JAMB Accounting 2001
Questions & Answers

Students might mistakenly select option A, the Balance Sheet, thinking that receivables or bad debt accounts stay as a permanent asset balance. Uncollectible receivables are classified as an expense incurred during the accounting period because they lessen the overall net profit of the enterprise. Therefore, when compiling the final accounts, this residual cost is cleared out by moving it directly to the profit and loss account. Common mistake: Confusing a permanent asset or provision balance with a period-end expense transfer.

Students could erroneously choose option C or D by failing to subtract the closing stock or by miscombining the figures. The correct figure is derived by taking the opening stock, adding total purchases, and then deducting the closing stock, yielding N800 plus N2,450 minus N675 to arrive at N2,575. Common mistake: Forgetting to subtract the closing stock from the sum of opening stock and purchases.

Students might select option C or D, assuming that the entire original float or the sum of the float and expenses is what gets reimbursed. Since expenses of N70 lower the available cash from N500 down to N430, replenishing the fund to its original level requires replacing precisely the amount that was spent. Common mistake: Confusing the remaining cash balance with the reimbursement amount needed to restore the imprest.

A student might incorrectly select option A or C by miscalculating the percentage of miscellaneous expenses or forgetting to deduct them from the gross margin. First, determine the miscellaneous expenses by taking 10% of N820,000, which equals N82,000. Subtracting both the cost of goods sold of N205,000 and these miscellaneous expenses from the total revenue of N820,000 gives the net income of N533,000. Common mistake: Calculating the percentage incorrectly or omitting one of the expense subtractions.

Students might mistakenly choose option B or C, assuming that all subsidiary book entries automatically update the general ledger. A memorandum entry is recorded in a subsidiary book strictly for tracking or informational needs without posting to the double-entry ledger system. Common mistake: Assuming every subsidiary book entry is part of the formal double-entry network.

Students might choose option A or C, assuming bank reconciliations are only about finding physical cash quantities or checking for overdrafts. Preparing the bank reconciliation guarantees that the cash balance is accurate, which in turn helps verify the correctness of profit calculations in incomplete records. Common mistake: Overlooking the primary accounting purpose of verifying profit accuracy when dealing with incomplete records.

Students could mistakenly pick option A, C, or D, assuming any expense or nominal account functions as a fixed asset. Machinery is a long-term fixed asset utilized for continuous operational activities, whereas items like wages, rent, and motor expenses are operational or current items. Common mistake: Confusing operating expenses or prepayments with long-term fixed assets.

Students might choose option B, C, or D by incorrectly including capital, rent, or motor expenses in the working capital computation. Working capital is computed by subtracting current liabilities from current assets, where debtors represent the current asset of N1,500 and creditors represent the current liability of N1,000, giving N1,500 minus N1,000 to equal N1,000. Common mistake: Including long-term capital or unrelated expense accounts in the working capital formula.

A student might choose option B or D by adding the liabilities to the assets instead of finding the difference. Capital is determined by subtracting total liabilities from total assets, resulting in N250,000 minus N80,000 to equal N170,000. Common mistake: Adding liabilities to assets instead of subtracting them to find capital.

Students might select option B or C by leaving out the bank loan or accrued expenses from the summation. Total liabilities are accumulated by adding together creditors of N50,000, the bank loan of N20,000, and accrued expenses of N7,000, summing up to N77,000. Common mistake: Forgetting to include accrued expenses or loans when calculating total liabilities.

Students might mistakenly choose option A, C, or D by trying to recalculate the general expenses from scratch or misinterpreting the closing balance. The problem explicitly states that general expenses equal N325, while the closing balance of N235 confirms that total expenses equal N1,750 minus N235, which equals N1,515, incorporating that exact N325 figure. Common mistake: Recalculating a figure that is already explicitly given in the prompt.

Students might mistakenly choose option B or D, confusing a financial negotiation with a simple cash collection or acceptance of an order. When a bill of exchange is negotiated to a bank, the bank provides a discounted amount upfront and collects the full payment at maturity, a procedure known as discounting. Common mistake: Confusing bill discounting with basic cash sales or order acceptance.

Students might choose option A, B, or C due to arithmetic errors or swapping the positions of unpresented and uncredited cheques. The bank statement balance is found by taking the cash book balance, adding unpresented cheques, and subtracting uncredited cheques, meaning N4,791 equals N4,315 plus N1,688 minus uncredited cheques, which isolates uncredited cheques at N1,212. Common mistake: Adding uncredited cheques instead of subtracting them in the reconciliation equation.

Students might select option A or C, mistakenly viewing a building sale as an extraordinary capital transaction or a windfall. Selling a completed building falls under a property development company's regular business operations, meaning the proceeds must be treated as a revenue receipt. Common mistake: Treating a core trading activity of a property developer as a capital receipt.

Students might select option A, C, or D by omitting one of the asset classes or miscalculating the sum. Total fixed assets are calculated by combining machinery valued at N200,000, buildings at N100,000, and vehicles at N50,000, totaling N350,000. Common mistake: Leaving out one of the asset categories from the total sum.

Students might select option A by dividing the total cost directly by the useful life without accounting for the residual value. The depreciable amount is found by taking the initial N500,000 cost and subtracting the N50,000 residual value to get N450,000, which is then divided by the 10-year useful life to yield an annual depreciation expense of N45,000. Common mistake: Forgetting to subtract the residual value before dividing by the useful life.

Students could mistakenly pick option D, confusing a catalogue price reduction with a cash settlement incentive. A trade discount represents a price reduction extended by a wholesaler to a retailer to encourage large-scale orders. Common mistake: Confusing trade discounts given on catalogue prices with cash discounts for prompt payment.

Students might pick option A or B by subtracting incorrectly or calculating a percentage instead of a direct difference. Gross profit is calculated by taking total sales and subtracting the cost of goods sold, resulting in N150,000 minus N100,000 to equal N50,000. Common mistake: Applying incorrect mathematical operations to sales and cost figures.

Students might select option C or D by mixing up the direction of the adjustment or confusing the percentage calculation with the final difference. The required provision is 5% of N200,000, which equals N10,000, and comparing this to the current provision of N12,000 requires a N2,000 decrease. Common mistake: Stating the new required provision amount instead of the adjustment needed to reach it.

Students might select option B, C, or D by incorrectly adding or subtracting the cash payments and opening balances. The closing balance owed to suppliers is found by taking the opening creditors, adding credit purchases, and subtracting payments made, yielding N30,000 plus N200,000 minus N160,000 to equal N70,000. Common mistake: Subtracting credit purchases instead of adding them when calculating closing creditors.