JAMB Principles of Accounts 1994 past questions and answers

The term 'accounting period' is used to refer to the

1. A.time span during which taxes are paid to the Inland Revenue Board
2. B.budget period, usually one year, relied on by the accountant
3. C.time span, usually one year, covered by financial statement
4. D.period within which debtors are expected to settle accounts.

Assigning revenues to the accounting period in which goods were sold or services rendered and expenses incurred is known as

1. A.passing of entries
2. B.consistency convention
3. C.matching concept
4. D.adjusting for revenue.

The accounting convention which states that 'profit must not be recognized until realized while all losses should be adequately provided for' is termed

1. A.materiality
2. B.objectivity
3. C.consistency
4. D.conservatism.

Accounting information is used by investors and creditors of a company to predict

1. A.future cash flows of the company
2. B.future tax payments of the company
3. C.potential merger candidates for the company
4. D.appropriate remunerations for the company's staff.

When a business incurs labour cost in installing a fixed asset, the cost is treated as

1. A.additional cost to the asset
2. B.business wages and salaries
3. C.installation cost of the asset
4. D.business cost of the asset.

What is the cardinal rule of the double entry system?

1. A.Debit the increasing account and credit the decreasing account
2. B.Debit the receiving account and credit the giving account
3. C.Debit the asset account and credit the liability account
4. D.Debit the revenue account and credit the expenditure account.

Malam Gambo bought a freezer for his shop costing ₦10 500. In recording, he debited office expenses account and credited the bank account. What book-keeping error has he committed?

1. A.Error of commission
2. B.Error of reversal of entries
3. C.Error of principle
4. D.Compensating error.

The use of the folio in the ledger is for

1. A.referencing purposes
2. B.particulars of the transaction
3. C.the account titles
4. D.only credit items.

Account of Tanko Nig. Ltd.
Dr: 1/10 Bal. b/f ₦5 000; 5/10 Sales ₦10 000
Cr: 2/10 Cash ₦3 000; 15/10 Bank ₦6 500
What is the closing balance of the account shown above?

1. A.₦5 000
2. B.₦6 500
3. C.₦5 500
4. D.₦15 000.

The suspense account is used to correct book-keeping errors where the

1. A.amount involved is quite significant
2. B.item involved is not material
3. C.item involved is unknown
4. D.error does not affect the agreement of the trial balance.

The discount column of a three column cashbook is not balanced off but periodically transferred to the discount accounts because discounts

1. A.are not important in cash book
2. B.are cash items only
3. C.do not form part of double entry
4. D.are used for bank reconciliation.

When is a petty cash account debited?

1. A.When the fund is established and every time money is spent
2. B.When the fund is established and every time it is replenished
3. C.When the fund is established and when the size of the fund is decreased
4. D.Every time money is drawn from the petty cash.

When preparing a bank reconciliation statement, which of the following is deducted from the balance per bank statement?

1. A.Bank charges
2. B.Uncleared cheques
3. C.Returned cheques
4. D.Unpresented cheques.

The financial position of an organization at a particular time can be ascertained from the

1. A.statement of sources and application of fund
2. B.statement of retained earnings
3. C.balance sheet
4. D.profit and loss account.

Given:
Purchases ₦20 000
Sales ₦40 000
Carriage inwards ₦5 000
Carriage outwards ₦5 000
Opening stock ₦10 000
Closing stock ₦5 000
What is the cost of goods sold?

1. A.₦30 000
2. B.₦25 000
3. C.₦20 000
4. D.₦15 000

The net profit or loss for the year is determined in the profit and loss account after

1. A.deducting purchases from sales
2. B.deducting cost of goods sold from sales and adding administrative expenses
3. C.adding commissions received to gross profit
4. D.eliminating all expenses from gross profit and adding any other income.

Stock: Cost price (₦), Qty (units)
Opening balance 1/1/90: ₦3.00, 3 000
Purchases January: ₦3.50, 15 000
Purchases February: ₦4.00, 25 000
Sales January: ₦4.50, 13 000
Sales February: ₦5.00, 28 000
Using LIFO, determine the value of closing stock.

1. A.₦9 600
2. B.₦7 600
3. C.₦6 000
4. D.₦2 000

Stock: Cost price (₦), Qty (units)
Opening balance 1/1/90: ₦3.00, 3 000
Purchases January: ₦3.50, 15 000
Purchases February: ₦4.00, 25 000
Sales January: ₦4.50, 13 000
Sales February: ₦5.00, 28 000
What is the gross profit at the end of February, if the closing stock were valued at ₦20 000?

1. A.₦65 000
2. B.₦57 000
3. C.₦48 000
4. D.₦37 000

If a bad debt previously written off is subsequently repaid, the amount collected is recorded as an

1. A.income in the profit and loss account
2. B.income in the balance sheet
3. C.additional cash in the profit and loss account
4. D.expense in the balance sheet.

Beginning and ending accounts receivable balances were ₦8 000 and ₦15 000 respectively. If collections from customers during the period were ₦36 000, then total sales on account would be

1. A.₦23 000
2. B.₦29 000
3. C.₦36 000
4. D.₦43 000.

From which of the following sources are creditors control account most likely to be posted?

1. A.supplier's invoices
2. B.cash disbursements journal
3. C.subsidiary debtors ledger
4. D.purchases journal.

Chukwuma Okeke did not keep his books based on the double entry principle.
On 1st January, 1993, Cash in hand was ₦60, Bank overdraft ₦1 100, Debtor ₦7 240, Stock ₦27 450, Furnishings ₦2 000 and Creditors ₦5 850.
As at 31st December 1993, Cash in hand was ₦40, Cash at bank ₦1 050, Debtors ₦6 720, Stock ₦29 180, Furnishings ₦2 000 and Creditors ₦6 990
Compute the capital as at 1st January 1993.

1. A.₦29 800
2. B.₦28 900
3. C.₦26 700
4. D.₦20 800

Chukwuma Okeke did not keep his books based on the double entry principle.
On 1st January, 1993, Cash in hand was ₦60, Bank overdraft ₦1 100, Debtor ₦7 240, Stock ₦27 450, Furnishings ₦2 000 and Creditors ₦5 850.
As at 31st December 1993, Cash in hand was ₦40, Cash at bank ₦1 050, Debtors ₦6 720, Stock ₦29 180, Furnishings ₦2 000 and Creditors ₦6 990
Determine his net profit as at 31st December, 1993.

1. A.₦2 000
2. B.₦2 200
3. C.₦3 500
4. D.₦4 200.

Which of the following categories of labour cost will be classified as direct?

1. A.accountant's salary
2. B.factory workers' salary
3. C.managing director's salary
4. D.cashier's salary.

Use the information below: (Units; Unit cost ₦; Total cost ₦; Units sold)
Beginning inventory: 20; 6; 120
Sale No. 1: units sold 18
Purchase No. 1: 30; 8; 240
Sale No. 2: units sold 20
Purchase No. 2: 10; 9; 90
Totals: 60 units; 38 units sold
Using the FIFO method of stock valuation, the ending inventory cost is

1. A.₦146
2. B.₦165
3. C.₦186
4. D.₦314

Use the information below: (Units; Unit cost ₦; Total cost ₦; Units sold)
Beginning inventory: 20; 6; 120
Sale No. 1: units sold 18
Purchase No. 1: 30; 8; 240
Sale No. 2: units sold 20
Purchase No. 2: 10; 9; 90
Totals: 60 units; 38 units sold
Using LIFO inventory procedures, the ending inventory cost is

1. A.₦136
2. B.₦176
3. C.₦196
4. D.₦264

The major difference between the receipt and payment account and the income and expenditure account is that while the former

1. A.is kept by the treasurer, the latter is not
2. B.deals with all receipts and payments in the year regardless of the time it relates to, the latter is for just that year
3. C.is a T-account, the latter is not
4. D.is not in the ledger, the latter is.

The following information relates to a hockey club:
Subscription owing at the beginning ₦40
Subscription owing at the end ₦35
Subscription received in advance at the beginning ₦15
Subscription received during the period ₦2 560
The amount to be shown in the income and expenditure account would be

1. A.₦2 500
2. B.₦2 540
3. C.₦2 570
4. D.₦2 590.

The net profit from the trading account of a non-profit making organization would be treated as income in the

1. A.income and expenditure account
2. B.receipt and payment account
3. C.balance sheet
4. D.statement of affairs.

Ada and Udo are lawyers who went into partnership as Ado and Co. Ada brought cash of ₦12 000, furnishings worth ₦18 000 and a motor vehicle worth ₦70 000. Udo on the other hand brought in cash ₦10 000, his building valued at ₦105 000 and a personal computer worth ₦35 000.
What is the capital of Ado & Co.?

1. A.₦22 000
2. B.₦100 000
3. C.₦150 000
4. D.₦250 000.

Ada and Udo are lawyers who went into partnership as Ado and Co. Ada brought cash of ₦12 000, furnishings worth ₦18 000 and a motor vehicle worth ₦70 000. Udo on the other hand brought in cash ₦10 000, his building valued at ₦105 000 and a personal computer worth ₦35 000.
What is the profit sharing ratio if it is based on capital contributed by Ada and Udo?

1. A.2:1
2. B.3:2
3. C.2:3
4. D.1:2

The major distinguishing element between the final accounts of a partnership and a sole trader is the

1. A.drawings account
2. B.appropriation account
3. C.capital account
4. D.creditors account.

Goodwill appears in the books of a business only if it has been

1. A.purchased at a certain price
2. B.raised in connection with the admission of a new partner
3. C.raised to account for the true value of a business on the death of a partner
4. D.raised in order to prevent the balance sheet showing that the business is insolvent.

Kayode, Akpan and Kachalla are in partnership. Their respective capital accounts had the following balances: ₦40 000, ₦50 000 and ₦70 000. The partners agree to admit Wamo as a new partner with a one-fifth interest in the partnership capital in exchange for ₦50 000 cash. Wamo's equity in the resulting partnership is

1. A.₦32 000
2. B.₦40 000
3. C.₦42 000
4. D.₦50 000.

Under which of the following conditions is a partnership dissolved?

1. A.Change of the partnership's head office
2. B.Admission of a new partner
3. C.Purchase of a large quantity of fixed assets
4. D.Retirement of a manager who is not a partner.

When shares issued are paid for, the accounting entry required is

1. A.debit bank or cash account and credit share capital and/or premium account
2. B.credit bank or cash account and debit share capital and/or premium account
3. C.debit shares account and credit capital account
4. D.credit shares account and debit capital account.

A limited liability company has an authorized share capital of ₦50 million split into 100 million shares. 80 million shares were offered for subscription at 60k per share payable in full on application. These have been fully subscribed and issued.
What is the nominal value of each share?

1. A.₦2
2. B.₦0.80
3. C.₦0.60
4. D.₦0.50.

A limited liability company has an authorized share capital of ₦50 million split into 100 million shares. 80 million shares were offered for subscription at 60k per share payable in full on application. These have been fully subscribed and issued.
What is the issued capital?

1. A.₦40m
2. B.₦48m
3. C.₦50m
4. D.₦80m.

The document setting out the regulations regarding shares, meetings and internal organization of a company is known as

1. A.memorandum of association
2. B.articles of association
3. C.prospectus
4. D.company law.

An advantage of using accounting ratios is that they

1. A.can be easily calculated
2. B.facilitate decision making
3. C.are stipulated by law
4. D.show errors and frauds

The accounts of Buba (Nig.) Plc showed the following for the year ended December 31, 1993:
Gross sales ₦219 900
Sales returns and allowances ₦4 900
Net sales ₦215 000
Accounts receivable (net): 1/1/93 ₦20 000; 31/12/93 ₦30 000
The turnover of accounts receivable is

1. A.6.14 times per year
2. B.8.14 times per year
3. C.8.60 times per year
4. D.8.64 times per year.

Given:
Sales ₦20 000
Cost of sales ₦15 000
The gross profit margin would be

1. A.33.33%
2. B.25.00%
3. C.20.00%
4. D.14.28%

Perebeni Enterprises has two departments, A and B, with the following information:
Opening stock: A ₦5 000; B ₦1 500
Purchases: A ₦26 000; B ₦3 000
Closing stock: A ₦7 000; B ₦2 500
Sales: A ₦45 000; B ₦4 000
The following expenses are to be shared in the ratio of 4 : 1
Rent ₦8 300
General expenses ₦3 200
What was the company's gross profit for the year?

1. A.₦11,500
2. B.₦12,500
3. C.₦20,000
4. D.₦23,000

Perebeni Enterprises has two departments, A and B, with the following information:
Opening stock: A ₦5 000; B ₦1 500
Purchases: A ₦26 000; B ₦3 000
Closing stock: A ₦7 000; B ₦2 500
Sales: A ₦45 000; B ₦4 000
The following expenses are to be shared in the ratio of 4 : 1
Rent ₦8 300
General expenses ₦3 200
What is the net profit (or loss) contributed by department B?

1. A.₦2 000
2. B.(₦2 000)
3. C.(₦300)
4. D.₦300.

The expenditure on a good or service which is consumed either immediately or within a current accounting period is called

1. A.fixed expenditure
2. B.capital expenditure
3. C.annual expenditure
4. D.recurrent expenditure.

The receipts from a special tax levy to pay maturing interest obligation are recorded in

1. A.Capital Project Fund
2. B.Debt Service Fund
3. C.Tax Assessment Fund
4. D.Special Revenue Fund.

The cash basis of accounting requires the recognition of revenue only when they are

1. A.due
2. B.earned
3. C.paid
4. D.received

The amount for individual items on a government budget is called a

1. A.vote
2. B.deposit
3. C.loan
4. D.grant.