2021 JAMB ACCOUNTING PAST QUESTIONS AND ANSWER

The sales ledger control account tracks the total amount owed by customers (debtors). This account summarizes all individual customer accounts and represents money owed to the business from credit sales. Options A, B, and C are incorrect as investors, creditors, and shareholders are not tracked in the sales ledger.

LIFO (Last In, First Out) is most suitable during inflation as it matches current costs with current revenues. When prices are rising, LIFO results in higher cost of goods sold and lower taxable income. Other methods may understate costs and overstate profits during inflation.

Ordinary shareholders have variable dividend rights, not fixed ones. Receiving dividends at a predetermined rate is a characteristic of preference shares. All other options are valid rights of ordinary shareholders: voting at AGM, electing directors, and participating in new share issues.

Personal advances, treasury clearance, and special trust funds are the main categories for government expenditure accounting. These funds ensure proper tracking and accountability of public funds. Other combinations listed don’t represent the standard government accounting structure.

Factory overhead includes all indirect manufacturing costs. Adding all factory-related costs (₦1,600 + ₦650 + ₦695 + ₦726 + ₦1,235 + ₦350 = ₦5,256). Note that carriage outwards and bank charges are not factory overheads.

In non-profit organizations, excess of income over expenditure is transferred to accumulated fund, similar to retained earnings in profit-making organizations. This represents the organization’s net worth accumulation over time.

Carriage outwards (delivery expenses) is typically apportioned based on turnover because it relates directly to sales volume. This provides a fair distribution of delivery costs among departments based on their sales activity.

Sales = Opening debtors + Receipts – Closing debtors = 25,000 + 255,000 – 15,000 = ₦265,000. This formula accounts for all cash movements and changes in debtors balance to determine total sales.

Using 60:40 ratio, Department A’s share: Electricity (₦1,200) and Depreciation (₦600). Total expenses = ₦3,600. Net profit = Gross profit – Total expenses = ₦6,000 – ₦3,600 = ₦2,400

Using the 60:40 ratio, Department B’s share of depreciation (₦1,000) would be 40% = ₦400. This reflects the proportional allocation of the total depreciation expense.

Accrual accounting recognizes transactions when they occur, regardless of cash movement. This provides a more accurate picture of financial position by matching revenues with related expenses in the same period.

The materiality concept states that items of insignificant value can be treated as expenses even if they have future benefits, to avoid unnecessary complexity in accounting records.

In the trial balance, bank overdraft (₦2,000) appears on credit side. Cash and furniture are debit items. Therefore, credit side total = ₦2,000.

Fixed assets are long-term assets used in business operations. From the given list, only premises (iii) and land (iv) qualify as fixed assets. Other items are either current assets or liabilities.

Current assets are assets expected to be converted to cash within one year. Cash at bank (i) and cash in hand (ii) are current assets. Other items are either fixed assets or liabilities.

Share premium is the excess over nominal value (₦0.50 per share on 750,000 shares = ₦375,000). This represents the additional amount paid by shareholders above the par value.

The second call amount is 25k per share on 750,000 shares = ₦187,500. This represents the amount due from shareholders on the final installment.

LIFO in rising prices results in higher cost of goods sold as recent, higher-cost items are sold first. This leads to lower profits and consequently lower income tax.

The primary purpose of departmental accounting is to evaluate each department’s profitability and contribution to overall business success. This helps in performance assessment and decision-making.

All three documents – memorandum of association, articles of association, and incorporation documents – must be submitted to the registrar for company incorporation.

Issued share capital represents shares that have been fully subscribed by shareholders. It’s the portion of authorized capital that has been actually issued to shareholders.

The straight-line method calculates annual depreciation by subtracting scrap value from cost and dividing by useful life. This provides equal depreciation charges over the asset’s life.

ICAN and ANAN are the only legally recognized professional accounting bodies in Nigeria. They regulate accounting practice and maintain professional standards.

When cash is received from a debtor (debit in cashbook), the corresponding entry is a credit to that person’s account in the ledger. This maintains double entry principle.

Quick Ratio = (Current Assets – Stock)/Current Liabilities = (247,000 – 28,000)/300,000 = 0.73:1. This measures immediate ability to pay current liabilities.

Owner’s equity = Paid up capital + Share premium + Profit and loss account = 200,000 + 15,000 + 60,000 = ₦275,000

Prime cost consists of direct materials, direct labor, and direct wages. These are the primary costs directly attributable to production.

Recurrent expenditures are operational expenses that occur regularly within one financial year. They include salaries, utilities, and other day-to-day expenses.

Source documents verify the actual cost of assets and transactions. They provide evidence of the true value and details of business transactions.

Cost = Selling Price ÷ (1 + markup%) = 100,000 ÷ 1.25 = ₦80,000. This calculates the original cost before the 25% markup.

When purchase price is lower than net assets, the difference is a capital reserve (bargain purchase). This represents an immediate gain to the buyer.

Adjusted profit = Original profit + Revenue correction (2 × 15,000) – Expense correction (2 × 4,000) = 180,000 + 30,000 – 8,000 = ₦202,000

Revenue adjustment is ₦15,000 (wrongly recorded as expense). This amount needs to be added back to correct the error.

Double entry ensures mathematical accuracy in the trial balance as every debit has a corresponding credit. This provides a self-checking mechanism.

Interest on partner’s loan is debited in profit and loss account as an expense. This ensures proper allocation of interest cost to the business.

Balance b/d (opening balance) in purchase ledger control represents amount owed to suppliers and appears as a debit entry.

When purchasing stationery for cash, debit stationery (asset increase) and credit cash (asset decrease). This follows double entry principles.

Working Capital = Current Assets – Current Liabilities = (3,600,000 + 800,000 + 2,400,000 + 580,000) – (920,000 + 200,000 + 600,000 + 180,000) = ₦5,480,000