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.