JAMB Principles of Accounts 1999

28 reviewed questions with answers and explanations.

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Question 2

The basic role of accounting is to;

  1. Detect fraud
  2. Attest to financial statements
  3. Measure performance
  4. Protect shareholders
Answer and explanation

C: Measure performance

Accounting measures and communicates financial performance and position. Detecting fraud or protecting shareholders may benefit from accounting, but performance measurement is its basic role here.

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Question 5

When a proprietor withdraw cash from the business for private use, he

  1. debits cash account and credits drawings account
  2. credits cash account and debit its bank account
  3. debits bank account and credit drawings account
  4. credits cash account and debit drawings accounts.
Answer and explanation

D: credits cash account and debit drawings accounts.

Personal cash withdrawals reduce business cash and the proprietor’s capital interest. Debit drawings to record the withdrawal and credit cash to record the outflow.

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Question 8

Opening cash ₦7,600; closing cash ₦9,200; total cash receipts ₦18,000. Find cash payments.

  1. ₦8,900
  2. ₦9,800
  3. ₦14,600
  4. ₦16,400
Answer and explanation

D: ₦16,400

Opening cash plus receipts equals payments plus closing cash. Payments are ₦7,600 + ₦18,000 − ₦9,200 = ₦16,400 for the period.

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Question 9

Discount allowed totals ₦230 and discount received ₦255 in the cash book. Which treatment is correct?

  1. They must be balanced in the cash book and the difference taken to the debtors ledger,
  2. they must be balanced in the cash, balance and the difference taken to the trial balance.
  3. They should not be balanced in the cash book before being taken to the trial balance.
  4. They should not appear in the trial balance a they were already either received or paid out.
Answer and explanation

C: They should not be balanced in the cash book before being taken to the trial balance.

Discount allowed and discount received are separate expense and income totals. Their columns are totalled independently and posted to separate accounts, rather than balanced against each other.

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Question 10

Which of the following bank reconciliation items should not be added or subtracted from the bank statement balance to determine the adjusted cash balnce?

  1. Outstanding cheques
  2. Bank service charges
  3. deposits in the mail not yet received by the bank
  4. Bank error, charging a company for another company’s cheques.
Answer and explanation

B: Bank service charges

Bank service charges are already reflected in the bank statement. They adjust the company’s cash book when unrecorded there, not the statement balance itself.

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Question 13

A vehicle costs ₦20,000 and is depreciated at 5% per year using the reducing-balance method. Find its carrying value after three years.

  1. ₦19,000.00
  2. ₦18,050.50
  3. ₦17,147.50
  4. ₦16,290.13
Answer and explanation

C: ₦17,147.50

Reducing-balance depreciation retains 95% of carrying value each year. After three years the value is ₦20,000 × 0.95³ = ₦17,147.50.

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Question 14

Opening capital ₦307,000; closing capital ₦342,000; net profit ₦121,600; opening stock ₦98,800; purchases ₦706,000; carriage inwards ₦17,500; cost of goods sold ₦740,700; selling, general and administration expenses ₦526,000; discount received ₦9,650. Find closing stock.

  1. ₦69,300
  2. ₦84,300
  3. ₦81,600
  4. ₦106,400
Answer and explanation

C: ₦81,600

Goods available cost ₦98,800 + ₦706,000 + ₦17,500 = ₦822,300. Subtract cost of goods sold ₦740,700 to obtain closing stock ₦81,600.

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Question 15

Opening capital ₦307,000; closing capital ₦342,000; net profit ₦121,600; opening stock ₦98,800; purchases ₦706,000; carriage inwards ₦17,500; cost of goods sold ₦740,700; selling, general and administration expenses ₦526,000; discount received ₦9,650. Find gross profit.

  1. ₦535,650
  2. ₦628,300
  3. ₦637,950
  4. ₦647,600
Answer and explanation

C: ₦637,950

Net profit equals gross profit plus discount received less expenses. Gross profit is therefore ₦121,600 + ₦526,000 − ₦9,650 = ₦637,950.

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Question 16

Chibuike buys 36 notebooks at ₦10 each, receives a 5% trade discount and takes a further 1% cash discount. Find the payment.

  1. ₦338.58
  2. ₦342.00
  3. ₦345.42
  4. ₦360.00
Answer and explanation

A: ₦338.58

The list total is 36 × ₦10 = ₦360. Apply the 5% trade discount first, then the 1% cash discount: ₦360 × 0.95 × 0.99 = ₦338.58.

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Question 18

The main features of the single entry system are that

  1. books of accounts are not maintained and business relies only on bank statement
  2. the journal records are absent and only the main ledger is kept
  3. there are incomplete classifications and recording procedures
  4. only credit sales transactions and credit purchases are recorded.
Answer and explanation

C: there are incomplete classifications and recording procedures

Single-entry records do not consistently record both aspects of every transaction. Their incomplete classification and recording require reconstruction to prepare full accounts.

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Question 19

The principal function of a sales ledger control account is to

  1. serve as internal check and provide quick information for the preparation of interim financial statements
  2. serve as external check and provide quick information for the preparation of interim financial statements
  3. provide quick information for the preparation of customers’ statements,
  4. provide information for the control of salesmen’s activities
Answer and explanation

A: serve as internal check and provide quick information for the preparation of interim financial statements

The control account independently summarises customer balances and provides a quick receivables total. This supports internal checking and preparation of interim financial statements.

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Question 21

Opening purchases-ledger credit balances ₦40,000 and debit balances ₦1,000; purchases journal ₦500,000; returns outwards ₦50,000; cheques to suppliers ₦400,000; promissory notes to suppliers ₦30,000; discounts received ₦8,000; contra against sales ledger ₦2,000. Find the total of either side after balancing the purchases ledger control account.

  1. ₦480,000
  2. ₦490,000
  3. ₦500,000
  4. ₦540,000
Answer and explanation

D: ₦540,000

The credit side consists of opening credit balances ₦40,000 plus credit purchases ₦500,000, giving ₦540,000. The debit side reaches the same total after the closing balance is inserted.

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Question 23

Cash received from debtors ₦30,000; purchases ₦21,000; opening debtors ₦4,000; equipment bought ₦2,500; closing debtors ₦3,000. Find sales represented by the debtors account.

  1. ₦29,000
  2. ₦31,500
  3. ₦46,500
  4. ₦50,000
Answer and explanation

A: ₦29,000

Credit sales equal collections plus closing debtors less opening debtors. Thus ₦30,000 + ₦3,000 − ₦4,000 = ₦29,000; purchases and equipment do not enter this calculation.

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Question 24

When the factory cost of production has been ascertained, manufactured goods are transferred to trading accounts by

  1. debiting manufacturing account and crediting trading account
  2. crediting sales account and debiting trading account
  3. debiting sales account and crediting trading account
  4. crediting manufacturing account and debiting trading account.
Answer and explanation

D: crediting manufacturing account and debiting trading account.

Completed production cost leaves the manufacturing account and enters the trading account. Credit manufacturing and debit trading for the same amount.

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Question 25

Lawal and Co makes blocks and sells to builders. In computing prime cost, which of the following costs would be considered appropriate?

  1. Cement, sand and carriage outward
  2. Water, carriage inwards and cement
  3. Sales boys wages, cement and sand
  4. carriage outwards, carriage inwards and cement.
Answer and explanation

B: Water, carriage inwards and cement

Water and cement are direct block-making materials. Inward carriage forms part of their acquisition cost; outward carriage and sales staff wages are selling costs, not prime cost.

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Question 27

The difference between the factory cost of production and prime cost production is

  1. direct materials
  2. direct labour
  3. selling expenses
  4. overhead.
Answer and explanation

D: overhead.

Factory production cost combines prime cost with factory overhead. Direct materials and labour are already part of prime cost, while selling expenses lie outside production.

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Question 28

Receipts and payments account of a non-profit making organisation is principally a summary of the

  1. bank entries
  2. cash book entries
  3. expenditure entries
  4. balance sheet entries.
Answer and explanation

B: cash book entries

The receipts and payments account summarises cash and bank transactions recorded in the cash book. It includes both capital and revenue cash movements.

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Question 29

Club opening debtors ₦150; cash sales ₦4,850; closing debtors ₦900; cash received from debtors ₦550. Find total club sales.

  1. ₦6,150
  2. ₦4,850
  3. ₦4,650
  4. ₦1,300
Answer and explanation

A: ₦6,150

Credit sales are collections ₦550 plus closing debtors ₦900 less opening debtors ₦150 = ₦1,300. Add cash sales ₦4,850 to obtain total club sales ₦6,150.

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Question 31

Goodwill can be valued in partnership when,

  1. partners make profits
  2. large losses are made
  3. a partner retires
  4. a new branch is opened.
Answer and explanation

C: a partner retires

Retirement changes partners’ interests in the business. Goodwill may be valued to compensate the retiring partner for their share of the business’s established earning capacity.

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Question 32

A partner contributes equipment originally costing ₦20,000 with accumulated depreciation ₦12,500. The partners agree on a value of ₦9,000. What amount is debited to equipment in the partnership books?

  1. ₦7,500
  2. ₦9,000
  3. ₦12,500
  4. ₦20,000
Answer and explanation

B: ₦9,000

The partnership records the asset at the agreed contribution value of ₦9,000. The contributor’s historical cost and previous depreciation belong to their old records.

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Question 33

When a partner makes a drawing of stock items from a partnership, the accounting impact of the drawing is to increase the partner’s

  1. Goodwill account balance
  2. Current account credit balance
  3. Current account debit balance
  4. Profit and account credit loss balance.
Answer and explanation

C: Current account debit balance

A stock withdrawal for personal use is charged to the partner as drawings. Where current accounts are maintained, this increases the debit side and reduces the partner’s net entitlement.

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Question 34

Partnership appropriation: Kudu receives capital interest ₦750, salary ₦800 and profit share ₦3,300. Wale receives capital interest ₦550, salary ₦600 and profit share ₦3,300. Find net profit before appropriations.

  1. ₦9,300
  2. ₦6,600
  3. ₦4,850
  4. ₦4,450
Answer and explanation

A: ₦9,300

Net profit before appropriations is the sum distributed as capital interest, salaries and residual profit. Add ₦750 + ₦550 + ₦800 + ₦600 + ₦3,300 + ₦3,300 = ₦9,300.

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Question 35

Dele and Seun who are in partnership, have decided to convert their business into a limited liability company where both become directors. To convert the business

  1. They will simply continue since there are no new members.
  2. The partnership is formally ended and new company books opened.
  3. The shares and all other items will be shared equally and not in their former ratios.
  4. Computation of goodwill must b e done as it is legally required.
Answer and explanation

B: The partnership is formally ended and new company books opened.

The company is a separate accounting entity. The partnership’s books must be closed and the company’s opening books established, even when the same people become directors.

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Question 36

If a sole proprietorship is purchased for cash, then

  1. The purchaser debits his business purchase account with the consideration he pays.
  2. All assets and liabilities must be bought
  3. Goodwill results where value liabilities taken is higher than the value of assets.
  4. The vendor debits his businesspurchase account with the consideration he receives.
Answer and explanation

A: The purchaser debits his business purchase account with the consideration he pays.

The purchaser records the agreed consideration as a debit to the business purchase account. Settlement credits cash; the acquired assets and liabilities are accounted for separately.

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Question 40

Zoom Plc reports paid-up capital ₦200,000, share premium ₦15,000 and retained profit ₦60,000. Find shareholders’ equity.

  1. ₦200,000
  2. ₦215,000
  3. ₦275,000
  4. ₦755,000
Answer and explanation

C: ₦275,000

Shareholders’ equity comprises paid-up capital, share premium and retained profit. The sum is ₦200,000 + ₦15,000 + ₦60,000 = ₦275,000; creditors are excluded.

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Question 42

Calls in advance are treated in the balance sheet as

  1. Current asset
  2. Current liability
  3. fixed assets
  4. fixed liability.
Answer and explanation

B: Current liability

Calls in advance are money received before the related share call is due. Until called, the amount is treated as an obligation to the shareholder rather than called-up share capital.

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Question 43

Shares issued to a vendour in payment of business purchased would require a debit to

  1. Cash account and credit to share capital account
  2. Share capital account and credit to vendor’s account
  3. Vendor’s account and credit to share capital account.
  4. Share capital account and credit to cash account.
Answer and explanation

C: Vendor’s account and credit to share capital account.

Issuing shares settles the amount owed to the vendor. Debit the vendor’s account to clear that liability and credit share capital for the shares issued.

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Question 45

To record a stock transfer between departments, which accounts are debited and credited?

  1. Debit goods outwards; credit goods inwards
  2. Debit merchandise; credit department stock
  3. Debit transferring department; credit receiving department
  4. Debit receiving department; credit transferring department
Answer and explanation

D: Debit receiving department; credit transferring department

The receiving department gains stock and is debited, while the transferring department gives up stock and is credited. The entries record the internal movement at the agreed transfer value.

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