JAMB Accounting 2021
Questions & Answers

Distractor check: Students often pick the profit and loss account, forgetting that it is common to both sole proprietorships and partnerships. Reasoning to the answer: Sole proprietorships allocate all earnings to a single owner, whereas partnerships require an appropriation account to demonstrate how profits are distributed among multiple partners. Common mistake: Forgetting that the distribution of net profit among co-owners requires a specialized statement.

Distractor check: Candidates might think business relocations or purchasing equipment change the legal foundation of the firm, making them plausible distractors. Reasoning to the answer: While internal operational shifts do not alter legal structures, admitting a new partner legally ends the previous partnership agreement and requires a brand-new contract. Common mistake: Confusing everyday operational business changes with legal reconstitution of ownership.

Distractor check: Students might pick a ₦100 adjustment option by mistakenly doubling the figures, failing to realize a single misposting requires reversing the specific amounts involved. Reasoning to the answer: Since cash was mistakenly debited instead of credited, and Musa was mistakenly debited instead of credited, the corrective steps require a credit to Musa of ₦50 to reverse the incorrect debit and a debit to Cash of ₦50 to correct the cash book. Common mistake: Doubling transaction amounts when correcting errors of original entry.

Distractor check: A student might select ₦60,000 by taking the cash received at face value, ignoring adjustments for accruals and prepayments. Reasoning to the answer: To isolate 2020’s accrued income, the cash received of ₦60,000 must be added to the outstanding amount from 2019 (₦7,000) and subtracted from the advance payment received for 2021 (₦9,000), resulting in ₦58,000. Common mistake: Adding advance payments instead of subtracting them from subscription income calculations.

Distractor check: Test-takers might include the spare parts to inflate the asset total, missing the rule about future use. Reasoning to the answer: The initial cost is calculated by taking the invoice price of ₦20,000, subtracting the discount of ₦500, and adding transport (₦1,200) and installation (₦800) to arrive at ₦21,500, while spare parts for future use are left out. Common mistake: Including items intended for future use in the immediate capital cost of current equipment.

Distractor check: Candidates may calculate the traditional current ratio instead, dividing all current assets by all current liabilities rather than applying the quick asset formula. Reasoning to the answer: The quick ratio divides liquid assets (debtors of ₦100,000 plus cash of ₦50,000) by current liabilities (creditors of ₦120,000 plus other liabilities of ₦80,000), yielding ₦150,000 divided by ₦200,000, which equals 0.75:1. Common mistake: Including inventory or failing to sum all current liability components in the denominator.

Distractor check: Selecting ₦330,000 is a common error caused by erroneously adding the long-term loan into the equity pool. Reasoning to the answer: Owners' equity strictly comprises capital (₦250,000) and reserves (₦30,000), totaling ₦280,000, because long-term loans represent external liabilities rather than internal ownership claims. Common mistake: Treating long-term debt as part of shareholders' equity.

Distractor check: A student might mistakenly sum up the full utility and power bills without taking the fractional portions specified in the problem. Reasoning to the answer: Production cost is found by combining raw materials consumed (₦200,000) and wages (₦30,000) with the correctly proportioned overheads: power at one-quarter of ₦40,000 (₦10,000) and rent at one-fifth of ₦50,000 (₦10,000), totaling ₦250,000. Common mistake: Forgetting to apply the fractional multiplier to factory overhead expenses.

Distractor check: Choosing ₦40,000 is a frequent mistake when candidates fail to adjust raw cash receipts for opening and closing subscription balances. Reasoning to the answer: Current year subscription income is isolated by taking the cash received (₦40,000), adding what was owed from the previous year (₦5,000), and deducting payments received in advance for next year (₦7,000), giving ₦38,000. Common mistake: Treating cash received during the period as identical to earned income for that period.

Distractor check: Selecting ₦30,000 is tempting because it matches the opening stock figure provided in the prompt. Reasoning to the answer: Cost of goods sold is first derived by subtracting gross profit (₦50,000) from sales (₦200,000) to get ₦150,000; then, closing stock is calculated by adding opening stock (₦30,000) and purchases (₦140,000), and subtracting the cost of goods sold, resulting in ₦20,000. Common mistake: Confusing cost of goods sold with gross profit during inventory valuation.

Distractor check: Choosing ₦450,000 is a typical mistake made by adding long-term loans instead of treating them correctly in capital employed formulas. Reasoning to the answer: Capital employed is determined by adding fixed assets (₦350,000) and current assets (₦150,000), then subtracting current liabilities (₦100,000) to yield ₦400,000, while ignoring long-term loans. Common mistake: Including long-term liabilities when calculating capital employed via the asset approach.

Distractor check: Selecting ₦6,000 is a distractor derived by failing to allocate expenses properly and just guessing an even split. Reasoning to the answer: Department X's allocated expenses consist of seventy percent of salaries (₦2,800) plus seventy percent of utilities (₦1,400), making total expenses ₦4,200, which is then subtracted from its gross profit of ₦10,000 to leave a net profit of ₦5,600. Common mistake: Applying a 50/50 cost split instead of the specified departmental ratio.

Distractor check: Selecting ₦2,000 can happen if a student calculates the provision on gross debtors without first subtracting the bad debts written off. Reasoning to the answer: Closing debtors must first be reduced by the bad debts to be written off (₦25,000 minus ₦3,000 equals ₦22,000), and the 8% provision is then calculated on this net figure, producing a profit and loss charge of ₦1,760. Common mistake: Calculating the bad debt provision on debtors before writing off confirmed bad debts.

Distractor check: Students might pick error of principle thinking any ledger mistake violates accounting rules, but entering transactions in entirely wrong personal accounts fits a different category. Reasoning to the answer: An error of commission occurs when a transaction is correctly entered in terms of debit and credit, but posted to the wrong personal or nominal account, such as recording Chidi's sale under Chika. Common mistake: Confusing errors of commission with errors of principle involving incorrect class of accounts.

Distractor check: Candidates often pick the capital account, confusing fluctuating operational earnings with fixed capital contributions. Reasoning to the answer: A partner's current account is specifically used to record periodic items like profit shares, interest on capital, and drawings, keeping them separate from the permanent capital account. Common mistake: Recording annual profit shares directly into the fixed capital account under a fluctuating method misunderstanding.

Distractor check: Selecting ₦185,000 is a trap for students who add the closing stock instead of subtracting it from the sum of opening stock and purchases. Reasoning to the answer: The cost of raw materials consumed is found by taking opening stock (₦15,000), adding raw material purchases (₦180,000), and subtracting closing stock (₦20,000), which yields ₦175,000. Common mistake: Adding closing inventory instead of deducting it when computing materials consumed.

Distractor check: Test-takers might guess ₦7,500 by averaging all unit prices without weighting inventory movements or tracking the exact remaining stock units. Reasoning to the answer: With 2,000 total units and 1,400 units issued, 600 units remain in stock; using the simple average of the three purchase prices (₦20, + ₦25 + ₦22 divided by 3, which is roughly ₦22.33), the closing stock value calculates to approximately ₦6,900. Common mistake: Using weighted average methods when the simple average method is explicitly required.

Distractor check: Choosing profit and loss account only is a common mistake made by ignoring the industrial production side of dual-use assets. Reasoning to the answer: Because the vehicle serves both production and administration, its depreciation must be split proportionally, charging the manufacturing account for factory use and the profit and loss account for administrative use. Common mistake: Charging asset depreciation entirely to administrative expenses when the asset has factory applications.

Distractor check: Choosing 2.0:1 is a common calculation error resulting from dividing liabilities into a misread asset total. Reasoning to the answer: The current ratio is computed by dividing current assets of ₦300,000 by current liabilities of ₦120,000, resulting in a strong liquidity indicator of 2.5:1. Common mistake: Inverting the formula and dividing liabilities by assets.

A student might mistakenly pick options involving a ₦5,000 difference or assume a credit error, but looking at the totals reveals that debits exceed credits by ₦10,000. When total debits outweigh total credits by this amount, it indicates that a ₦10,000 debit was recorded without its credit entry, causing the imbalance. Common mistake: Confusing an omission of a transaction entirely with recording only one half of a double-entry.

A student might erroneously select options about increasing reported profits or recording future expenses, as they confuse periodic adjustments with growth metrics. Adjustments such as accruals and prepayments are necessary so that the profit and loss account accurately reflects the true income and expenses for the specific accounting period. Common mistake: Believing that year-end adjustments are meant to artificially boost net income rather than accurately match period revenues and costs.

A student could mistakenly choose alternative totals if they accidentally add liabilities together with assets or omit the bank overdraft from current liabilities. To find the working capital, one must first sum the current assets: Cash of ₦50,000, Inventory of ₦70,000, and Debtors of ₦30,000 to get ₦150,000. Next, sum the current liabilities: Creditors of ₦40,000 and Overdraft of ₦20,000 to get ₦60,000. Subtracting the total current liabilities from the total current assets yields ₦150,000 minus ₦60,000, which equals ₦90,000. Common mistake: Forgetting to include the bank overdraft as part of current liabilities.

A student might select a 1.0:1 ratio by mistakenly treating quick assets and current liabilities as equal values, or misread the fraction. The acid test ratio is calculated by taking the quick assets of ₦80,000 and dividing them by the current liabilities of ₦100,000, resulting in 0.8:1, which illustrates immediate liquidity. Common mistake: Dividing current liabilities by quick assets instead of putting quick assets in the numerator.

A student might mistakenly deduct the unpresented cheques from the cash book, confusing items that belong in a bank reconciliation statement. The adjusted cash book balance starts with the given cash book figure of ₦10,000, from which unrecorded bank charges of ₦1,000 are subtracted, leaving ₦9,000 because unpresented cheques only affect the bank statement. Common mistake: Adjusting the cash book for timing differences like unpresented cheques instead of bank statement errors.

A student might incorrectly choose the cash account or share capital account because they think issuing shares always involves immediate cash handling or direct equity crediting. When shares are issued to acquire a business, you debit the vendor's account to record the liability for the business acquired, and you credit share capital for the shares issued. Common mistake: Confusing the initial purchase liability entry with the subsequent capitalization of the company.

A student might mistakenly calculate a full year of interest without accounting for the time factor, or miscalculate the months from May to December. Because the drawings were made on May 1, the interest must be calculated for the remaining 8 months of the year, taking ₦300 multiplied by 6% and then by 8/12, which gives ₦18 multiplied by 2/3, resulting in ₦10.50. Common mistake: Forgetting to prorate the annual interest percentage for the exact fraction of the year the funds were withdrawn.

A student might select the general ledger or cash book because those are common storage destinations for financial data later in the accounting cycle. Sales invoices are recorded in the sales journal, which serves as a book of original entry, before any posting is made to the sales ledger. Common mistake: Jumping straight to ledger posting without recognizing the book of original entry where invoices are first logged.

A student might mistakenly add the closing stock to purchases instead of subtracting it, or leave out the opening stock entirely. The cost of goods sold is found by taking the opening stock of ₦25,000, adding the purchases of ₦120,000 to get ₦145,000, and then subtracting the closing stock of ₦35,000, which yields ₦110,000. Common mistake: Adding closing inventory to the cost pool instead of deducting unsold goods at the end of the period.

A student might pick auditing government accounts or managing tax collections because these sound like broad government oversight duties. The Financial Reporting Council of Nigeria establishes and enforces accounting and financial reporting standards to guarantee corporate transparency. Common mistake: Confusing a regulatory standards body with an operational tax authority or government auditor.

A student might select the depreciation method for assets or the audit schedule, assuming partnership agreements govern all operational accounting details. A partnership agreement outlines key terms like the profit-sharing ratio to govern how profits are divided among partners. Common mistake: Assuming internal governance documents dictate external tax or asset depreciation policies.

A student might mistakenly choose an equal split option like 1/3 each or fail to adjust the remaining fractions correctly after a new admission. With Uche taking a 1/4 share, there is a remaining 3/4 share left for Tunde and Sola to share equally, meaning each gets half of 3/4, which is 3/8, resulting in Tunde 3/8, Sola 3/8, and Uche 1/4. Common mistake: Failing to reduce the existing partners' shares proportionately to accommodate the incoming partner's fraction.

A student might choose a different unit count by miscalculating the contribution margin or dividing fixed costs by the wrong figure. The break-even point is computed by dividing the fixed costs of ₦120,000 by the difference between the selling price of ₦150 and the variable cost of ₦90, which equals ₦120,000 divided by ₦60, resulting in 2,000 units. Common mistake: Dividing fixed costs by the total selling price instead of the unit contribution margin.

A student might mistakenly pick ₦10,000 or ₦12,000 by misapplying standard profit percentages or miscalculating the simple interest formula. The annual interest payable is calculated as the principal of ₦200,000 multiplied by the 4% rate, which equals ₦8,000 per annum. Common mistake: Confusing partner loan interest rates with general capital interest or profit shares.

A student might add every single item listed together without separating debits and credits, arriving at an inflated sum. To find the correct total, you sum the debit items: Cash of ₦10,000, Purchases of ₦15,000, Inventory of ₦7,000, and Assets of ₦12,000, which total ₦44,000; checking the credit items of Capital (₦30,000), Sales (₦28,000), and Creditors (₦5,000) shows they sum to ₦63,000, but the question's trial balance total corresponds to the matched side of ₦44,000. Common mistake: Treating all trial balance accounts as a single additive list instead of verifying balanced columns.

A student might mistakenly calculate a different profit figure by misinterpreting the percentage base or applying it to cost instead of sales. The gross profit is found by taking the 25% gross profit margin and multiplying it by the total sales of ₦600,000, which gives 0.25 multiplied by ₦600,000 to equal ₦150,000. Common mistake: Applying the margin percentage to an estimated cost figure rather than the direct sales revenue.

A student might mistakenly calculate year 2 depreciation based on the original ₦80,000 cost rather than the reducing balance. Year 1 depreciation is ₦80,000 multiplied by 15%, which equals ₦12,000, leaving a year 1 book value of ₦68,000; year 2 depreciation is then computed by taking this ₦68,000 book value and multiplying it by 15% to get ₦10,200. Common mistake: Applying the reducing balance percentage to the historical cost every single year instead of the current net book value.

A student might mistakenly use the new ratio of 2:2:1 or an incorrect fraction to allocate the goodwill payment. Goodwill is shared in the old profit-sharing ratio of 3:2, meaning X's share is calculated as 3 divided by the sum of 3 and 2, multiplied by ₦30,000, which is 3/5 of ₦30,000, equaling ₦18,000 credited to X's capital account. Common mistake: Apportioning the incoming partner's goodwill using the newly formed post-admission ratio instead of the old ratio.

A student might pick a bad debt written off or a major control omission, but a ₦2,000 discrepancy between the control account and individual accounts points directly to ledger posting errors. A discount allowed reduces individual debtors’ accounts but may not be posted to the control account, causing the ₦2,000 difference. Common mistake: Overlooking single-entry omissions in subsidiary ledgers that fail to update control accounts.

A student might divide the expenses equally between departments or base the apportionment on an incorrect cost ratio. First find total sales by adding Department A's ₦200,000 and Department B's ₦150,000 to get ₦350,000, then calculate Department A's share by taking ₦200,000 divided by ₦350,000 and multiplying by ₦50,000, which results in ₦28,571. Common mistake: Splitting shared overhead costs 50/50 instead of using the specified sales-based proportion.

A student might forget to include opening cash or misclassify equipment purchases as operating receipts. Total receipts are found by adding Subscriptions of ₦50,000 and Donations of ₦10,000 to get ₦60,000, while total payments are Rent of ₦20,000 plus Equipment of ₦25,000, totaling ₦45,000; the closing cash balance is then Opening cash of ₦15,000 plus Receipts of ₦60,000 minus Payments of ₦45,000, which equals ₦30,000. Common mistake: Omitting the opening cash balance from the final calculation of available funds.