Principles of Accounting JAMB Questions and Answers 2027

Correct Answer: B. Going concern concept

Explanation/Tip: The going concern concept implies that the enterprise has neither the intention nor the necessity of liquidation or curtailing its scale of operations significantly.

Correct Answer: B. Credit entry

Explanation/Tip: The fundamental golden rule of double entry is: “Debit the receiver (or what comes in), Credit the giver (or what goes out).” Giving value means credit.

Correct Answer: B. Credit note

Explanation/Tip: A credit note is issued to reduce the amount owed by a customer due to goods returned or overcharges on an invoice.

Correct Answer: C. Sales journal (Sales Day Book)

Explanation/Tip: The sales journal is a subsidiary book used exclusively to record credit sales before postings are made to individual customer accounts in the sales ledger.

Correct Answer: C. Arithmetical errors affecting one side of a transaction

Explanation/Tip: Errors like omission, principle, and commission do not cause trial balance disagreement because dual aspects are equally affected; single-sided errors cause imbalances.

Correct Answer: B. Acquiring, improving, or extending fixed assets

Explanation/Tip: Capital expenditure adds long-term value and earning capacity to the business, unlike revenue expenditure which covers routine operational costs.

Correct Answer: B. Accrual / Matching concept

Explanation/Tip: The matching concept requires that the cost of using a fixed asset over an accounting period be matched against the revenue generated in that same period.

Correct Answer: B. 10,000

Explanation/Tip: Depreciation = (Cost – Residual Value) / Useful Life = (52,000 – 2,000) / 5 = 50,000 / 5 = 10,000 per year.

Correct Answer: A. Issued by the business but not yet presented to the bank for payment

Explanation/Tip: Unpresented cheques are credited in the cash book by the business but have not yet cleared through the bank statement.

Correct Answer: B. Cash deposited into the bank or cash withdrawn from the bank for office use

Explanation/Tip: A contra entry affects both the cash and bank columns on opposite sides of the cash book, denoted by the letter “C”.

Correct Answer: B. Provide independent arithmetical check on the debtors’ ledger and locate errors

Explanation/Tip: Control accounts summarize credit transactions to verify the accuracy of subsidiary ledgers and facilitate quick balancing.

Correct Answer: B. Current liabilities

Explanation/Tip: Accrued expenses are expenses incurred but not yet paid for during the period, representing a short-term debt obligation (current liability).

Correct Answer: C. Both A and B

Explanation/Tip: Cost of goods sold can be derived from trading account components (Opening stock + Net purchases + Carriage inwards – Closing stock) or from sales minus gross profit.

Correct Answer: A. Direct materials + Direct labor + Direct expenses

Explanation/Tip: Prime cost represents the total of all direct manufacturing costs directly traceable to the production of goods.

Correct Answer: B. Current assets

Explanation/Tip: Subscriptions in arrears mean members owe money to the club, which constitutes money receivable (current asset).

Correct Answer: B. An appropriation of profit in the profit and loss appropriation account

Explanation/Tip: Interest on capital and salaries are appropriations distributed from net profit among partners, not operating expenses of the firm.

Correct Answer: B. Old profit and loss sharing ratio

Explanation/Tip: Existing goodwill generated by old partners is written off in their old profit-sharing ratio before admitting the incoming partner.

Correct Answer: B. Receive a fixed rate of dividend in priority to ordinary shareholders

Explanation/Tip: Preference shares carry preferential rights regarding dividend payout and capital repayment upon liquidation, but usually lack voting power.

Correct Answer: C. Capital and reserves (Shareholders’ funds)

Explanation/Tip: Share premium represents the excess amount over par value received from issuing shares, forming part of capital reserves under shareholders’ equity.

Correct Answer: B. Current assets minus current liabilities

Explanation/Tip: Net working capital indicates short-term financial liquidity available for day-to-day business operations.

Correct Answer: C. 2 to 1

Explanation/Tip: Current Ratio = Current Assets / Current Liabilities = 80,000 / 40,000 = 2.0 (expressed as 2:1).

Correct Answer: C. Stock (Inventory) and prepayments

Explanation/Tip: Stock is excluded from quick assets because it takes time to convert into cash compared to debtors and bank balances.

Correct Answer: A. Average stock

Explanation/Tip: Stock Turnover = Cost of Goods Sold / Average Stock (where Average Stock = [Opening Stock + Closing Stock] / 2).

Correct Answer: A. Completely omitted from being recorded in the books of original entry and ledger

Explanation/Tip: An error of complete omission leaves no trace in the trial balance because neither debit nor credit entry was made.

Correct Answer: B. Temporarily hold trial balance differences while errors are being investigated

Explanation/Tip: When a trial balance fails to agree, the difference is temporarily placed in a suspense account until single-sided errors are corrected.

Correct Answer: B. Cost of goods sold

Explanation/Tip: Markup = (Gross Profit / Cost of Goods Sold) × 100, whereas margin expresses gross profit as a percentage of sales.

Correct Answer: A. 20%

Explanation/Tip: If markup is 1/4 (25%), margin is 1/(4+1) = 1/5 = 20% of sales.

Correct Answer: A. Imprest system

Explanation/Tip: Under the imprest system, the petty cashier starts each period with a fixed float, and expenses incurred are reimbursed to restore the float to its original sum.

Correct Answer: B. Credit balance in the cash book bank column

Explanation/Tip: An overdraft means the business owes money to the bank, which constitutes a bank loan liability represented by a credit balance in the cash book.

Correct Answer: C. General journal (Journal Proper)

Explanation/Tip: Purchases journals record credit purchases of trading goods only; non-trading fixed assets bought on credit are recorded in the general journal.

Correct Answer: A. The business to its suppliers (creditors)

Explanation/Tip: Returns outward (purchases returns) are goods sent back to suppliers, while returns inwards (sales returns) are goods returned by customers.

Correct Answer: C. Provision for doubtful debts

Explanation/Tip: Provision for doubtful debts is a contra-asset account offsetting debtors, hence it carries a credit balance.

Correct Answer: B. Part of the direct cost of acquiring goods for resale

Explanation/Tip: Carriage inwards (transport cost on purchases) increases the total cost of goods purchased, whereas carriage outwards is an operating expense.

Correct Answer: C. Working capital

Explanation/Tip: Working capital measures the short-term liquidity buffer available to finance daily business trading cycles.

Correct Answer: A. Opening capital and closing capital adjusted for drawings and capital introduced

Explanation/Tip: Profit = Closing Capital + Drawings – Additional Capital Introduced – Opening Capital (Statement of Affairs method).

Correct Answer: C. Goodwill

Explanation/Tip: Goodwill is an intangible fixed asset reflecting the extra earning power and business reputation built over time.

Correct Answer: C. Drawings made by the partner

Explanation/Tip: Drawings reduce a partner’s equity stake, hence debited to their current account (along with interest on drawings).

Correct Answer: B. Surplus

Explanation/Tip: Clubs and societies do not aim for profit; thus, excess of income over expenditure is called a surplus (or deficit if expenses exceed income).

Correct Answer: B. Long-term loan capital owed to lenders

Explanation/Tip: Debenture holders are long-term creditors of the company who receive fixed interest irrespective of profitability.

Correct Answer: B. Prudence (Conservatism) convention

Explanation/Tip: Prudence requires anticipating all possible losses but recognizing no profits until realized in cash or realizable assets.