2019 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

Transactions are recorded in the ledger following the Double Entry Principle, which states that every transaction affects at least two accounts – one debit and one credit. While accounting concepts, source documents, and data collection are important, the fundamental rule governing how transactions are posted is the double entry principle.

When rent is paid by cheque, the rent expense account is debited (increased) as it represents an expense, and the bank account is credited (decreased) as money is leaving the bank account. The other options are incorrect as they either reverse the entries or involve incorrect accounts.

A ledger is specifically designed to record transactions of one particular type or class. While cash books and petty cash books are specific types of ledgers, they only record cash transactions. The double entry system is the overall method, not a specific record.

The primary advantage of double entry is that it makes preparing final accounts easier by ensuring all transactions are properly balanced and recorded. The other options don’t describe advantages specific to the double entry system.

Accounts are fundamentally classified into personal (relating to persons/entities) and impersonal (relating to assets, expenses, incomes) accounts. This is the most basic and comprehensive classification. Other options represent transaction types or specific account categories rather than fundamental classifications.

When goods are purchased on credit, the Purchase Account is debited and the supplier’s account (Tosanwumi International) is credited. This follows the principle of increasing assets (purchases) and increasing liabilities (amount owed to supplier).

Wages are typically charged to the trading account as they are direct costs associated with trading activities. The profit and loss account handles indirect expenses, while the balance sheet shows financial position, not expenses.

To calculate Gross Profit percentage: (Gross Profit/Sales) × 100 = (63,000/233,000) × 100 = 27%. This represents the profit margin before deducting operating expenses.

Net Profit percentage of expenses = (Net Profit/Total Expenses) × 100 = (25,000/38,000) × 100 = 65.7%. This shows how efficiently expenses are converted into profit.

To find sales: First calculate cost of goods sold (Opening Stock + Purchases – Closing Stock = ₦55,000), then add the margin (33⅓% of cost price = ₦27,500) to get sales of ₦82,500.

The paid-up capital is calculated as total issued shares (100,000) minus unpaid shares (₦20,000), resulting in ₦80,000. This represents the actual amount received from shareholders.

Unissued capital is the difference between authorized capital (₦200,000) and issued capital (₦100,000), which equals ₦100,000. This represents shares available for future issuance.

Calculate retained profit by starting with net profit (₦27,370) and adjusting for all appropriations and provisions. After deducting dividends, reserves, and write-offs, the retained profit is ₦36,320.

Retained profits are classified as revenue reserves because they arise from normal business operations and can be distributed as dividends. They differ from capital reserves which arise from capital transactions.

Sam’s share is calculated using the profit-sharing ratio of 3:8 of ₦4,950, considering adjustments for interest on drawings and capital. This results in ₦991.8.

Calculate 5% interest on Ade’s capital contribution according to the partnership agreement. Based on the given figures, this amounts to ₦200.

Calculate by adjusting cash received for accruals and prepayments: Add opening arrears, subtract closing arrears, add closing prepayments, subtract opening prepayments. This gives ₦7,400.

The ₦1000 represents a liability as it is a prepaid subscription for the next accounting period. It must be carried forward as an obligation to provide services.

The opening cash balance is ₦3,650 as shown by the balance brought forward (Bal b/f) in the Receipts and Payments Account.

Provision for bad debts is the only option that doesn’t appear in control accounts as it’s an estimate rather than an actual transaction. Bad debts, discounts, and returns are all recorded in control accounts.

Calculate: Opening stock + Purchases + Carriage inwards – Closing stock = ₦32,160 + ₦145,000 + ₦7,000 – ₦29,640 = ₦148,120

Prime cost includes direct materials consumed (₦148,120), direct wages (₦52,000), and direct expenses (₦12,500), totaling ₦213,480.

Depreciation represents the systematic allocation of an asset’s cost over its useful life, accounting for wear, tear, and obsolescence. It’s not an estimate or the asset itself.

Using straight-line method: (Cost – Residual Value)/Useful Life = (₦10,000 – ₦4,000)/4 years = ₦1,500 per year

Recurrent expenditure includes items like stationery (₦300,000), electricity (₦45,000), and drugs (₦76,000), totaling ₦421,000. These are regular, ongoing expenses.

Capital expenditure includes bore holes (₦2,900,000), motor car (₦920,000), and beds (₦425,000), totaling ₦4,245,000. These are long-term investments.

There is no “selling plus percentage” method in branch accounting. The standard methods are cost price, cost plus percentage, and selling price.

Calculate profit by taking sales (₦13,020) minus cost of goods (₦20,580) and bad debts (₦129), considering the markup percentage of 50%.

For Department B: Opening stock (₦800) + Purchases (₦2,000) + Share of wages (based on sales ratio) = ₦2,800

Calculate: Sales (₦3,000) – Cost of goods sold – Share of expenses (based on sales ratio) = ₦880

This describes the entity concept, which separates business transactions from personal transactions of owners. Other concepts don’t address this separation.

Accrual and Cash are the two fundamental bases of accounting. Other options represent types of transactions or accounts, not accounting bases.

Calculate drawings: Opening capital + Additional capital + Net profit – Closing capital = ₦8,000 + ₦4,000 + ₦1,500 – ₦12,000 = ₦1,500

Bank statements don’t help to debit an account – this is done through journal entries. The other options are valid purposes of bank statements.

The International Accounting Standards Board (IASB) is the primary body responsible for issuing international accounting standards. Other bodies have different

Weighted Average Price (WAP) method calculates the average cost per unit by dividing total value by total quantity. This differs from FIFO and LIFO which use specific identification of costs.

A joint venture is specifically for a particular project or venture, unlike partnerships which are typically ongoing businesses. The other characteristics are common to both forms.

Credit transactions involve deferred payment, meaning payment is made at a later date rather than immediately. This is fundamental to modern commerce and accounting.

Purchasing a vehicle increases the asset (motor vehicle) account. The bank account decreases but this isn’t the primary effect being asked about in the question.

When cash is withdrawn, the drawings account is debited (increased) and cash account is credited (decreased). This properly records the reduction in business assets.

The fundamental principle of double entry requires every transaction to affect two accounts – one debit and one credit. This maintains the accounting equation balance.

Double entry is based on the dual concept where every transaction affects two accounts, while single entry doesn’t follow this principle. This is the fundamental distinction.

When rent is paid by cheque, rent account is debited (expense increased) and bank account is credited (asset decreased). This follows the double entry principle.

The primary purpose of the profit and loss account is to determine net profit by matching revenues against expenses for the period. Other options are components or partial measures.

Discount received is an income and therefore appears in the profit and loss account. It represents a reduction in the amount paid to creditors.

Calculate cost of goods sold using opening stock + purchases – closing stock for both departments combined and including all direct costs.

Calculate: Sales – Cost of goods sold (Opening stock + Purchases – Closing stock) = ₦100,000 – (₦20,000 + ₦70,000 – ₦15,000) = ₦25,000

When shares are issued below their nominal value (₦80 < ₦100), they are issued at a discount. This represents a reduction from the nominal value.

A rights issue is specifically when existing shareholders are given the opportunity to purchase additional shares, usually at a favorable price.

Calculate average profit (₦16,000) and multiply by 2 years as specified. This gives goodwill value of ₦32,000. This method values the business’s earning capacity.