JAMB Principles of Accounts 1998 past questions and answers

The Act establishing the Institute of Chartered Accountants of Nigeria (ICAN) came into force on

1. A.1st September, 1960
2. B.1st October, 1960
3. C.1st October, 1963
4. D.1st September, 1965.

Cost reports for the attention of management should reflect

1. A.as much details as possible
2. B.summary figures only
3. C.details of non-controllable expenses
4. D.cost and comparable data useful in decision-making.

Responsibility accounting is particularly concerned with

1. A.historical accounting
2. B.controllable costs
3. C.storekeeping
4. D.valuation of stock.

An advantage of the use of the voucher system is that it

1. A.reduces the number of cheques that will be written during any given period
2. B.provides a highly flexible system for handling unusual transactions
3. C.provides a comprehensive record of business done with particular suppliers
4. D.ensures that every expenditure is reviewed and verified before payment is made.

A business transaction is recorded in the books of accounts when the

1. A.owner of the business invests his ₦10,000 in another company
2. B.business retains part of its profits for future expansion purposes
3. C.business applies for overdraft facilities from its bankers
4. D.owner of the business collects ₦5,000 from the accountant.

When a transaction causes an asset account to increase, there is

1. A.a decrease of equal amount in the owner's equity account
2. B.an increase in a liability account
3. C.an increase of equal amount in another asset account
4. D.a decrease of equal amount in a liability account.

(₦)
Bank account 59,410
Capital account 50,000
Purchases account 20,000
Rent 2,500
Stationery 90
Typewriter 6,500
Sales 38,500
In preparing a trial balance from the list of balances given above, what is the total in debit and credit columns?

1. A.₦147,910
2. B.₦138,500
3. C.₦88,500
4. D.₦85,800.

If the inventory at the end of the current year is understated and the error is not caught during the following year, the effect is to

1. A.overstate income this year and understate in next year
2. B.understate income this year and overstate in next year
3. C.understate this year's income with no effect on next year's
4. D.overstate the income for the two-year period.

The total of the discounts received column in the cash book is posted to the

1. A.credit of the discounts received account
2. B.debit of the discounts received account
3. C.credit of the discounts allowed account
4. D.debit of the discounts allowed account.

Use the information below to answer questions 11 and 12.
The initial imprest as at July 1st was ₦500. Petty cash vouchers with the custodian by July 15th added up to ₦394. An I O U slip received from a co-worker was ₦65 and there was a shortage of ₦5 cash. The co-worker made refund on July 18th just before the imprest was replenished.
What was the actual cash in the till as at 15th July?

1. A.₦106
2. B.₦101
3. C.₦70
4. D.₦36

Use the information below to answer questions 11 and 12.
The initial imprest as at July 1st was ₦500. Petty cash vouchers with the custodian by July 15th added up to ₦394. An I O U slip received from a co-worker was ₦65 and there was a shortage of ₦5 cash. The co-worker made refund on July 18th just before the imprest was replenished.
The amount required to replenish the payments made from the imprest was

1. A.₦399
2. B.₦394
3. C.₦358
4. D.₦101.

State Bank collected a note for A-Makura Company. This collection, not yet recorded in Al-Makura's books, appears on the bank reconciliation as

1. A.an addition to balance per books
2. B.a deduction from balance per bank statement
3. C.an addition to balance per bank statement
4. D.a deduction from balance per books.

Mayana Corporation uses special journals to record its transactions. If one of Mayana's customers returns merchandize purchased with cash (for a refund), it makes an entry in the

1. A.cash receipts journal
2. B.sales journal
3. C.general journal
4. D.cash disbursement journal.

Sobande Incorporation acquired a machine that involved the following expenditures and related factors
(₦)
Gross invoice price 15,000
Sales tax 900
Purchases discount taken 300
Freight 750
Assembly of machine 500
Installation of machine 800
Assorted spare parts for future use 1200
Turning and adjusting machine 700
What is the initial accounting cost of the machine?

1. A.₦19,550
2. B.₦18,950
3. C.₦18,350
4. D.₦17,500.

A pottery company had sales of ₦176,000 during the current period and a gross profit rate of 40%. The company's cost of merchandize available for sale during the period was ₦128,000. The company's ending inventory is

1. A.₦22,400
2. B.₦32,000
3. C.₦51,200
4. D.₦76,800.

Use the information below to answer questions 17 and 18.
Wazobia Enterprises Balance Sheet as at 1/1/95
Liabilities: Capital ₦40,000; Total ₦40,000
Assets: Furnishings ₦10,000; Ceiling fan ₦1,500; Cash in hand ₦28,500; Total ₦40,000
If at 31/1/95 the following information was ascertained (i) Rent for shop ₦12, 000 paid for the year (ii) Total purchases ₦15,000 (iii) Total sales ₦8,200 (iv) Stock of goods left ₦10,000 (v) Paid sales boy ₦500.
What is the new balance sheet total as at 31/1/95?

1. A.₦40,000
2. B.₦41,500
3. C.₦41,700
4. D.₦48,500.

Use the information below to answer questions 17 and 18.
Wazobia Enterprises Balance Sheet as at 1/1/95
Liabilities: Capital ₦40,000; Total ₦40,000
Assets: Furnishings ₦10,000; Ceiling fan ₦1,500; Cash in hand ₦28,500; Total ₦40,000
If at 31/1/95 the following information was ascertained (i) Rent for shop ₦12, 000 paid for the year (ii) Total purchases ₦15,000 (iii) Total sales ₦8,200 (iv) Stock of goods left ₦10,000 (v) Paid sales boy ₦500.
What is the balance on its cash account as at 31/1/95?

1. A.₦22,800
2. B.₦21,200
3. C.₦9,200
4. D.₦800

On 1st January, 1993, Lobo Company purchased equipment for ₦18,000. It uses straight-line depreciation and estimates an eight-year useful life and a ₦2,000 salvage value. On 31st December, 1996, it sells the equipment for ₦8,000. In recording this sale, it should reflect

1. A.₦10,000 loss
2. B.₦2,000 loss
3. C.₦6,000 gain
4. D.₦8,000 gain.

The balance on a purchases ledger control account represents the

1. A.present amount that a business owes its suppliers at date
2. B.total credit available to the business at the end of the year to be utilized in future
3. C.total credit the business enjoyed for the particular year from its suppliers
4. D.total credit owed the business by its customers.

A powerful instrument of control over both the sales ledger and the clerk whose duty is to post the ledger is the

1. A.total debtors account
2. B.purchases day book
3. C.sales day book
4. D.cash book.

Mini Enterprises Sales Ledger as at 31/12/94 read:
(₦)
Balance b/f 12750
Total credit sales 28185
Payments by debtors 12112
Discount allowed 638
Sales returns 1500
Prepare the sales ledger control account and determine the balance due from debtors.

1. A.₦40,935
2. B.₦27,961
3. C.₦26,685
4. D.₦1,185.

Determine the year's purchases from the following information relating to a firm
(₦)
Total creditor's b/f 7,200
Total cash payments to suppliers 98,800
Total creditors c/f 8,400

1. A.₦7,200
2. B.₦98,800
3. C.₦100,000
4. D.₦105,200.

Derive the total sales figure from the following information extracted from a firm's cash book and other relevant records
(₦)
Total debtors b/f 5,600
Total cash receipts from debtors and cash sales 153, 000
Total debtors c/f 6,800

1. A.₦6, 800
2. B.₦153,000
3. C.₦154, 200
4. D.₦159,800.

The statement of affairs prepared from incomplete records can be described as

1. A.the summary of all the business transactions of the trader ascertained by the accountant
2. B.a balance sheet at a particular date showing the assets and liabilities of the business
3. C.a schedule of all the business ventures entered into for the period to which the records relate
4. D.the statement that shows the profit or loss made during the period.

The contribution margin on a job is the

1. A.gross profit
2. B.net profit
3. C.excess of sales revenue over variable costs
4. D.difference between fixed and variable costs.

The objective of allocating all costs to products is to

1. A.produce a scientifically accurate cost
2. B.avoid unallocated overhead and compute total product cost
3. C.co-ordinate the cost and financial accounts
4. D.compute the contribution of the product to the final profit.

Use the information below to answer questions 28 and 29.
Raw materials inventory at the beginning of a period was ₦46,800 and at the close of the period there was a balance of ₦38,600. From the purchases made during the period, defective materials costing ₦9,200 were returned. Cost of materials consumed during the period was ₦448,500.
What was the total purchases made during the period?

1. A.₦487,100
2. B.₦457,700
3. C.₦449,500
4. D.₦440,300.

Use the information below to answer questions 28 and 29.
Raw materials inventory at the beginning of a period was ₦46,800 and at the close of the period there was a balance of ₦38,600. From the purchases made during the period, defective materials costing ₦9,200 were returned. Cost of materials consumed during the period was ₦448,500.
What is the cost of materials available for use during the period?

1. A.₦487,100
2. B.₦449,500
3. C.₦448,500
4. D.₦440,300.

A non-profit-making organization differs from a profit-making one in that

1. A.it does not earn income
2. B.proceeds from sale of shares form part of its income
3. C.all its income is committed
4. D.annual subscriptions and levies form part of its income.

The limitations of the receipts and payments account arise mainly because of the reliance on

1. A.cash movement as evidence of transaction
2. B.the accounting officer to report
3. C.the capital account of the organization
4. D.the transaction papers as evidence of transaction.

The trading account is to a sole trader what income and expenditure account is to a

1. A.partnership
2. B.public limited organization
3. C.manufacturing organization
4. D.non-profit-making organization.

Which of the following indicate that a partnership business is in place? (I) There is a business (II) It is run commonly by partners (III) It has profit-making in view (IV) Partners' liability is limited

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

When forming a partnership, new partners should record non-monetary assets on the new partnership's books at

1. A.their current fair market values
2. B.their historical costs when first used
3. C.their historical costs when first purchased by each new partner
4. D.the highest values practical so that future income tax deductions are maximized.

Umar and Ahmed share profits and losses equally and have capital balances of ₦40,000 and ₦60,000 respectively. If Abdullahi purchases one-third interest with no bonus, how much will he have to contribute to the partnership?

1. A.₦33,333
2. B.₦40,000
3. C.₦44,444
4. D.₦50,000.

Which of the following is an intangible asset and a measure of a firm's supperior earning power?

1. A.Patent
2. B.Goodwill
3. C.Trademark
4. D.Right issue.

The price paid by an acquiring company is the

1. A.premium
2. B.purchase consideration
3. C.sales consideration
4. D.conversion fee.

Use the information below to answer questions 38 and 39.
Dan & Baker are in partnership with capitals of ₦50,000 and ₦30,000 each. The partnership agreement provides that: (i) profits be shared in the ratio of capital (ii) Baker be paid a salary of ₦8,000 (iii) both partners earn interest on capital at 6% p.a. (iv) both partners pay interest on drawings at 6% p.a. At the end of the year, Dan drew ₦15,000 while Baker drew ₦14,000 in four instalments on 31/3, 30/6, 30/9 and 31/12. The net profit for the year was ₦48,000. ₦5,000 is to be written off the Goodwill account.
What is the interest on the drawings by Baker?

1. A.₦210
2. B.₦315
3. C.₦450
4. D.₦840

Use the information below to answer questions 38 and 39.
Dan & Baker are in partnership with capitals of ₦50,000 and ₦30,000 each. The partnership agreement provides that: (i) profits be shared in the ratio of capital (ii) Baker be paid a salary of ₦8,000 (iii) both partners earn interest on capital at 6% p.a. (iv) both partners pay interest on drawings at 6% p.a. At the end of the year, Dan drew ₦15,000 while Baker drew ₦14,000 in four instalments on 31/3, 30/6, 30/9 and 31/12. The net profit for the year was ₦48,000. ₦5,000 is to be written off the Goodwill account.
Determine the total interest on capital due to the partners

1. A.₦1200
2. B.₦1800
3. C.₦3000
4. D.₦4800.

The ordinary shareholders enjoy the following rights except the right to

1. A.vote at annual general meetings
2. B.elect the board of directors
3. C.participate in additional issues of shares
4. D.receive dividends at a predetermined rate.

Granada Corporation has net assets of ₦600,000 and contributed capital of ₦180,000. The corporation has 30,000 shares of common stock outstanding with no preferred stock. This suggests that the corporation has

1. A.a book value of ₦14 per share
2. B.a book value of ₦20 per share
3. C.a deficit of ₦420,000
4. D.retained earnings of ₦600,000.

Under which of these conditions can a company issue shares at discount? (I) A resolution must be passed at a general meeting (II) The amount of discount must be stated in the resolution (III) The share must have existed for at least six years (IV) On the order of a court

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

The part of equity which is payable on winding up is called

1. A.general reserve
2. B.revenue reserve
3. C.capital reserve
4. D.normal reserve.

To compute gearing ratio, divide

1. A.profit by capital employed
2. B.current assets by current liability
3. C.profit by total assets
4. D.long-term debt by equity capital.

Which of the following entries is effected by a department when goods are charged to it at selling prices?

1. A.stock account is debited
2. B.purchases account is debited
3. C.stock account is credited
4. D.mark-up account is debited.

The difference between the closure of the books of a branch and those of a separate company is that

1. A.there is retained earnings account on the branch books
2. B.the revenue and expense account is closed to branch current account
3. C.there is no retained earnings account on the branch books
4. D.the revenue and expense account is not closed to the home office current account.

The term fiscal compliance means

1. A.all financial and related laws and regulations are adhered to
2. B.only the budget for the current period is complied with and no deficits allowed
3. C.all physical assets requirements have been met
4. D.fiscal planning is necessary for proper accountability in the public sector.

Money not required to meet chargeable expenditure in any fiscal year under cash accounting, should be

1. A.surrendered to the consolidated revenue fund
2. B.carried forward to the next financial year
3. C.reserved to meet any deficits or contingencies
4. D.returned to the taxpayer.

If a monthly insurance premium is remitted to a company by the state government, the initial deductions from employees are recorded in

1. A.the general fund
2. B.agency fund
3. C.special fund
4. D.general long-term fund.