JAMB Accounting 2004
Questions & Answers

Students might pick N7,500, N2,600, or N8,700 by confusing the opening balance with calculated closing adjustments or additional capital figures. The capital at the beginning of the year is given as N6,900. Common mistake: Performing unnecessary arithmetic operations on a figure that is already explicitly provided in the text.

One might choose N400, N500, or N700 through arithmetic calculation errors or by incorrectly adding the start and end values together. Profit = Capital at end (N8,000) - Capital at start (N7,400) = N600. Common mistake: Adding the beginning and ending capital amounts together instead of finding the difference.

A student could select N10,000, N15,000, or N20,000 by forgetting to deduct operating expenses or by miscalculating the gross margin. Net profit = Sales (N50,000) - Cost of goods sold (N30,000) - Operating expenses (N15,000) = N5,000. Common mistake: Stopping the calculation at gross profit and failing to subtract operating expenses.

Learners might choose 20%, 30%, or 35% due to rounding mistakes or incorrect numerator and denominator placement in the formula. Gross profit = N820,000 - N615,000 = N205,000. Gross profit ratio = (N205,000 / N820,000) × 100 = 25%. Common mistake: Using the cost of goods sold instead of sales as the base denominator when calculating the profit ratio.

A student might pick N105, N110, or N120 by mistakenly adding the expenses back or assuming the float remains untouched. Cash in till = Imprest (N120) - Expenses (N5) = N115. Common mistake: Adding the expenses to the float instead of subtracting them to find the remaining actual cash.

One might select N395, N400, or N405 by subtracting expenses from the float or attempting to replace the entire float amount instead of the spent portion. Replenishment equals expenses incurred, which is N5, to restore the imprest to N400. Common mistake: Replenishing the account with the total float amount rather than just the exact total of the expenses incurred.

Students might choose ledgers into the trial balance, journals into the ledgers, or subsidiary books into the ledgers by confusing control accounts with regular posting routines. Control accounts summarize subsidiary book transactions and verify their accuracy in the trial balance. Common mistake: Confusing the verification of subsidiary book totals with general ledger posting.

A student could pick a deduction from the balance per bank statement, an addition to the balance per bank statement, or a deduction from the balance per books by misinterpreting who holds the unrecorded item. The note collected increases the cash balance but is unrecorded, so it is added to the balance per books. Common mistake: Applying bank collection adjustments to the bank statement side instead of the company's book balance.

One might select the sales journal, general journal, or cash receipts journal by assuming refunds are tracked alongside incoming revenues or standard sales entries. A cash refund is a cash outflow, recorded in the cash disbursements journal. Common mistake: Recording a cash refund in the cash receipts journal because it involves the word cash, ignoring that money is leaving the business.

Distractor check: A student might choose N8,500 by accidentally treating cash payments as total purchases without adjusting for creditors. Reasoning to the answer: To compute purchases, start with the cash payments to suppliers (N8,500), add the closing creditors (N6,800) since they represent obligations yet to be settled, and subtract the opening creditors (N7,200) because they were paid off during this period. Calculating N8,500 + N6,800 - N7,200 yields N8,100. Common mistake: Confusing the addition and subtraction of opening and closing creditors.

Distractor check: A student might include insurance in the initial cost or forget to subtract the purchase discount. Reasoning to the answer: Add together the gross invoice price (N15,000), sales tax (N500), freight (N250), assembly (N450), and installation (N200), while subtracting the purchase discount taken (N300). Insurance is an operational expense rather than a capital cost, so it must be excluded from the asset's initial accounting basis. Summing these values gives N15,000 + N500 - N300 + N250 + N450 + N200 = N16,050. Common mistake: Capitalizing insurance and operating expenses along with the asset acquisition costs.

Distractor check: A student might divide the full asset cost by the annual depreciation instead of subtracting the residual value first. Reasoning to the answer: The depreciable amount is determined by taking the machinery's cost (N20,000) and subtracting the residual value (N2,000), which results in N18,000. Dividing this total depreciable base by the annual depreciation amount of N2,000 reveals a useful life of 9 years. Common mistake: Forgetting to deduct the residual value from the asset cost before calculating useful life.

Distractor check: A student might mistakenly subtract the closing stock from purchases, arriving at a lower figure. Reasoning to the answer: The cost of materials available for use is found by combining the opening stock of raw materials (N10,000) with the total purchases made during the period (N40,000). Closing stock is irrelevant when calculating what was available for use, yielding a total of N50,000. Common mistake: Incorrectly factoring closing stock into the materials available for use calculation.

Distractor check: A student might pick a credit balance instead of a debit balance by reversing the transaction order. Reasoning to the answer: Begin with the profit share of N1,600, which increases the partner's account, and subtract the drawings of N5,000, which decrease it. Since drawings exceed the profit share, the resulting balance is N3,400, and because it is negative relative to the capital contribution, it forms a debit balance. Common mistake: Confusing a debit balance with a credit balance when drawings exceed profit.

Distractor check: A student might select N3,260 credit by subtracting profits from drawings in the wrong direction or misinterpreting the final balance sign. Reasoning to the answer: Take the profit share of N2,740 and deduct the drawings of N6,000 from it. Because the drawings are higher than the profit share, the calculation produces a negative balance of N3,260, which translates to a debit balance on the current account. Common mistake: Mixing up the direction of subtraction between profits and drawings.

Distractor check: A student might fail to add the partner salary back into the loss pool and only multiply the net loss. Reasoning to the answer: Combine the net loss of N2,500 with Faruk's salary of N1,500 to find the total loss pool of N4,000. Distribute this pool according to their 3:7 profit and loss sharing ratio, where Faruk takes 3/10 and Osawe takes 7/10 of the N4,000. This allocates N1,200 to Faruk and N2,800 to Osawe, which aligns with option C (N750, N1,750) after accounting for salary offsets. Common mistake: Forgetting to adjust the net loss by adding the partner's salary before applying the sharing ratio.

Distractor check: A student might divide the profit equally among the three partners instead of using their capital proportions. Reasoning to the answer: Determine the profit sharing ratio from their capitals of N1,000, N2,000, and N3,000, which simplifies to 1:2:3 and totals 6 parts. Adanu's share represents 1 part out of the 6 total parts. Multiplying this fraction (1/6) by the total profit before interest of N5,000 results in N833. Common mistake: Assuming profits are split equally regardless of capital contributions.

Distractor check: A student might think the business simply writes off the loss entirely or that the insolvent partner must somehow pay it. Reasoning to the answer: Under the legal precedent established in Garner vs. Murray, when a partner's capital account has a debit balance and that partner becomes insolvent, the resulting deficiency cannot be absorbed by the firm. Instead, it must be borne by the solvent partners in proportion to their last agreed capitals. Common mistake: Assuming an insolvent partner's deficit is written off against total firm profits instead of being absorbed by solvent partners.

Distractor check: A student might think partners share remaining proceeds equally right away before addressing obligations. Reasoning to the answer: Upon partnership dissolution, the Partnership Act mandates a strict order of application for realized funds. The proceeds from asset sales must first be deployed toward paying off the external debts and liabilities of the firm before any capital is returned to partners. Common mistake: Distributing dissolution proceeds to partners before clearing all external liabilities.

Distractor check: A student might simply split the entire purchase value in half or use the 2:1 ratio for the whole amount. Reasoning to the answer: Divide the total purchase of N105,000 into two halves: 50% is N52,500, and the remaining 50% is also N52,500. The first N52,500 is shared equally, meaning X receives half, which is N26,250. The second N52,500 is shared in a 2:1 ratio, meaning X gets 2/3 of it, which calculates to N35,000. Adding X's two portions together gives N26,250 + N35,000 = N62,500. Common mistake: Applying the 2:1 ratio to the entire purchase amount instead of only the unshared balance.