2020 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

A partnership dissolution occurs when there’s a fundamental change in the partnership structure. The admission of a new partner (Option C) changes the existing partnership agreement and requires dissolution of the old partnership and formation of a new one. Changes in office location (A), asset purchases (B), or non-partner staff changes (D) don’t affect the partnership’s legal structure.

Source documents are original records of financial transactions that serve as evidence of business activities. Sales invoices and debit notes (Option B) are primary source documents as they directly record original transactions. Journals, ledgers, and cashbooks are books of accounts derived from source documents, not source documents themselves.

The business entity concept is a fundamental accounting principle stating that a business and its owner(s) are separate legal entities (Option A). This separation ensures clear distinction between personal and business transactions. The concept prevents mixing of personal and business finances, making accounting records more accurate and meaningful.

To calculate the trial balance totals, sum all debit balances (Bank: 59,410 + Purchases: 20,000 + Rent: 2,500 + Stationery: 90 + Typewriter: 6,500 = 88,500) and credit balances (Capital: 50,000 + Sales: 38,500 = 88,500). Both columns must equal, showing ₦88,500.

To find closing stock: Opening stock (₦98,800) + Purchases (₦706,000) + Carriage inwards (₦17,500) – Cost of goods sold (₦740,700) = ₦81,600. This calculation follows the perpetual inventory system, accounting for all inventory movements during the period.

To calculate gross profit: Sales (Cost of goods sold + Gross profit: 740,700 + 647,600 = 1,388,300) – Cost of goods sold (740,700) = 647,600. The gross profit represents the difference between sales revenue and cost of goods sold before deducting operating expenses.

Only errors that affect the equality of debits and credits impact trial balance totals. Option C, omitting one account from the list, creates an imbalance. Other options like compensating errors or posting to wrong sides don’t affect the total equality of debits and credits.

Calculate: Original price (10 × ₦500 = ₦5,000) – Trade discount (5% of ₦5,000 = ₦250) = ₦4,750. Then cash discount (12% of ₦4,750 = ₦570). Only cash discount is recorded in books, trade discount is not recorded.

Cost of goods sold = Opening stock (₦800) + Purchases (₦2,450) – Closing stock (₦940) = ₦2,310. Production wages (₦675) should be added as it’s part of cost of production, making total ₦2,985. Administrative expenses and carriage outwards are not included.

Provision for bad debts is recorded on the debit side of the sales ledger control account because it reduces the amount expected to be received from debtors. This contra entry ensures accurate representation of collectible debts.

In the accounting equation (Assets = Liabilities + Capital), accounts payable is a liability representing amounts owed to creditors. It must be classified under liabilities to maintain the balance of the accounting equation.

Under imprest system: Period 2 expenses (₦350) should be reimbursed to maintain float at ₦500. Therefore, reimbursement needed = ₦350 to restore imprest amount. This maintains the fixed float while covering expenses.

Calculate: Initial float (₦500) – Expenses (Stamp ₦200 + Newspaper ₦250 = ₦450) = Balance of ₦50. This represents the remaining cash before reimbursement for Period 2.

Accrual accounting recognizes both debtors and creditors (Option D), recording transactions when they occur regardless of cash movement. This provides a more complete picture of financial position than cash accounting, which only records actual cash movements.

Accrued subscriptions represent amounts owed but not yet paid, making them a current liability (Option D). They are short-term obligations that need to be settled within the next accounting period.

Book keeping’s primary purpose is to maintain permanent records of all financial transactions (Option C). This creates an audit trail and provides historical data for future reference. Unlike the other options, this feature is fundamental to accounting’s role in business documentation.

Using the accounting equation: Capital = Assets – Liabilities. Total Assets (₦2000 + ₦4000) – Total Liabilities (₦1200 + ₦2000) + Drawings (₦200) = ₦3000. Drawings are added back since they temporarily reduce capital.

Net working capital = Current Assets – Current Liabilities (₦2000 – ₦1200 = ₦800). This represents the business’s short-term financial health and ability to meet immediate obligations.

Direct payments (Option D) made into a bank account but not recorded in the cashbook cause the bank statement balance to be higher than the cashbook balance. This common timing difference requires adjustment during bank reconciliation.

A journal’s standard format contains five columns (Option A): date, particulars, folio reference, and separate debit and credit columns. This structure enables proper recording of double-entry transactions and maintains a clear audit trail.

When goods are sent to a branch, the head office debits the branch current account (Option A) to record the amount due from the branch. This maintains proper control over branch inventory and ensures accurate inter-office accounting.

Using straight-line method: (Cost – Scrap Value) ÷ Years = (₦35,000 – ₦9,000) ÷ 5 = ₦5,200. This calculation spreads the depreciable amount evenly over the asset’s useful life.

With new scrap value: (₦35,000 – ₦15,000) ÷ 5 = ₦4,000. The higher scrap value reduces the total depreciable amount, resulting in lower annual depreciation expense.

For a cash purchase, the credit entry appears in the cash book (Option B). This follows the double-entry principle where the asset (vehicles) is debited and cash is credited to show the reduction in cash balance.

The accounting period refers to the time span covered by financial statements (Option A), typically one year. This concept ensures regular reporting of financial performance and position for consistent comparison and analysis.

Net profit is calculated by adding partners’ shares (₦3,300 × 2 = ₦6,600). Interest on capital and salaries are appropriations of profit, not deductions in determining net profit. Therefore, total net profit before appropriation is ₦6,600.

The appropriation account (Option B) is unique to partnerships as it shows how profits are distributed among partners, including salaries, interest on capital, and profit-sharing ratios. Sole traders don’t need this since all profits belong to one owner.

Advertising expenses are a selling cost (Option C) as they directly relate to promoting and selling products. These expenses help generate sales revenue and are therefore properly classified under the sales department’s responsibilities.

Production, selling, distribution, and administration (Option A) represent the complete overhead classification system. Materials are prime costs, not overheads, which is why options including materials are incorrect. This classification helps in cost allocation and control.

The primary advantage of departmental accounts is identifying the most profitable department (Option D). This enables performance evaluation, resource allocation, and strategic decision-making based on departmental profitability analysis.

When debentures are issued above their nominal value, the difference is called a premium (Option B). This represents the additional amount investors are willing to pay above the face value, often due to favorable interest rates or market conditions.

A standing order is an instruction from a customer to their bank (Option C) to make regular, fixed payments. This differs from direct debits as the amount and timing are set by the customer, not the recipient.

The sales ledger control account represents the total of all individual debtors’ accounts (Option B). This provides a quick overview of total amounts owed to the business by customers.

This calculation determines the cost of goods manufactured (Option A). It includes all production costs (direct and indirect) adjusted for work-in-progress to show the actual cost of completed production during the period.

The President (Option D) has the constitutional power to appoint the Auditor General, subject to confirmation by the Senate. This ensures independence of the office from the legislature and civil service.

Both income and liabilities appear as credit balances (Option A) in the trial balance. This follows the fundamental accounting principle that increases in income and liabilities are credited.

A partnership deed (Option B) is the formal agreement containing all rules governing the partnership’s operation, including profit sharing, capital contributions, and management responsibilities.

Original partners share equally (1/2 each). When Kemi takes 1/5, the remaining 4/5 is shared equally between Kola and Sunday. Therefore, Kola gets 2/5, Sunday 2/5, and Kemi 1/5 (Option D).

The conservatism convention (Option C) requires accountants to be prudent by recognizing potential losses but not anticipating gains. This ensures financial statements don’t overstate the financial position.

If M’s space is x, then L = 2x and O = 0.5x. Total space = 3.5x. M’s portion = x/3.5x of ₦70,000 = ₦20,000. This allocation ensures rent is distributed proportionally based on space usage.