160. Profit = 9160 – 7340 = 1820

Selling price method provides better control as branches can’t alter prices, making it easier to track performance and detect discrepancies. It provides a standardized basis for monitoring branch operations and sales.

Branches must sell above transfer price (cost plus markup) to ensure profitability. While they have pricing flexibility, they cannot go below the transfer price as this would result in a loss.

Peak pricing is not a recognized transfer pricing method. The standard methods are cost-based, market-based, and dual pricing systems. Peak pricing relates to demand-based pricing rather than internal transfers.

Winding up involves the systematic process of completing unfinished business, collecting assets, paying debts, and preparing for final distribution. This differs from formation (starting), dissolution (ending agreement), or termination (final end).

Adjusted balance = Overdraft (4000) + Bank charges (300) = 4300 DR. Adding unpresented cheques or subtracting uncredited ones doesn’t affect cashbook balance – these are bank statement adjustments.

Invoice price is used for branch stock adjustment to maintain consistent valuation and facilitate control. This helps track branch inventory accurately and calculate proper profit figures.

Partnership deed promotes mutual understanding by clearly defining rights, duties, and responsibilities of partners. It provides a legal framework for partnership operations and prevents potential disputes.

Cost price method is most suitable for goods sold at specific prices, ensuring consistent pricing across locations. It’s less suitable for perishable goods or items with varying profit margins.

The cost of goods credited to head office trading account = Goods sent – Returns = 8000 – 340 = 7660. This represents the net value of goods transferred to the branch that the head office can recognize in its trading account.

Fixed assets are carried forward in the closing balance sheet at their brought forward values, maintaining continuity in asset recording despite incomplete records. This ensures proper asset tracking across accounting periods.

Interest calculation requires considering time: 3000(11/12) + 2000(9/12) + 4000(6/12) + 1500(3/12) + 2500(2/12) = 2750 + 1500 + 2000 + 375 + 417 = 7042 × 10% = 705

Inventory adjustments belong in the trading account, not the profit and loss account. Accruals, depreciation, and subscriptions are legitimate P&L adjustments to match expenses with the accounting period.

For Dept P: Sales(6000) – Cost of Sales(2000 + 2500 – 1500 + 300) – Expenses(200) = 6000 – 3300 – 200 = 2500. The transfer from Q to P (300) increases P’s cost of sales.

Without a deed, the Partnership Act specifies no salaries for partners, equal profit/loss sharing, no interest on drawings, and standard interest on loans. These default provisions ensure fair treatment.

A deed is the formal document that establishes partnership rules and regulations. Unlike articles (companies) or constitutions (organizations), deeds specifically govern partnerships.

Original partners reduce their shares proportionally. If Khadija takes 1/5, remaining 4/5 split equally: Sule 2/5, Ahmed 2/5, Khadija 1/5. This maintains original partners’ relative proportions.

Cost plus markup provides optimal control while allowing profit margin at branch level. Pure cost price doesn’t show branch efficiency, while selling price reduces branch flexibility.

Cash in transit and debtors often cause discrepancies as timing differences occur between recording at branch and head office. This affects both cash remittances and customer payments.

Departmentalization reveals individual division performance, enabling managers to assess efficiency and profitability of each department separately. This granular view is more valuable than overall firm performance or unit costs alone for decision-making.

New partners must compensate existing partners for the established reputation and earning capacity they’ve built in the market. This payment recognizes the value of the existing business beyond its tangible assets.

With floor space ratio 3:2:5 (total 10 parts), clothing department occupies 5/10 of space. Therefore: ₦3500 × 5/10 = ₦1750. This allocation reflects the department’s proportional space usage.

Space occupied is the most logical basis for rent allocation as it directly relates to how much of the building each department uses. Other bases like employees or stock value don’t reflect actual space usage.

For Joy: ₦100(9/12) + ₦240(6/12) = ₦75 + ₦120 = ₦195 × 5% = ₦9.75. This represents the interest charge on drawings based on time period held.

Factory overhead is a conversion cost as it represents expenses incurred in converting raw materials into finished goods. Unlike materials (input cost) or purchases, overhead contributes to transformation process.

Starting balance (50,000) – Total drawings (13,000) – Interest on drawings (705) = 36,295 Dr. This reflects all changes to the current account during the period.

Branch debits P&L and credits head office account to recognize expenses paid on its behalf. This ensures proper expense recording while acknowledging the debt to head office.

Start with cashbook (13,560) + dividend (2,000) – charges (280) – standing order (600) + unpresented (5,120) – uncredited (2,300) = 17,500. Each item affects the bank balance differently.

LILA is not a recognized inventory costing method. Standard methods are FIFO (First-In-First-Out), LIFO (Last-In-First-Out), and Average Cost. LILA is a fictitious option.