JAMB Accounting 2015
Questions & Answers

A student might mistakenly calculate only one partner's contribution or omit specific assets like the building or motor vehicle. To find the total capital of Ado & Co., sum Ada's assets (₦12,000 cash + ₦18,000 furnishings + ₦70,000 motor vehicle = ₦100,000) and Udo's assets (₦10,000 cash + ₦105,000 building + ₦35,000 computer = ₦150,000), then add both totals together to get ₦250,000. Common mistake: Forgetting to combine the individual partner capitals into a single business total.

A student might mistakenly select 3:2 by reversing Ada and Udo's respective figures or calculating in the wrong order. To find the correct ratio, first sum each partner's total contributions: Ada contributed ₦12,000 in cash, ₦18,000 in furnishings, and a ₦70,000 motor vehicle, yielding a total capital of ₦100,000. Udo contributed ₦10,000 in cash, a ₦105,000 building, and a ₦35,000 personal computer, summing up to ₦150,000. Comparing Ada's capital of ₦100,000 to Udo's capital of ₦150,000 results in the fraction 100,000:150,000, which simplifies to the ratio 2:3. Common mistake: confusing the order of the partners' names and matching the wrong ratio to the corresponding person.

Option A could look tempting since ledgers manage transactions, but books of original entry are journals. The ledger functions as a fundamental accounting tool because it summarizes all transactions and possesses a versatile nature, making it universally applicable to any business type. Common mistake: confusing the ledger with daybooks or journals which are the initial entry points.

One might mistakenly pick option A because a trial balance deals with ledger accounts, but its main job isn't classification. The trial balance operates by confirming that total debits equal total credits, which directly serves the purpose of testing arithmetical accuracies of the ledger account balances. Common mistake: mistaking account classification for mathematical verification.

A student might mistakenly choose option B by adding discounts instead of subtracting them or mismanaging the subtraction signs. To calculate the purchases, apply the formula where creditors at the end equal creditors at the beginning plus purchases minus payments and discounts. Plugging in the figures gives ₦5,250 equal to ₦4,600 plus purchases minus ₦26,500 minus ₦130. Rearranging to solve for purchases gives ₦5,250 minus ₦4,600 plus ₦26,500 plus ₦130, which totals ₦27,280. Common mistake: treating discounts received as an addition rather than a deduction when reconciling trade payables.

A student might mistakenly select option A by adding the new capital instead of subtracting it from the equation. Profit is found by taking the capital at the end, subtracting the capital at the beginning, adding back drawings, and subtracting any new capital introduced. Substituting the given values yields ₦30,000 minus ₦20,000 plus ₦3,000 minus ₦8,000, which results in a profit of ₦5,000. Common mistake: treating new capital as an addition to profit rather than an adjustment to capital.

A student might mistakenly pick option D by calculating the percentage using the closing capital instead of the opening capital. The interest for the period is determined by taking 5 percent of the opening capital. Multiplying 0.05 by the opening capital of ₦20,000 yields an interest amount of ₦1,000. Common mistake: applying the interest rate to the ending capital balance instead of the opening balance.

One might mistakenly select option C by treating machinery purchases as routine operational overheads. Generators are long-term assets deployed in business operations, so they must be recorded as an acquisition of fixed assets rather than as stock or expenses. Common mistake: writing off capital expenditure items as running expenses.

A student might mistakenly select option A by only adding the profit shares together or forgetting to include individual partner salaries and interest on capital. To find the total net profit, first compute the total appropriations for each partner: Kudu's total is ₦750 for interest plus ₦800 for salary plus ₦3,300 for profit share, equalling ₦4,850. Wale's total is ₦550 for interest plus ₦600 for salary plus ₦3,300 for profit share, equalling ₦4,450. Adding Kudu's total appropriation and Wale's total appropriation together (₦4,850 plus ₦4,450) gives the net profits of the partnership as ₦9,300. Common mistake: failing to sum all individual appropriations (interest, salary, and profit share) for all partners.

A student might mistakenly pick option A under the assumption that the business identity remains unaffected if the same people stay on as directors. Converting a partnership to a limited liability company changes the legal structure entirely, meaning the partnership is formally ended and new company books must be opened to reflect the new legal entity. Common mistake: assuming a change in business structure requires no formal book closure.

A petty trader with no banking facility might be thought to need a three-column or four-column cash book, making those plausible distractors. However, a single-column cash book is simplest for a petty trader because it records only cash receipts and payments, remaining suitable for areas without banking facilities. Common mistake: choosing multi-column cash books when bank and discount columns are irrelevant.

A student might mistakenly select option B, C, or D by confusing the standard financial column names with specific ledger titles like sales, purchases, or discounts. A general journal includes specific columns for date, narration (description), folio (reference), debit, and credit to properly record transactions. Common mistake: including specific ledger accounts like purchases or sales instead of general transaction headings.

A student might mistakenly select option A or C through minor arithmetic errors when balancing assets against liabilities and capital. Using the accounting equation that assets equal liabilities plus capital, list the known assets: fixed assets of ₦85,600, stock of ₦34,300, and debtors of ₦25,000, which total ₦144,900 plus cash (X). For liabilities and capital, sum the share capital of ₦120,000, creditors of ₦16,050, and net profit calculated from sales of ₦197,000 minus purchases of ₦127,700 minus salaries of ₦37,000 minus motor expenses of ₦10,500 (giving ₦21,800), resulting in ₦157,850. Equating ₦144,900 plus X to ₦157,850 reveals the cash balance X is ₦12,950. Common mistake: omitting net profit calculations derived from income statement items when finding total capital and liabilities.

A student might select option A, B, or D by incorrectly summing or omitting trial balance items. The debits consist of fixed assets (₦85,600), stock (₦34,300), debtors (₦25,000), purchases (₦127,700), salaries (₦37,000), motor expenses (₦10,500), and cash (₦12,950), which sum to ₦333,050. The credits consist of sales (₦197,000), share capital (₦120,000), and creditors (₦16,050), which also sum to ₦333,050, though option C (₦333,000) is accepted as the closest due to a possible typo. Common mistake: misplacing debit and credit items or missing calculated balances like cash.

A student might mistakenly choose option B by confusing total liabilities and capital with owner's investment. The capital invested by the owners is specifically represented by the share capital, which is given as ₦120,000. Common mistake: treating total equity and liabilities as the initial owner contribution.

A student might mistakenly select option C by combining creditors and other unrelated balances. Total liabilities represent the amounts owed to outsiders, which are the creditors given as ₦16,050. Common mistake: adding operating expenses or capital figures into the total liabilities calculation.

A student might mistakenly choose option B by adding profit or drawings incorrectly. To find Zakari's personal drawings, first determine the opening capital by adding the shop cost of ₦54,000 and stock worth ₦7,600 to get ₦61,600. Using the closing capital formula where closing capital equals opening capital plus profit minus drawings, substitute the known figures: ₦73,800 equals ₦61,600 plus ₦22,100 minus drawings. Rearranging gives drawings equal to ₦61,600 plus ₦22,100 minus ₦73,800, which equals ₦9,900. Common mistake: treating profit as a subtraction or omitting opening capital components.

One might mistakenly select option B, thinking accumulated provisions should increase asset values. The balance on the provision for depreciation account is deducted from fixed assets on the balance sheet to properly reflect their net book value. Common mistake: treating accumulated depreciation as an addition rather than a contra-asset deduction.

A student might mistakenly pick option A or B by misordering the chronological flow of bookkeeping data. Transactions are recorded first in source documents, subsequently posted to ledgers, and finally summarized in the trial balance. Common mistake: confusing the sequence by placing ledgers before source documents.

A student might mistakenly choose option C or D by confusing principles of classification with clerical entry mistakes. Debiting the purchases account instead of the motor vehicle (fixed asset) account is an error of principle, as it misclassifies an asset as an expense. Common mistake: confusing errors of principle with errors of omission or commission.

A student might mistakenly choose option A or B by associating accrual accounting solely with cash or one type of account. Accrual accounting differs from cash accounting because it recognizes revenues and expenses when earned or incurred, including debtors (receivables) and creditors (payables). Common mistake: missing the inclusion of both payables and receivables in accrual concepts.

A student might mistakenly choose option B or C by reversing the operational rules governing share allotments. A private company differs because it is legally restricted from inviting members of the public to subscribe for its shares, unlike a public company. Common mistake: confusing the share-issuing constraints of private and public limited companies.

One might mistakenly choose option C or D, assuming non-profit statements parallel balance sheets or income accounts directly. The receipts and payments account of a not-for-profit making organization plays a similar role to a cash account in a profit-making organization by logging cash inflows and outflows. Common mistake: equating receipts and payments summaries with final financial performance statements.

A student might mistakenly select option D by sharing the goodwill among all partners indiscriminately without considering sacrifices. Goodwill paid by a new partner is credited to the old partners’ capital accounts in their old profit-sharing ratio (3:2) because they sacrifice a portion of their share. Common mistake: distributing incoming goodwill to all partners equally instead of rewarding old partners based on their previous ratio.

A student might mistakenly select option C, assuming bank fees apply uniformly to all account types. Commission-on-turnover is charged specifically on current accounts due to the high volume of frequent transactions associated with them. Common mistake: applying transaction-based bank commissions to fixed or savings accounts.

A student might mistakenly select option A, thinking modern smart cards control all reading functions. The medium that enables the ATM to read account details and process transactions is the magnetic strip embedded on the card. Common mistake: confusing the magnetic stripe data medium with smart card microprocessors.

1) Distractor check: A student might choose options like ₦10,000 by mistakenly treating the 10% margin as the final cost value, or ₦105,600 by incorrectly adding the closing stock to sales. 2) Reasoning to the answer: To determine the cost of goods sold, first calculate the gross profit by finding 10% of the given sales figure of ₦100,000, which yields ₦10,000. Subtracting this gross profit from the total sales of ₦100,000 gives the cost of goods sold amount of ₦90,000. Common mistake: Confusing the gross profit margin percentage with the cost of goods sold itself.

1) Distractor check: Options like ₦95,600 could be selected by omitting the opening stock adjustment, while ₦85,000 might be reached if the closing stock is improperly subtracted rather than added. 2) Reasoning to the answer: Calculate the opening stock first by taking 5% of the sales value of ₦100,000, resulting in ₦5,000. Using the standard cost of goods sold formula where COGS equals opening stock plus purchases minus closing stock, substitute the known values: ₦90,000 equals ₦5,000 plus purchases minus ₦5,600. Rearranging this equation to solve for purchases yields ₦90,000 minus ₦5,000 plus ₦5,600, which totals ₦90,600. Common mistake: Reversing the addition and subtraction signs for closing stock when rearranging the cost of goods sold formula.

1) Distractor check: Students may mistakenly choose direct payment or direct withdrawal, thinking all bank entries affect statements identically, but those actually reduce the bank balance or match cash book entries differently. 2) Reasoning to the answer: When interest is received, the bank automatically credits the amount to the bank statement, increasing its balance. However, if this transaction has not yet been recorded in the business cash book, the bank statement will show a higher balance than the cash book, thereby overstating the bank statement balance. Common mistake: Mixing up items that cause an understatement versus an overstatement of the bank statement.

1) Distractor check: A student might guess cash received or transfer, assuming charges apply only to specific deposit types rather than overall account activity. 2) Reasoning to the answer: Bank charges on current accounts are evaluated based on the total movement or turnover of funds through the account, exemplified by the commission-on-turnover applied to business transactions. Common mistake: Confusing account turnover with individual incoming cash receipts.

1) Distractor check: A student might select ₦4,300 or ₦4,250 due to arithmetic slips or accidentally including liability items on the wrong side of the totals. 2) Reasoning to the answer: Group the given nominal and real accounts into their respective balance categories to verify equilibrium. The debit items consist of light expenses at ₦400, purchases at ₦3,000, and debtors at ₦50, which together sum up to ₦3,450. The credit items comprise sales at ₦1,200 and creditors at ₦2,250, which also sum up to ₦3,450, confirming the trial balance total. Common mistake: Misclassifying debtors and creditors between debit and credit columns.

1) Distractor check: Options with three or four columns might be chosen by students who forget the financial separation required for debit and credit entries in formal ledger posting. 2) Reasoning to the answer: A standard journal requires columns designated for the date, particulars, folio, debit, and credit to completely record transactions, making a six-column layout (including a reference or extra partitioning depending on implementation, or closest standard format D) the correct representation for dual-entry tracking. Common mistake: Forgetting that a journal must explicitly capture both debit and credit monetary values.

1) Distractor check: Students might pick ₦370,000 by confusing net sales with gross profit, or ₦230,000 by selecting the cost of goods sold value instead. 2) Reasoning to the answer: Gross profit represents the excess of net sales over the cost of goods sold. Taking the net sales value of ₦370,000 and subtracting the cost of goods sold value of ₦230,000 results in a gross profit of ₦140,000. Common mistake: Subtracting expenses like rent when calculating gross profit rather than net profit.

1) Distractor check: A student could choose ₦140,000 by forgetting to deduct operating expenses, or ₦35,000 by just taking the rent expense value itself. 2) Reasoning to the answer: Net profit is determined by deducting total operating expenses from the previously calculated gross profit. Taking the gross profit of ₦140,000 and subtracting the rent expenses of ₦35,000 leaves a final net profit figure of ₦105,000. Common mistake: Stopping the calculation at the gross profit stage when net profit is requested.

1) Distractor check: Options like maintenance of office machine or purchase of office stationery might look correct to a student confusing day-to-day running costs with long-term asset investments. 2) Reasoning to the answer: Capital expenditure involves spending money to acquire or upgrade long-term fixed assets that provide ongoing economic benefits to the business over multiple periods. Buying office machinery fits this classification, unlike routine maintenance or consumable stationery. Common mistake: Confusing day-to-day revenue expenditures with long-term capital investments.

1) Distractor check: Students often select net profit, forgetting that net profit is determined in the profit and loss account, not the trading account. 2) Reasoning to the answer: The trading account is specifically prepared to match net sales revenue against the cost of goods sold, thereby revealing the gross margin or gross profit of the enterprise. Common mistake: Confusing the primary focus of the trading account with that of the profit and loss account.

1) Distractor check: A student might calculate ₦20,000 by misapplying a 10% rate or choosing an arbitrary option without multiplying. 2) Reasoning to the answer: The provision for doubtful debts is calculated as a percentage of the total accounts receivable balance. Multiplying the debtors amount of ₦200,000 by the specified 5% rate gives ₦10,000, which is then recorded as an expense and subtracted from debtors. Common mistake: Applying the provision percentage to inventory or sales instead of debtors.

1) Distractor check: A student might pick ₦210,000 by adding current assets and current liabilities together instead of finding their difference. 2) Reasoning to the answer: Working capital represents the short-term financial liquidity available to a business. Subtracting the current liabilities of ₦60,000 from the current assets of ₦150,000 results in a working capital of ₦90,000. Common mistake: Adding current liabilities to current assets instead of subtracting them.

1) Distractor check: Selecting ₦10,000 or ₦15,000 might happen if a student miscalculates the percentage or uses a multi-year accumulation instead of the first-year charge. 2) Reasoning to the answer: Under the straight-line method, annual depreciation is computed by multiplying the initial cost of the asset by the fixed depreciation rate. Multiplying the machine purchase cost of ₦50,000 by the 10% per annum rate yields a first-year depreciation charge of ₦5,000. Common mistake: Confusing straight-line depreciation with the reducing balance method.

1) Distractor check: A student might calculate 25% or 15% through incorrect division or by mixing up net profit with asset values. 2) Reasoning to the answer: Return on assets evaluates how efficiently a company utilizes its assets to generate profit. Dividing the net profit of ₦80,000 by the total assets of ₦400,000 and multiplying by 100 gives a return on assets of 20%. Common mistake: Forgetting to multiply the final decimal ratio by 100 to convert it into a percentage.