JAMB Accounting 2020
Questions & Answers

Distractor check: Option B is the exact cash amount Wamo paid, which fools students who forget to calculate the actual resulting equity share based on total partnership capital. Reasoning to the answer: First, combine the pre-admission capital balances of Kayode (₦40,000), Akpan (₦50,000), and Kachalla (₦70,000) to get ₦160,000. Adding Wamo's ₦50,000 cash contribution brings the total partnership capital to ₦210,000, and taking one-fifth of that total gives Wamo an equity share of ₦42,000. Common mistake: Equating the amount of cash contributed directly with the partner's final capital equity credit.

Distractor check: Option C might seem like a major operational shift, but buying fixed assets is an internal business decision that does not legally dissolve a firm. Reasoning to the answer: Bringing a new partner on board fundamentally changes the ownership structure and dissolves the existing partnership agreement, necessitating the formation of a brand new legal entity. Common mistake: Confusing routine business expansions with structural partnership dissolutions.

Distractor check: Option A is a distractor that adds the values together instead of calculating the net difference between the overdraft and the deposit. Reasoning to the answer: Starting with a bank overdraft balance of ₦600 Cr, the uncredited payment of ₦1,080 must be treated as a Dr entry, which results in an adjusted cash account balance of ₦480 Dr after subtracting the overdraft. Common mistake: Mishandling the signs between bank overdrafts and uncredited deposits when reconciling.

Distractor check: Option C is incorrect because simply showing total cash paid or received ignores accruals, prepayments, and non-cash items. Reasoning to the answer: Making period-end adjustments ensures that the profit and loss account accurately captures actual expenses incurred and income earned during the specific period, fully complying with the accrual concept. Common mistake: Confusing cash flow tracking with the accrual-based matching principle.

Some students might mistakenly select options involving fixed assets or long-term loan totals by confusing them with short-term metrics. Working capital is derived by taking the sum of the current assets, which include stock at ₦4,000, debtors at ₦6,000, and cash at ₦8,000 to total ₦18,000, and subtracting the sum of the current liabilities, made up of creditors at ₦9,000 and accrued wages at ₦5,000 to total ₦14,000, yielding ₦18,000 minus ₦14,000 for a final result of ₦4,000. Common mistake: Subtracting non-current liabilities or including land and buildings in current asset computations.

An uninitiated student might accidentally try to include stock or fixed assets in the liquidity ratio calculation. The acid test ratio is computed by comparing quick assets, consisting of debtors at ₦6,000 plus cash at ₦8,000 to equal ₦14,000, against current liabilities, which combine creditors at ₦9,000 and accrued wages at ₦5,000 to total ₦14,000, producing a final ratio of ₦14,000 to ₦14,000 which simplifies to 1:1. Common mistake: Including inventory (stock) in the quick assets numerator, which would distort the strict liquidity measurement.

One might mistakenly add all transaction inflows and outflows blindly to the initial capital instead of updating individual asset accounts. The updated cash balance must first be calculated by taking the initial cash of ₦28,500, adding sales of ₦8,200, and subtracting rent paid of ₦12,000, purchases of ₦15,000, and the sales boy payment of ₦500 to arrive at ₦9,200, which is then added together with the remaining stock of ₦10,000, furnishings of ₦10,000, and ceiling fan of ₦1,500 to reach the new asset total of ₦30,700. Common mistake: Forgetting to adjust the cash balance for operating expenses before aggregating the final balance sheet assets.

A test-taker could mistakenly combine expenses with revenues or omit specific payments when tracking liquidity movements. The cash account balance is determined by taking the opening cash of ₦28,500, adding the cash sales of ₦8,200, and then systematically deducting the payments made during the month, which include rent paid of ₦12,000, purchases of ₦15,000, and the sales boy wages of ₦500, resulting in a net cash balance of ₦9,200. Common mistake: Treating inventory purchases or unpaid items as immediate cash outflows rather than adhering to the specific cash transaction records.

Students often confuse prepayments received with trade payables or long-term borrowing obligations. Calls in advance are amounts received from shareholders before they are due, recorded as a current liability until the shares are issued. Common mistake: Classifying money received ahead of schedule as a fixed liability or shareholder equity prematurely.

A student might incorrectly debit cash or credit the vendor instead of recognizing the acquisition of assets and issuance of equity. The vendor’s account is debited to record the asset or liability acquired, and share capital is credited for the shares issued. Common mistake: Mixing up the direction of the double entry by crediting the vendor or debiting the share capital account.

An exam candidate might miscalculate the time proportion or mistakenly credit instead of debit the current account. Interest is calculated using the formula (₦100 × 5% × 9 months) plus (₦240 × 5% × 6 months), which yields ₦45 plus ₦72, totaling ₦117, and because this represents drawings interest it is debited to Joy’s current account. Common mistake: Applying the percentage for a full twelve months or mixing up credit entries with the correct debit treatment for partner drawings interest.

One might forget to account for the fraction of the year or omit the initial drawings total when finding the final current balance. Interest is computed as (₦200 × 5% × 9/12) plus (₦300 × 5% × 3/12), giving ₦7.50 plus ₦3.75 for a total interest of ₦11.25, which is then added to the total drawings of ₦500 to yield a total debit of ₦511.25 debit. Common mistake: Subtracting the interest from the drawings instead of aggregating them as part of the total debit exposure on the current account.

A student might mistakenly think cash is directly affected at the branch level for head office expenditures. The branch debits the expenses account to record the expense and credits the head office account to reflect the liability owed to the head office. Common mistake: Crediting the cash account at the branch level when the payment was handled entirely by the head office.

Candidates frequently confuse sales invoices with delivery notes or receipts when identifying book-keeping source documents. The sales invoice is the source document used to record credit sales in the sales journal. Common mistake: Selecting the receipt or delivery note instead of the invoice that validates the transaction amount for the journal.

It is easy to mistakenly swap closing stock for purchases or include sales figures when evaluating inventory availability. Cost of goods available for sale equals opening stock plus purchases, representing the total inventory available during the period. Common mistake: Adding sales figures into the computation instead of focusing purely on inventory valuation components.

One might confuse factory overheads or administrative costs with direct production expenses. Prime costs include direct costs like direct wages, directly attributable to production. Common mistake: Selecting factory rent or administrative expenses which fall under overheads rather than direct prime costs.

Students sometimes mix up the consistency convention with the going concern or prudence concepts. The consistency convention ensures the same accounting methods are applied across periods, enabling comparability. Common mistake: Confusing consistency with materiality or prudence principles.

A learner might mistakenly credit cash or sales when private inventory withdrawals occur. Goods taken for personal use are debited to the drawings account and credited to the purchases account to reduce inventory. Common mistake: Crediting the cash account or sales account instead of reducing purchases when inventory is removed for private use.

A common error is confusing the purchases ledger with the sales ledger or general ledger. The purchases ledger contains accounts of individual suppliers (creditors) for credit purchases. Common mistake: Choosing the sales ledger, which tracks customers rather than suppliers.

A candidate might mistakenly multiply the cost by the useful life or divide by a wrong factor. Annual depreciation equals cost divided by useful life, which is ₦100,000 divided by 5, resulting in ₦20,000. Common mistake: Multiplying the asset cost by the lifespan instead of dividing.