JAMB Accounting 2017
Questions & Answers

1) Distractor check: Students might mistakenly pick interest accrued or account duration because fixed deposits involve time periods and interest rates, but fees specifically target breaches of contract. 2) Reasoning to the answer: Fixed deposit charges often arise from early withdrawal penalties, as funds are locked until maturity. 3) Common mistake: Assuming bank charges relate to normal earnings rather than penalty terms.

1) Distractor check: Students might mistakenly pick a multi-column cash book like the two-column or three-column variant assuming modern businesses require bank and discount columns. 2) Reasoning to the answer: A single-column cash book tracks only cash transactions, ideal for a farmer without banking services. 3) Common mistake: Choosing a multi-column format when there are no bank transactions to record.

1) Distractor check: Students might mistakenly pick barcode scanner or internet connection because point-of-sale machines rely heavily on network signals and peripheral hardware to function. 2) Reasoning to the answer: EMV chips on cards securely transmit account data to POS terminals for transaction processing. 3) Common mistake: Confusing data storage and security hardware with peripheral input devices.

1) Distractor check: Students might mistakenly pick date, narration, debit, and credit because those terms look like standard ledger or journal entries rather than specialized book formats. 2) Reasoning to the answer: The purchases day book records credit purchases with details like date, particulars, invoice number, and amount. 3) Common mistake: Mixing up day book columnar requirements with ledger account formatting.

1) Distractor check: Students might mistakenly pick recording transactions chronologically because that describes a journal or day book rather than a final classified summary. 2) Reasoning to the answer: A ledger organizes transactions into specific accounts for financial reporting. 3) Common mistake: Confusing the chronological listing function of journals with the classifying function of ledgers.

1) Distractor check: Students might mistakenly pick transferring all liabilities or continuing operations without changes because restructuring sounds administrative rather than legally transformative. 2) Reasoning to the answer: Merging requires dissolving the old partnership and establishing new terms with the merging firm. 3) Common mistake: Overlooking the legal requirement to dissolve the prior entity before a merger.

1) Distractor check: Students might mistakenly pick financial statements first or trial balance before ledgers because they see final reports more often than raw posting books. 2) Reasoning to the answer: Transactions are posted to the ledger, summarized in a trial balance, then used for financial statements. 3) Common mistake: Getting the accounting cycle steps out of chronological order.

1) Distractor check: Students might mistakenly pick omission or compensation thinking a transaction was completely left out or accidentally balanced by another error. 2) Reasoning to the answer: Misclassifying an expense (rent) as purchases violates the principle of account classification. 3) Common mistake: Confusing classification errors with mechanical entry mistakes.

1) Distractor check: Students might mistakenly pick ₦130,000 or ₦110,000 due to arithmetic errors when subtracting the margin percentage from the total sales figure. 2) Reasoning to the answer: Gross profit = 20% of ₦150,000 = ₦30,000. Cost of goods sold = Sales - Gross profit = ₦150,000 - ₦30,000 = ₦120,000. 3) Common mistake: Misapplying the gross profit margin percentage to the wrong base number.

1) Distractor check: Students might mistakenly pick ₦37,500 or ₦38,500 by improperly adding or subtracting discounts received instead of treating them correctly in the control account formula. 2) Reasoning to the answer: Closing creditors = Opening creditors + Purchases - Payments - Discounts. ₦12,500 = ₦10,000 + Purchases - ₦35,000 - ₦500. Purchases = ₦38,000. 3) Common mistake: Forgetting to account for discounts received when computing total credit purchases.

1) Distractor check: Students might mistakenly pick unpresented cheques because those are common bank reconciliation items, even though they affect the bank statement balance instead. 2) Reasoning to the answer: Unrecorded bank charges reduce the cash book balance, causing a discrepancy. 3) Common mistake: Attributing items that adjust the bank statement directly to the cash book balance.

1) Distractor check: Students might mistakenly pick ₦18,000 or ₦18,500 by misclassifying assets, capital, or drawings items during the summation process. 2) Reasoning to the answer: Debits: Cash ₦3,000, Purchases ₦5,000, Inventory ₦2,000, Fixed assets ₦6,000, Drawings ₦1,500 = ₦17,500. Credits: Capital ₦10,000, Sales ₦12,000, Creditors ₦2,500 = ₦17,500. 3) Common mistake: Including drawings incorrectly on the credit side instead of treating it as a contra-equity debit.

1) Distractor check: Students might mistakenly pick revenues and expenses when incurred because that describes accrual accounting rather than the simpler cash-focused method. 2) Reasoning to the answer: Cash basis accounting recognizes transactions only when cash is received or paid. 3) Common mistake: Confusing cash-basis timing with accrual-basis matching principles.

1) Distractor check: Students might mistakenly pick having a maximum of 50 shareholders because that restriction applies to private limited companies rather than public entities. 2) Reasoning to the answer: Public limited companies can sell shares publicly, unlike private ones. 3) Common mistake: Mixing up shareholder limits and stock-offering rules between private and public companies.

1) Distractor check: Students might mistakenly pick ₦1,200 or ₦800 by calculating the percentage against closing capital or including new capital/drawings incorrectly. 2) Reasoning to the answer: Interest = 4% of ₦25,000 = ₦1,000. 3) Common mistake: Applying interest on capital to the closing balance instead of the opening balance.

1) Distractor check: Students might mistakenly pick ₦300,000 or ₦310,000 due to simple addition slips when combining multiple asset contributions from different partners. 2) Reasoning to the answer: Segun: ₦30,000 + ₦50,000 + ₦90,000 = ₦170,000. Amina: ₦20,000 + ₦100,000 + ₦40,000 = ₦160,000. Total = ₦330,000. 3) Common mistake: Omitting one of the non-cash asset contributions while calculating total capital.

Students might choose option B or C by adding rather than subtracting costs or miscalculating the difference. To find the gross profit, subtract the cost of goods sold from the net sales amount. Taking the net sales of ₦400,000 and subtracting the cost of goods sold of ₦290,000 gives a gross profit of ₦110,000. Common mistake: Subtracting expenses like salaries when calculating gross profit instead of waiting for the net profit calculation.

Students might select option A or B due to arithmetic errors or forgetting to subtract new capital. To isolate profit, adjust the closing capital by reversing the effect of drawings and new capital, and comparing it to the opening capital. Specifically, taking the closing capital of ₦32,000, subtracting the opening capital of ₦25,000, adding back the drawings of ₦4,000, and subtracting the new capital of ₦6,000 results in a profit of ₦9,000. Common mistake: Adding new capital to closing capital instead of deducting it during the capital reconciliation.

Students might mistakenly pick option A, thinking the trading account covers all final profits. The trading account specifically computes the initial trading margin by comparing total sales against the cost of goods sold. Through this comparison, it arrives at either a gross profit or a gross loss before operating expenses are applied. Common mistake: Confusing gross profit with net profit when identifying the purpose of the trading section.

Students might select option A or B if they misallocate certain items between assets and liabilities or miscompute interim totals. The missing cash balance can be determined by balancing the fundamental accounting equation where total assets equal liabilities plus capital. Adding the known asset values of equipment ₦90,000, stock ₦40,000, and debtors ₦20,000 gives ₦150,000 plus cash. On the other side, combining share capital ₦100,000, creditors ₦15,000, and net profit calculated from sales ₦200,000 minus purchases ₦110,000, salaries ₦30,000, and utilities ₦10,000 yields a total of ₦165,000. Solving for cash gives an exact balance of ₦15,000. Common mistake: Forgetting to compute operating profit to include within the capital and liability side.