JAMB Accounting 2000
Questions & Answers

Students might mistakenly choose option A or D by confusing whether sales should be debited or credited to correct an overstatement. An overcast in the sales day book means sales were overstated. The entry is Debit Suspense N40,000 (to balance the trial balance) and Credit Sales N40,000 (to reduce sales). Common mistake: debiting sales instead of crediting them when correcting an overcast.

A student might mistakenly calculate based on total ratio parts incorrectly or pick a partial profit figure like N75,000. Total parts = 5 + 3 + 2 = 10. Q’s share (3 parts) = N45,000, so 1 part = N45,000 ÷ 3 = N15,000. Total profit = 10 × N15,000 = N150,000. Common mistake: dividing the profit by the wrong number of proportional parts.

An incorrect choice like provision for depreciation might be selected due to confusing asset write-downs with debtor adjustments. Provision for doubtful debts is deducted from trade debtors to show their net realizable value in the balance sheet. Common mistake: applying depreciation accounts to current trade receivables.

A student might mistakenly pick N360,000 by forgetting to subtract the residual value before calculating annual depreciation. Depreciable amount = N500,000 - N50,000 = N450,000. Annual depreciation = N450,000 ÷ 5 = N90,000. Accumulated depreciation after 3 years = 3 × N90,000 = N270,000. Common mistake: omitting the residual value from the depreciable base calculation.

A test-taker might select the purchase of a generator by confusing short-term operational costs with capital asset purchases. Payment for fuel is a revenue expenditure, incurred for day-to-day operations, unlike capital expenditures like purchasing assets. Common mistake: classifying day-to-day running costs as capital expenditures.

A student might mistakenly select N100,000 by adding the prepaid amount instead of subtracting it. Prepaid insurance (N20,000) is not an expense for the period. Insurance expense = N80,000 - N20,000 = N60,000. Common mistake: adding prepayments to trial balance figures instead of deducting them.

An option like record cash purchases might be chosen if a student confuses control accounts with day books. The purchases ledger control account summarizes transactions with creditors, ensuring accuracy of the creditors’ ledger. Common mistake: treating control accounts as books of prime entry for individual cash items.

Someone might mistakenly choose the accrual concept by confusing monetary recording limits with period-matching rules. The money measurement concept limits accounting records to transactions that can be expressed in monetary terms. Common mistake: mixing up the definition of money measurement with accrual accounting.

A student could mistakenly select option C by reversing the debtor and cash accounts in the transaction. Cash received from a debtor increases cash and reduces the debtor’s balance. The entry is Debit Cash, Credit Debtors. Common mistake: debiting the debtor instead of the cash account upon receipt.

An option like factory rent might be mistakenly picked by students who fail to distinguish direct versus indirect factory costs. Factory overheads include indirect costs like factory rent, depreciation, and electricity. Direct labour is a prime cost, alongside direct materials, and is not an overhead. Common mistake: grouping direct labor under factory overheads.

A student might mistakenly choose N400,000 by multiplying the total shares by the nominal value rather than the called-up amount. Share capital is based on the called-up amount. 200,000 shares × N1.80 = N360,000. Common mistake: using the authorized or issued price instead of the called-up fraction.

An incorrect figure like N340,000 might be selected by adding instead of subtracting the closing work-in-progress. Cost of production = Cost of goods manufactured + Opening work-in-progress - Closing work-in-progress = N300,000 + N40,000 - N60,000 = N280,000. Common mistake: adding closing work-in-progress instead of deducting it.

A test-taker might mistakenly select the furniture account by confusing nominal accounts with real asset accounts. Nominal accounts record expenses, income, losses, or gains, such as rent expense, unlike real or personal accounts. Common mistake: classifying asset accounts as nominal.

A student might mistakenly add uncredited lodgements or subtract unpresented cheques when adjusting the cash book balance. Bank statement balance = Cash book balance (N150,000) - Uncredited lodgements (N25,000, not yet in bank) + Unpresented cheques (N30,000, not yet cleared) = N150,000 - N25,000 + N30,000 = N125,000. Common mistake: reversing the treatment of uncredited lodgements and unpresented cheques.

Someone might select the prudence principle by confusing asset valuation rules with conservative loss-reporting practices. The cost principle requires assets to be recorded at their historical cost, not market value. Common mistake: applying prudence rules to initial asset recording instead of historical cost principles.

Students might mistakenly pick options that add or subtract items incorrectly, such as combining all values without accounting for drawings. To determine the correct closing capital, start with the opening capital of N600,000, add the net profit of N120,000 to reflect the earnings retained in the business, and then subtract the drawings of N80,000 to account for personal withdrawals. This calculation results in N640,000. Common mistake: Subtracting net profit or adding drawings instead of applying the standard accounting equation.

A student might incorrectly select land, inventory, or machinery because they are tangible resources easily found on a balance sheet. Goodwill is recognized as an intangible asset because it lacks physical form, distinguishing it from physical items like land, inventory, or machinery. Common mistake: Confusing long-term physical assets with non-physical business value.

A test-taker might mistakenly debit cash or credit cash, confusing a return of goods with a cash refund or sale. When merchandise is sent back to a supplier, the creditor’s balance decreases because less money is owed, while purchases returns increase. Therefore, the correct entry requires debiting purchases returns and crediting creditors. Common mistake: Mixing up the direction of the entry for supplier returns by crediting the return account instead of the liability.

An examinee might mistakenly divide by the wrong denominator or pick a total based on the wrong ratio share. First, find the total parts of the ratio by adding 3 and 2 together to get 5. Next, multiply the total goodwill valuation of N90,000 by the fraction representing the specified partner's share, which is 3/5, yielding N54,000. Common mistake: Forgetting to sum the ratio parts correctly to form the denominator.

A student might mistakenly subtract depreciation directly from net profit or combine all given figures. By taking the gross profit of N200,000 and subtracting the net profit of N80,000, you find the total expenses equal N120,000. Subtracting the depreciation of N30,000 from this total leaves the remaining expenses excluding depreciation at N90,000. Common mistake: Failing to subtract net profit from gross profit to find total expenses first.