JAMB Principles of Accounts 1994

C: time span, usually one year covered by financial statement

An accounting period is the reporting interval covered by financial statements. It is commonly one year, allowing performance for that interval to be measured.

C: matching concept

The matching concept relates expenses to the revenue they helped generate in the same accounting period, allowing the profit for that period to be measured.

D: conservatism.

Conservatism, also called prudence in traditional accounting terminology, requires caution when recognising uncertain gains and providing for expected losses.

A: future cash flows of the company

Investors and creditors assess the amounts, timing and uncertainty of future cash flows. Those flows affect the business’s ability to provide returns and repay obligations.

A: additional cost to the asset

Labour directly attributable to bringing a fixed asset into working condition forms part of its cost. Installation labour is therefore added to the asset rather than expensed as routine wages.

C: Error of principle.

A freezer used in the shop is a capital asset. Charging its purchase to office expenses wrongly treats capital expenditure as revenue expenditure, which is an error of principle.

A: Referencing purposes

A folio is a cross-reference to the related book or account page. It helps trace the posting back to its source and locate the corresponding entry.

C: ₦5,500

Debits total ₦5,000 + ₦10,000 = ₦15,000. Credits total ₦3,000 + ₦6,500 = ₦9,500. Their difference is a closing debit balance of ₦5,500.

B: when the fund is established and every time it is replenished

Petty cash is an asset. Establishing or replenishing the fund increases that asset and is recorded as a debit; spending from it is recorded as a credit.

D: Unpresented cheques.

An unpresented cheque is already deducted in the cash book but has not yet reduced the bank statement balance. Deduct it when reconciling a positive bank-statement balance to the cash-book balance.

C: balance sheet

The balance sheet, or statement of financial position, reports assets, liabilities and equity at a specified date. Profit and loss instead reports performance over a period.

A: ₦30,000

Cost of goods sold is opening stock plus purchases and carriage inwards, less closing stock: ₦10,000 + ₦20,000 + ₦5,000 − ₦5,000 = ₦30,000. Carriage outwards is a selling expense.

D: Deducting all operating expenses from gross profit and adding other income

Net profit is gross profit plus other income less operating expenses. Purchases alone do not represent all costs, and administrative expenses must be deducted rather than added.

C: ₦6,000

Total units available are 43,000 and units sold are 41,000, leaving 2,000. Under the stated LIFO exercise, the remaining units come from the opening layer at ₦3, valued at ₦6,000.

B: ₦57,000

Sales total ₦198,500. Goods available cost ₦161,500; with the specified closing value ₦20,000, cost of sales is ₦141,500. Gross profit is ₦198,500 − ₦141,500 = ₦57,000.

A: income in the profit and loss account

Recovery of a debt previously written off is recognised as income in the profit and loss account. The receipt also increases cash or bank in the accounting records.

D: ₦43,000

Opening receivables plus credit sales less collections equals closing receivables. Thus credit sales = ₦15,000 − ₦8,000 + ₦36,000 = ₦43,000.

B: Factory production workers’ salary

Direct labour is work that can be traced to making the product. Production workers’ wages are the direct-labour category here, unlike administrative and cashier salaries.

C: ₦186

The business has 22 units remaining. FIFO leaves the latest 10 units at ₦9 and 12 units at ₦8, giving ₦90 + ₦96 = ₦186.

B: The former records all cash received and paid during the year; the latter records income and expenses relating to that year

Receipts and payments records cash movements when received or paid. Income and expenditure allocates income and expenses to the period to which they relate.

C: ₦2,570

Start with cash received ₦2,560. Subtract opening arrears ₦40, add closing arrears ₦35 and add opening receipts in advance ₦15. Income is ₦2,570.

A: Income and expenditure account

A club’s trading activity produces a profit or loss separately. Its trading profit is then included as income in the club’s income and expenditure account.

D: ₦250,000

Ada contributes ₦100,000 and Udo contributes ₦150,000. Adding the contributions gives the partnership’s total capital of ₦250,000.

C: 2:3

Their contributions are ₦100,000 and ₦150,000. The capital-based sharing ratio is 100,000:150,000, which reduces to 2:3 for Ada:Udo.

B: appropriation account

The partnership appropriation account allocates profit among partners, including agreed interest and salaries. A sole trader has no profit allocation among multiple owners.

D: ₦0.50

Nominal value per share is authorised nominal capital divided by the number of shares: ₦50million/100million = ₦0.50. The issue price is a separate amount.

A: ₦40 million

Issued share capital uses nominal value: 80million × ₦0.50 = ₦40million. The additional ₦0.10 paid per share is share premium, not nominal share capital.

B: articles of association

Articles of association contain rules for a company’s internal administration, such as share arrangements and meetings. A prospectus instead provides information for prospective investors.

B: facilitate decision-making

Accounting ratios summarise relationships between figures, helping users compare performance and financial position and make decisions. They do not by themselves prove the absence of fraud.

C: 8.60 times per year

Average receivables are (₦20,000 + ₦30,000)/2 = ₦25,000. Using net sales ₦215,000 as credit sales gives turnover 215,000/25,000 = 8.60 times per year.

B: 25.00%

Gross profit is sales less cost of sales, ₦20,000 − ₦15,000 = ₦5,000. Gross profit margin uses sales as the denominator, giving 5,000/20,000 × 100 = 25.00%.

D: ₦23,000

A has cost of sales ₦24,000 and gross profit ₦21,000. B has cost of sales ₦2,000 and gross profit ₦2,000. Together the departments earn gross profit ₦23,000.

C: ₦300 loss

B’s gross profit is ₦4,000 − (₦1,500 + ₦3,000 − ₦2,500) = ₦2,000. Its one-fifth share of ₦11,500 expenses is ₦2,300, leaving a net loss of ₦300.

D: recurrent expenditure

Recurrent expenditure relates to goods and services consumed in ordinary current operations. It differs from capital expenditure, which creates or improves longer-lived assets.

B: Debt Service Fund

A debt service fund accounts for resources dedicated to paying debt principal and interest. A levy specifically intended for maturing interest therefore belongs to that fund.

D: received.

Under the cash basis, revenue is recognised when cash is received. Earning an amount or making it due does not by itself trigger cash-basis recognition.

A: vote

A vote is an amount authorised or allocated for an expenditure item in a government budget. It specifies the approved spending provision for that item.