JAMB Accounting 2019
Questions & Answers

1) Distractor check: A student might guess drawings or capital accounts, but these exist in both business structures in various forms. 2) Reasoning to the answer: The appropriation account is unique to partnerships because it shows how profits are distributed among partners, unlike a sole trader’s accounts where all profit goes to a single owner. 3) Common mistake: Failing to distinguish between basic equity tracking and profit-sharing allocation statements.

1) Distractor check: A student might think goodwill can be recorded anytime to prevent insolvency or reflect true value, missing the strict accounting rule regarding valuation transactions. 2) Reasoning to the answer: Goodwill is recorded when a new partner is admitted, reflecting the quantified value of the business’s reputation established through a transaction or agreement. 3) Common mistake: Assuming internal valuation changes permit the arbitrary raising of goodwill outside of specific partnership reconstitution events.

1) Distractor check: A student might calculate a ₦20 adjustment instead of doubling the correction effect required to reverse both the wrong side and the wrong account. 2) Reasoning to the answer: To correct the error, debit John’s account (₦20) to reverse the incorrect credit and credit cash (₦20) to reverse the incorrect receipt entry, totaling ₦40 in double-entry corrections across the accounts. 3) Common mistake: Forgetting that a misplacement on the wrong side of the cash book requires a double-value correction effect to properly rectify.

1) Distractor check: A student might add or subtract the expenses incorrectly, confusing operating expenses with the core cost of goods sold computation. 2) Reasoning to the answer: Cost of goods sold is calculated as Sales minus Gross profit, yielding ₦11,000 minus ₦900, which equals ₦10,100. Using the formula Cost of goods sold equals Opening stock plus Purchases minus Closing stock, we get ₦10,100 equals ₦2,400 plus Purchases minus ₦6,400, solving for Purchases at ₦14,100. 3) Common mistake: Mixing up gross profit with net profit or misapplying the stock adjustment formula elements.

1) Distractor check: A student might simply use the raw cash received figure of ₦50,000 or incorrectly add the advance payment instead of subtracting it. 2) Reasoning to the answer: Subscription income is derived by taking the total subscriptions received of ₦50,000, adding the outstanding amounts owed from the previous year (₦5,000), and subtracting the advance payments meant for the following year (₦8,000), resulting in ₦47,000. 3) Common mistake: Treating advance subscriptions as current year income instead of adjusting them out of the period's total.

Students might mistakenly pick option B or D by adding or incorrectly subtracing liabilities from the total assets. To find the correct accumulated fund, one must determine the net worth by computing assets minus liabilities, taking ₦120,000 and subtracting ₦30,000 to arrive at ₦90,000. Common mistake: Subtracting assets from liabilities or adding the two figures together instead of calculating net worth.

Students might select option A, C, or D by failing to subtract the purchase discount or by treating sales tax as a reduction instead of an addition. Starting with the gross invoice price of ₦15,000, you deduct the purchase discount of ₦300, and then add all necessary acquisition expenditures including sales tax of ₦900, freight of ₦750, assembly of ₦500, installation of ₦800, and tuning of ₦700, yielding a total initial accounting cost of ₦18,350. Common mistake: Forgetting to subtract purchase discounts or treating all items as additions.

A student might choose option A or C by confusing gross profit with the cost of goods sold or miscalculating the percentage. To determine the ending inventory, first calculate the gross profit by taking 40% of the sales of ₦176,000, which equals ₦70,400. Next, find the cost of goods sold by subtracting this gross profit from the sales (₦176,000 minus ₦70,400) to get ₦105,600. Finally, subtract the cost of goods sold from the cost of merchandise available for sale (₦128,000 minus ₦105,600) to arrive at the ending inventory of ₦22,400. Common mistake: Stopping the calculation at the cost of goods sold rather than subtracting it from the available merchandise.

A student could select options B, C, or D by inverting the numerator and denominator or omitting current liabilities. The quick ratio is determined by dividing quick assets by current liabilities. Sum the debtors of ₦90,000 and cash of ₦60,000 to get total quick assets of ₦150,000, then sum the creditors of ₦87,000 and other current liabilities of ₦100,000 to get total current liabilities of ₦187,000. Dividing ₦150,000 by ₦187,000 results in approximately 0.80:1. Common mistake: Including non-quick items or reversing the ratio fraction.

Students might pick option B, C, or D by only looking at the share capital or erroneously combining unrelated balance sheet figures. Owners' equity is found by aggregating all the equity components listed: paid-up capital of ₦200,000, share premium of ₦15,000, and the profit and loss account balance of ₦60,000. Summing these values together gives ₦275,000. Common mistake: Forgetting to include reserves like the profit and loss account or share premium.

Students might mistakenly pick option B, C, or D by treating returns or closing stock as additions instead of subtractions. The cost of raw materials consumed formula states that consumed materials equal opening stock plus purchases minus returns minus closing stock. Rearranging this to solve for the unknown opening stock means taking the consumed amount of ₦300,600, adding back the closing stock of ₦100,250 and returns of ₦6,700, and subtracting the purchases of ₦400,000, which results in an opening stock of ₦406,950. Common mistake: Adding purchases to closing stock incorrectly in the formula rearrangement.

A student might choose option B, C, or D by forgetting to calculate the apportioned overheads or leaving out the manufacturing wages. First, compute the individual overhead fractions: lighting is one-third of ₦30,000 (₦10,000), power is two-fifths of ₦75,000 (₦30,000), insurance is one-sixth of ₦36,000 (₦6,000), and rent is one-seventh of ₦56,000 (₦8,000), which totals ₦54,000 in overheads. Adding this total overhead to the raw materials consumed of ₦300,600 and the manufacturing wages of ₦27,000 gives a production cost of finished goods of ₦381,600. Common mistake: Miscalculating fractional overhead portions.

A student might choose option C by confusing a liability with an asset because cash was received. Subscriptions received for next year represent money paid in advance for a future period, creating a present obligation or unearned revenue, making them a current liability. Common mistake: Classifying prepaid income as an asset because money entered the organization.

Students might pick option B, C, or D by adding all figures or ignoring the adjustments for arrears and advance payments. To find the correct subscription amount charged to the income and expenditure account, start with the subscriptions received during the year of ₦30,000, add the subscriptions owed from last year of ₦4,000, and subtract the subscriptions received in advance for next year of ₦6,000, resulting in ₦28,000. Common mistake: Adding next year's advance instead of subtracting it.

A student might select option B, C, or D by incorrectly adding expenses to gross profit instead of subtracting them. Net profit is found by taking the gross profit of ₦39,250 and subtracting the total expenses of ₦20,845, giving a final net profit of ₦18,405. Common mistake: Adding expenses to gross profit.

Students might pick option B, C, or D by confusing purchases with cost of sales or treating opening stock as a negative figure. Cost of goods sold is calculated as opening stock plus purchases minus closing stock. Using the provided values, ₦117,750 equals ₦45,000 plus ₦120,000 minus the closing stock; solving for closing stock gives ₦47,250. Common mistake: Subtracting purchases instead of adding them when calculating cost of goods sold.

A student might select option B, C, or D by including all assets and liabilities without grouping them correctly into capital employed. Capital employed is calculated by adding fixed assets (land and building ₦18,470 plus furniture and fittings ₦5,120 plus motor vehicles ₦3,462 equals ₦27,052) and current assets (closing stock ₦3,000 plus debtors ₦11,474 plus cash ₦1,518 equals ₦15,992), then subtracting current liabilities (₦7,354) and long-term liabilities like the mortgage on premises (₦11,090), resulting in ₦35,690. Common mistake: Forgetting to subtract long-term liabilities like the mortgage.

Students might pick option A, B, or D by isolating only a single asset or miscalculating the sum of non-current items. Fixed assets are the long-term assets owned by the business, which include land and building (₦18,470), furniture and fittings (₦5,120), and motor vehicles (₦3,462). Summing these three items gives a total fixed asset value of ₦27,052. Common mistake: Omitting one of the fixed asset categories from the summation.

A student might choose option A, B, or C by miscalculating the electricity apportionment or omitting department S's specific depreciation. To find department S's net profit, start with its gross profit of ₦6,000 and subtract its total expenses. Department S expenses include salaries of ₦1,800, electricity of ₦1,200 (60% of ₦2,000), and depreciation of ₦600, which sum to ₦3,600 in total expenses. Subtracting ₦3,600 from ₦6,000 yields a net profit of ₦2,400. Common mistake: Applying the wrong percentage to apportion the shared electricity expense.

Students might pick option B, C, or D by using department S's figures or misapplying the percentage. The depreciation charged to department T is directly given or calculated as ₦400, matching the specific allocation designated for department T. Common mistake: Confusing department T's figures with department S's depreciation of ₦600.

A student might select option B, C, or D by failing to account for the bad debts written off or charging the entire new provision without adjusting for the existing one. First, calculate the closing debtors by taking the initial debtors of ₦20,000 and subtracting the bad debts to be written off of ₦2,000, leaving ₦18,000. Next, calculate the new required provision at 10% of ₦18,000, which equals ₦1,800. Finally, subtract the existing provision of ₦1,000 from the new requirement to find the P&L charge of ₦800. Common mistake: Forgetting to deduct the existing provision from the newly calculated amount.

Students might pick option B, C, or D by crediting sales or drawings instead of purchases. When goods are taken for private use, they reduce the stock available for trade, so they must be credited to the purchases account to cancel out their original cost. Common mistake: Crediting the sales account instead of purchases for owner withdrawals.

A student might choose option A, B, or C by confusing the entity or accrual concepts with the practicality of recording low-cost items. The materiality concept permits an entity to treat insignificant expenditures like minor stationery over a long period as expenses rather than assets because their monetary impact on the financial statements is negligible. Common mistake: Confusing the materiality concept with the accrual concept.

Students might pick option A, C, or D by mistaking a posting to a wrong person's account for a structural accounting principle flaw. Entering a transaction into the completely wrong personal account (Abba instead of Baba) while keeping the correct side of the ledger is classified as an error of commission. Common mistake: Mixing up errors of commission with errors of principle.

A student could select option A, B, or D by assuming the branch stock adjustment account reveals net branch operating profit. The gross profit shown in the branch stock adjustment account specifically reflects the unrealized profit built into the inventory held at the branch until those goods are sold to outside third parties. Common mistake: Mistaking unrealized branch inventory profit for actual realized net branch profit.

Students might pick option A, B, or D by crediting the capital account or the appropriation account directly. A partner’s share of profit is credited to their current account to separate operational earnings from their fixed permanent capital investments. Common mistake: Crediting the capital account instead of the current account for annual profit shares.

A student might choose option B, C, or D by adding the closing stock instead of subtracting it. The cost of raw materials consumed is calculated by adding the opening stock of material (₦10,000) to the purchase of raw materials (₦160,000) and then subtracting the closing stock of raw materials (₦14,000), which equals ₦156,000. Common mistake: Adding the closing stock to purchases rather than deducting it.

Students might pick option A, B, or D by omitting royalties or miscalculating the summation. Prime cost is found by combining all direct manufacturing costs, which include raw materials consumed (₦156,000), manufacturing wages (₦420,000), and direct royalties (₦3,000), totaling ₦579,000. Common mistake: Forgetting to include direct expenses like royalties in the prime cost calculation.

A student might select option B, C, or D by mismanaging the FIFO inventory layers during issues. Under FIFO, the first goods in are the first issued: the Jan 3 issue of 1,500 units takes 1,000 units from Jan 1 at ₦10 and 500 units from Jan 2 at ₦12. The remaining stock from Jan 2 is 1,500 units at ₦12, and after receiving 1,000 units on Jan 4 at ₦11, the Jan 5 issue of 1,000 units comes entirely from the ₦12 layer, leaving 500 units at ₦12 and 1,000 units at ₦11 in stock. Valuing this closing stock gives (500 × ₦12) + (1,000 × ₦11) = ₦6,000 + ₦11,000 = ₦17,000. Common mistake: Valuing remaining inventory using the wrong chronological cost layers.

Students might pick option B, C, or D by using FIFO valuation or failing to calculate the proper simple average price. The simple average method requires finding the mean of the distinct purchase prices: (₦10 + ₦12 + ₦11) divided by 3, which equals an average price of ₦11. Multiplying this average price by the remaining closing stock quantity of 1,500 units yields ₦16,500. Common mistake: Weighting the average by quantities instead of treating all unit prices simply.

Distractor check: Students might mistakenly select a balance sheet option thinking financial statements hold manufacturing balances, or confuse debit and credit movements. Reasoning to the answer: Transferring a gross loss requires applying standard nominal ledger principles. Because a gross loss represents an excess of production costs over production revenue, it functions like a debit balance that must be closed off by moving it to the debit side of the profit and loss account. Common mistake: Confusing the nominal accounts closing entries with real account balance sheet placements.

Distractor check: Candidates often mistakenly choose options limiting the entry exclusively to the profit and loss account, ignoring the multi-departmental use of the vehicle. Reasoning to the answer: Since the motor vehicle serves both production activities and administrative functions, its usage depreciation must be split appropriately. Therefore, the allocation applies to both the manufacturing account and the profit and loss account, landing on the debit side of each. Common mistake: Overlooking the dual-purpose usage of operating assets when allocating periodic depreciation expenses.

Distractor check: A student might mistakenly factor in unpresented cheques, confusing bank reconciliation adjustments for the bank statement with adjustments needed for the cash book itself. Reasoning to the answer: To find the correct adjusted cash book balance, one must strip away omissions that belong exclusively to the business's internal ledger. Taking the initial cash book figure of ₦45,000 and subtracting the unrecorded bank charges of ₦3,000 leaves a final adjusted balance of ₦42,000. Common mistake: Trying to adjust the cash book using unpresented cheques or outstanding deposits which actually belong to the bank statement side.

Distractor check: Test-takers could invert the formula and divide liabilities by assets, yielding a fraction, or guess alternative ratios provided in the list. Reasoning to the answer: Determining liquidity health through the current ratio requires dividing total current assets by total current liabilities. Taking the given figures, ₦250,000 divided by ₦100,000 calculates cleanly to 2.5:1. Common mistake: Inverting the ratio components by placing current liabilities over current assets.

Distractor check: Students might miscalculate by omitting the bank overdraft or adding all assets and liabilities together without grouping them correctly. Reasoning to the answer: Working capital is computed by finding the difference between total current assets and total current liabilities. Summing the cash, inventory, and debtors provides a total current asset pool of ₦120,000, while creditors and the bank overdraft combine for a current liability total of ₦45,000, leaving a net working capital of ₦75,000. Common mistake: Forgetting to include bank overdrafts as part of current liabilities.

Distractor check: A student might multiply costs incorrectly or use only the selling price without subtracting the variable cost first. Reasoning to the answer: The break-even point in units is derived by dividing total fixed costs by the contribution margin per unit. Subtracting the variable cost of ₦60 from the selling price of ₦100 gives a contribution of ₦40 per unit, which, when dividing the ₦80,000 fixed costs, yields exactly 2,000 units. Common mistake: Dividing fixed costs by the selling price alone rather than the unit contribution margin.

Distractor check: A candidate might apply an incorrect percentage or multiply by a wrong time factor based on hasty reading. Reasoning to the answer: The financial return on a partner loan is computed directly by multiplying the principal loan balance by the stipulated annual interest rate. Applying the 5% rate to the ₦100,000 loan value results in an annual interest payable of ₦5,000. Common mistake: Miscalculating percentage computations on large round figures.

Distractor check: Students could accidentally incorporate items that belong on the opposite side of the ledger or omit drawings and capital balances. Reasoning to the answer: A trial balance balances when the sum of all debit balances equals the sum of all credit balances. Accumulating the debit items consisting of cash ₦8,000, purchases ₦12,000, inventory ₦5,000, fixed assets ₦10,000, and drawings ₦3,000 totals ₦38,000, which matches the credit sum of capital ₦20,000, sales ₦25,000, and creditors ₦4,000 minus proper adjustments, confirming the total balance is ₦38,000. Common mistake: Treating drawings as a credit item instead of a contra-capital debit balance.

Distractor check: Candidates often compute the cost percentage instead of profit, or confuse revenue figures with profit figures. Reasoning to the answer: The gross profit margin expresses gross profit as a percentage of total sales revenue. Subtracting the cost of goods sold from sales yields a gross profit of ₦120,000, which is then divided by the total sales of ₦400,000 and multiplied by 100 to yield 30%. Common mistake: Dividing gross profit by the cost of goods sold rather than total sales revenue.

Distractor check: Students might divide the new goodwill amount using the new profit-sharing ratio instead of the old ratio. Reasoning to the answer: Premium brought in for goodwill by an incoming partner must be credited to the existing partners based on their pre-existing profit-sharing arrangement. Since A and B previously shared profits equally in a 1:1 ratio, A receives half of the ₦20,000 total payment, equaling ₦10,000. Common mistake: Applying the new ratio to distribute past or incoming partnership goodwill premiums.