JAMB Principles of Accounts 1997 past questions and answers

The most important reason for studying Accounting is that

1. A.the information provided by Accounting is useful in making decisions
2. B.Accounting plays an important role in a society
3. C.the study of Accounting leads to a challenging career
4. D.Accounting provides gross profit information.

In preparing accounting records, the owners of a business and the business are treated as

1. A.the same person
2. B.having business relationship
3. C.separate legal entities
4. D.partners.

Creditors use Accounting information for the purpose of

1. A.planning sales to a company
2. B.controlling a company's affairs
3. C.investing in a company
4. D.assessing a company's liquidity.

The instruments that are generated when firms enter into business transactions with others are called

1. A.purchases documents
2. B.journals
3. C.source documents
4. D.invoices.

The document that is used to acknowledge the acceptance of the return of goods by the seller from the buyer is known as

1. A.credit note
2. B.debit note
3. C.invoice
4. D.voucher.

The effect of the payment of a liability is that it

1. A.increases both assets and liabilities
2. B.increases assets and decreases liabilities
3. C.decreases assets and increases liabilities
4. D.decreases both assets and liabilities.

Books of original entry are used for

1. A.recording business transactions
2. B.the adjustment of accounts
3. C.reminding the bookkeeper to post transactions in the ledger
4. D.informing the bookkeeper about the state of affairs.

The term 'posting' in Accounting refers to

1. A.recording entries in the journal
2. B.transferring the balances in the ledger to the trial balance
3. C.tracing amounts from the journal to the ledger to find errors
4. D.transferring entries to the ledger from the journal.

Erroneous rearrangement of financial figures such as writing ₦624 as ₦264 is called

1. A.transposition
2. B.principle
3. C.commission
4. D.omission.

Bank Account
Debit (₦): Capital 50 000; Sales 38 500
Credit (₦): Purchases 20 000; Rent 2 590; Motor vehicles 6 500
What is the balance of the bank account shown above?

1. A.₦88 500 debit
2. B.₦88 500 credit
3. C.₦59 410 credit
4. D.₦59 410 debit

Which of the following demonstrates the imprest system?

1. A.Float → expenses paid → cash in bank → float.
2. B.Float → cash from bank → expenses paid → float.
3. C.Float → expenses paid → cash from bank → float.
4. D.Float → cash in bank → expenses paid → float.

When a sum of money appears on the credit side of the cash book, but not on the debit side of the bank statement, the sum is regarded as

1. A.uncredited cheques
2. B.dishonoured cheques
3. C.direct remittance to the bank
4. D.unpresented cheques.

An examination of the cash book on 3rd August 1993 showed a different balance from the bank statement of 31st July 1993 which read ₦722. Uncredited cheques were Bimpe ₦40; Wale ₦60 while unpresented cheques were; Usman ₦20, Kalu ₦32 and Musa ₦70. What is the cash book balance after the reconciliation?

1. A.₦700
2. B.₦770
3. C.₦800
4. D.₦822.

Use the information below to answer questions 14 and 15.
On 30/5/93 Tolu & Co. paid 2 years rent of ₦50 000 which was debited to the rent account.
At 31/12/93, what portion of that amount was prepaid?

1. A.₦14 583
2. B.₦25 000
3. C.₦35 417
4. D.₦37 415

Use the information below to answer questions 14 and 15.
On 30/5/93 Tolu & Co. paid 2 years rent of ₦50 000 which was debited to the rent account.
The adjustment needed as at 31st December, 1993 is

1. A.debit rent account and credit adjustment account
2. B.debit prepayment account and credit rent account
3. C.debit rent account and credit prepayment account
4. D.debit adjustment account and credit prepayment account.

The receipt of cash from a customer who bought goods with ₦800 list price, 25% trade discount and 2/10, n/30 terms would, if paid within the discount period, amount to

1. A.₦576
2. B.₦588
3. C.₦600
4. D.₦624

At the end of a financial period, the trading profit and loss account of a company showed a profit of ₦120 000. It was however discovered that revenue of ₦12 000 was recorded as expenses while expenses of ₦4 000 had been recorded as revenue. What should be the correct profit for the period?

1. A.₦104 000
2. B.₦128 000
3. C.₦136 000
4. D.₦144 000

Given:
Net profit ₦25 000
Cost of sales ₦25 000
Sales ₦85 000
Determine the total expenses.

1. A.₦45 000
2. B.₦35 000
3. C.₦25 000
4. D.₦15 000

Given: capital, ₦13 000; office machinery, ₦9 000; creditors ₦900, stock of goods ₦1550; debtors, ₦275; cash at bank, ₦5 075 and loan from Jumbo, ₦2 000. What is the balance sheet total?

1. A.₦19 500
2. B.₦18 500
3. C.₦17 900
4. D.₦15 900

The recording of wages due but not yet paid is an example of an adjustment for

1. A.apportionment of revenue between two periods
2. B.recognizing accrued expenses
3. C.recognizing unaccounted revenue
4. D.recognizing prepaid expenses.

The process of allocating the cost of an intangible asset over its useful life is known as

1. A.depreciation
2. B.extraction
3. C.depletion
4. D.amortization.

The principal use of control accounts is to

1. A.localize errors within the ledgers
2. B.prevent fraud
3. C.increase sales
4. D.record assets and liabilities.

In the absence of a sales day book or sales account, the credit for sales can be computed from

1. A.creditors control account
2. B.debtors control account
3. C.opening figures of the balance sheet
4. D.closing figures of the balance sheet.

which of the following conditions best represents the net effect of discount allowed on credit sales on the accounts of a business?

1. A.decrease in the closing balance of sales ledger control account
2. B.increase in net profit
3. C.increase in the value of sales
4. D.decrease in the value of purchases in the trading account.

The total of the creditors at the beginning of the year was ₦4 600 and at the end of the year ₦5 250. During the year, ₦26 500 was paid to suppliers and ₦130 was received in discounts from these suppliers. The purchases for the year would be

1. A.₦26 630
2. B.₦27 038
3. C.₦27 150
4. D.₦27 280

Given:
Capital at the beginning ₦20 000
Drawings ₦3 000
Capital at end ₦30 000
New capital introduced ₦8 000
What is the profit for the period?

1. A.₦4 000
2. B.₦5 000
3. C.₦6 000
4. D.₦8 000.

In analyzing incomplete records, which of the following should be investigated?

1. A.The general ledger
2. B.The purchases day book and sales day book
3. C.The nature of trading activities and the basis on which goods are sold
4. D.The asset register together with the depreciation schedule.

Which of the following stock valuation methods is suitable under inflationary conditions?

1. A.FIFO
2. B.LIFO
3. C.Simple average
4. D.Weighted average.

Given:
Direct material ₦10 000
Direct labour ₦5 000
Direct expenses ₦2 000
Factory overhead ₦4 000
What is the prime cost?

1. A.₦21 000
2. B.₦17 000
3. C.₦15 000
4. D.₦6 000

The understatement of closing value of work-in-process would have the effect of

1. A.understating cost of goods manufactured
2. B.overstating prime cost of goods manufactured
3. C.overstating cost of goods manufactured
4. D.understating prime cost of goods manufactured.

Emeka Manufacturing Company (Extract) Manufacturing Account.
Direct material ₦5 000
Direct labour ₦4 500
Direct expenses ₦3 000
Factory overhead ₦2 500
Selling and distribution ₦1 500
Calculate the production cost

1. A.₦16 500
2. B.₦15 000
3. C.₦14 000
4. D.₦12 500.

The difference between a trading account and a manufacturing account is that while the manufacturing account

1. A.has no particular period, the trading account has
2. B.does not consider the cost of goods involved, the trading account does
3. C.is concerned with the cost of production, the trading account is not
4. D.is not concerned with the stock of raw materials, the trading account is.

An income and expenditure account is a summary of

1. A.all income and expenditure during a period
2. B.revenue income and expenditure during a period
3. C.receipts and payments during a period
4. D.the trading income during a period.

Use the information below to answer questions 34 and 35.
Gbagada Social Club. Receipt and Payments Account for the year 1993
Receipts (₦): Balance b/d 720; Subscriptions 14 300; Proceed from raffle draws 2 000; Total 17 020
Payments (₦): Rent 180; Furniture 3 500; Rate 580; Stationery 120; Welfare expenses 1 000; Raffle prize 950; Balance c/d 10 690; Total 17 020
Additional information: (₦ at 1:1:93; ₦ at 31:12:93)
Subscription in arrears 300; 450
Furniture 7 000; —
Subscription received in advance 500; 400
Rate owing 50; 60
Subscription relating to the accounting year 1993 in the income and expenditure account is

1. A.₦15 050
2. B.₦14 550
3. C.₦14 300
4. D.₦13 400

Adamu, Babaji and Chukwu are in partnership and they share profit and losses on ratio 3:2:1. Their respective capitals are ₦20 000, ₦15 000 and ₦5 000 on which they are entitled to interest at 5% per annum. The profit for the year before charging interest on capital amounted to ₦5 500. Calculate the profit for Adamu.

1. A.₦583
2. B.₦1 000
3. C.₦1 167
4. D.₦1 750

Use the table below to answer questions 37 and 38.
Partners Current Account (₦: Musa; Kalu; Lawal)
Debit side: Interest on capital 10 000; 8 000; 8 000
Drawings 18 800; 10 000; 6 000
Totals 28 800; 18 000; 14 000
Balance b/d 1 800; 4 300; 540
Credit side: Interest on drawing 800; 600; 360
Share of profit 26 200; 13 100; 13 100
Balance b/d 1 800; 4 300; 540
Totals 28 800; 18 000; 14 000
The current account above for Musa, Kalu and Lawal has some errors in the arrangement of the accounts.
The correct closing balance for Musa's current account is

1. A.₦36 200 credit
2. B.₦16 600 credit
3. C.₦16 600 debit
4. D.₦1 800 credit.

Use the table below to answer questions 37 and 38.
Partners Current Account (₦: Musa; Kalu; Lawal)
Debit side: Interest on capital 10 000; 8 000; 8 000
Drawings 18 800; 10 000; 6 000
Totals 28 800; 18 000; 14 000
Balance b/d 1 800; 4 300; 540
Credit side: Interest on drawing 800; 600; 360
Share of profit 26 200; 13 100; 13 100
Balance b/d 1 800; 4 300; 540
Totals 28 800; 18 000; 14 000
The current account above for Musa, Kalu and Lawal has some errors in the arrangement of the accounts.
The correct closing balance of Lawal's current account is

1. A.₦21 100 debit
2. B.₦14 740 debit
3. C.₦14 740 credit
4. D.₦540 credit.

Faruk and Osawe are in partnership sharing profits and losses in the ratio of 3:7. Faruk is to receive a salary of ₦9 000. In one accounting period, the business recorded a loss of ₦1 500 (before deduction of Faruk's salary). The appropriate distribution of the net loss would be

1. A.Faruk, (₦450); Osawe, (₦1 050)
2. B.Faruk, (₦3 150); Osawe, (₦7 350)
3. C.Faruk, (₦2 250); Osawe, (₦5 250)
4. D.Faruk, (₦8 550); Osawe, (₦1 050).

On partnership dissolution, if a partner's capital account has a debit balance and the partner is insolvent, the deficiency will, in accordance with the decision of the case of Garner v Murray, be

1. A.borne by all the partners
2. B.borne by the insolvent partner
3. C.written off
4. D.borne by the solvent partners.

Share premium can be used to
I write off discount on shares
II give loans to directors
III pay dividends
IV pay company's formation expenses.

1. A.I and IV only
2. B.I and III only
3. C.II and III only
4. D.III and IV only.

A company has 5% debentures worth ₦500 000, ordinary share capital ₦2 000 000, and preference shares ₦1 500 000. If the company made a profit of ₦1 000 000, the debenture interest would amount to

1. A.₦1 000 000
2. B.₦500 000
3. C.₦50 000
4. D.₦25 000.

Alabede (Nig.) Limited issued 50 000 ordinary shares of ₦1 each at a market value of ₦2.50 each. The share premium is

1. A.₦125 000
2. B.₦100 000
3. C.₦75 000
4. D.₦50 000.

A dividend of 10% in a company on 500 000 ordinary shares of ₦1 nominal value has been declared. How much will a shareholder receive if he has 200 shares?

1. A.₦500 000
2. B.₦50 000
3. C.₦200
4. D.₦20

Use the information below to answer questions 45 and 46.
Udoh Trading Company Balance Sheet as at 31st December, 1992
Capital ₦39 000
Long term loan ₦15 000
Creditors ₦9 000
Accrued wages ₦5 000
Total ₦68 000
Land ₦20 000
Building ₦30 000
Stock ₦4 000
Debtors ₦6 000
Cash ₦8 000
Total ₦68 000
What is the working capital?

1. A.₦12 000
2. B.₦11 000
3. C.₦8 000
4. D.₦4 000.

Use the information below to answer questions 45 and 46.
Udoh Trading Company Balance Sheet as at 31st December, 1992
Capital ₦39 000
Long term loan ₦15 000
Creditors ₦9 000
Accrued wages ₦5 000
Total ₦68 000
Land ₦20 000
Building ₦30 000
Stock ₦4 000
Debtors ₦6 000
Cash ₦8 000
Total ₦68 000
The acid test ratio in the company is

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

If goods are invoiced to the branch at cost and the invoice par value is ₦2 000 with 5% discount rate, cash remitted to the head office is

1. A.₦2 100
2. B.₦2 000
3. C.₦1 900
4. D.₦100.

Which of the following are advantages of departmental accounts?
I. The department making the highest profit can be easily determined
II. The capital of the business can be calculated easily
III. Easy knowledge of the sources of funding
IV. Encouragement of healthy rivalry among the various departments.

1. A.I and IV only
2. B.II and III only
3. C.II and IV only
4. D.III and IV only.

The end result of governmental accounting procedure is to

1. A.keep proper records of government expenditures
2. B.give financial information to the public and investors
3. C.produce timely and accurate financial reports for legislators and the public
4. D.give information on the performance of public enterprises.