JAMB Principles of Accounts 2006 past questions

Checked by the Skolra question team · Last updated 23 October 2026

Ten questions from the 2006 JAMB Principles of Accounts paper, with answers and explanations. We hold 45 questions from this paper, and the Skolra app has all of them.

JAMB Principles of Accounts 2006 questions and answers

1. 1.Departmentalization of accounts is useful because it shows the?
   1. A
      cash receipts and payments of each department
   2. B
      profit or loss made by each department
      Correct
   3. C
      assets and liabilities held by each department
   4. D
      net profit of the business as a whole
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   Answer: B

   When a business runs several departments under one roof, say provisions, drinks and cosmetics, it can rule its Trading and Profit and Loss Account into columns, one for each department. Each department is credited with its own sales, charged with its own cost of sales, and given a fair share of the indirect expenses, apportioned on a suitable basis, for example rent and rates by floor area, wages by number of employees, carriage outwards by turnover and depreciation by value of assets used.

2. 2.Accrual accounting differs from cash accounting because it recognizes?
   1. A
      revenue when it is earned and expenses when they are incurred, regardless of cash movement
      Correct
   2. B
      revenue and expenses only when cash is actually received or paid out
   3. C
      revenue when cash is received but expenses only when they are incurred
   4. D
      only those transactions that are supported by receipts and payment vouchers
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   Answer: A

   The whole quarrel between the two bases is timing: at what point does a transaction enter your books?

   Under the accrual basis, revenue is recognised in the period it is earned (goods delivered or service rendered) and expenses in the period they are incurred (benefit consumed) — whether or not the cash has changed hands. That is exactly why we adjust for accrued income, income received in advance, outstanding expenses and prepayments before drawing up the final accounts, and it is what makes the matching concept possible. If you sell goods on credit in December 2006, the sale belongs to 2006 even if the debtor pays you in January 2007.

3. 3.The use of a three-column cash book is determined by?
   1. A
      The need to record cash, bank and discount transactions
      Correct
   2. B
      The volume of credit purchases made during the period
   3. C
      The number of bank accounts operated by the business
   4. D
      The size of the petty cash float fixed by the cashier
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   Answer: A

   The shape of a cash book is decided by the kinds of transactions the business has to record, not by its size.

   A single-column cash book carries only a cash column. Once the trader banks his takings, a bank column is added and it becomes a two-column cash book. When the trader also allows cash discount to debtors and receives cash discount from creditors, a discount column is placed on each side — discount allowed on the debit side, discount received on the credit side. That gives discount, cash and bank on both sides: the three-column cash book. So the need to record cash, bank and discount transactions together is what determines its use.

4. 4.A private company is different from a public company because?
   1. A
      it is owned and controlled by the government
   2. B
      it cannot invite the public to subscribe for its shares
      Correct
   3. C
      its members enjoy unlimited liability for the company's debts
   4. D
      its shares are freely transferable on the stock exchange
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   Answer: B

   Go straight to the Companies and Allied Matters Act (CAMA). It defines a private company as one whose articles do three things: restrict the transfer of its shares, limit its members to a maximum of fifty (employees and former employees not counted), and forbid it from inviting the public to subscribe for its shares or debentures. A public company is simply any company that is not private, so it may advertise its shares, list on the Nigerian Exchange, and take in as many shareholders as it can attract. That prohibition on going to the public for capital is therefore the real dividing line, and it is why a private company carries "Limited (Ltd)" while a public one carries "Public Limited Company (Plc)".

5. 5.The objective of the purchase ledger control account is to establish the?
   1. A
      Total value of goods purchased during the trading period
   2. B
      Total amount owed by trade debtors at a given date
   3. C
      Total cash paid to suppliers during the trading period
   4. D
      Total amount owed to trade creditors at a given date
      Correct
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   Answer: D

   The purchase ledger control account is also called the creditors control account or bought ledger control account. It is one summary account kept in the general ledger that collects, in total, everything that happens in the many individual supplier accounts in the purchases ledger.

   Credit side: opening creditors balance and total credit purchases.
   Debit side: cash and cheques paid to suppliers, discount received, returns outwards, and set-offs (contra) with the sales ledger.

6. 6.

   Motor: ₦10 000
   Fixtures: ₦5 000
   Cash: ₦2 500
   Creditors: ₦7 000
   Loan: ?

   LOAN IS 30% OF CREDITORS.

   What is the capital balance?

   1. A
      ₦10,500
   2. B
      ₦15,400
   3. C
      ₦12,600
   4. D
      ₦8,400
      Correct
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   Answer: D

   Use the accounting equation: Capital = Assets − Liabilities.

   Step 1 – Add up the assets:
   Motor ₦10,000 + Fixtures ₦5,000 + Cash ₦2,500 = ₦17,500.

   Step 2 – Find the missing loan:
   The loan is 30% of creditors, so 30/100 × ₦7,000 = ₦2,100.

   Step 3 – Add up the liabilities:
   Creditors ₦7,000 + Loan ₦2,100 = ₦9,100. Remember, a loan is money owed by the business, so it is a liability, never an asset.

   Step 4 – Get the capital:
   ₦17,500 − ₦9,100 = ₦8,400.

7. 7.When goodwill is not retained in the business, the entries in the new partners' book will be to debit?
   1. A
      goodwill account and credit the old partners' capital accounts in the old profit-sharing ratio
   2. B
      the old partners' capital accounts in the old profit-sharing ratio and credit goodwill account
   3. C
      goodwill account and credit all the partners' capital accounts in the new profit-sharing ratio
   4. D
      all the partners' capital accounts in the new profit-sharing ratio and credit goodwill account
      Correct
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   Answer: D

   When a new partner is admitted, goodwill is handled in two steps. First the goodwill is raised: debit Goodwill Account and credit the old partners' capital accounts in the OLD profit-sharing ratio, because the goodwill was built up by them before the new partner joined.

   But the question says the goodwill is not retained in the business — meaning it must be written off so that no goodwill shows in the new firm's balance sheet. To write it off you simply reverse it against everybody who now shares profits: debit all the partners' capital accounts in the NEW profit-sharing ratio and credit the Goodwill Account. The goodwill account then closes off completely.

8. 8.In converting a to a partnership company, the loss on asset revaluation is?
   1. A
      credited to the revaluation account and shown as a liability in the balance sheet
   2. B
      debited to the goodwill account and written off against future profits
   3. C
      debited to the capital accounts of the existing owners in their profit-sharing ratio
      Correct
   4. D
      credited to the capital accounts of the existing owners in their profit-sharing ratio
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   Answer: C

   Anytime a business changes its form — a sole trader taking in a partner, or partners turning the firm into a company — the assets and liabilities must first be brought to their true worth through a Revaluation Account. Every fall in the value of an asset is debited to that account and every rise is credited to it. The balancing figure is the net profit or loss on revaluation.

9. 9.

   Head office sends goods to its branch at cost plus mark-up of of 25%. A debit of ₦40,000 to the branch stock account in the head office books will indicate that the head office has sent goods with a profit of

   1. A
      ₦8,000
      Correct
   2. B
      ₦32,000
   3. C
      ₦50,000
   4. D
      ₦10,000
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   Answer: A

   When a head office runs a branch stock account at selling (invoice) price, every consignment sent to the branch is debited to that account at cost plus the agreed loading. Here the loading is a mark-up of 25%, and a mark-up is always calculated on cost.

   So if cost is 100, invoice price is 125. The debit of ₦40,000 is the invoice figure, which represents the 125.
   Cost = ₦40,000 × 100/125 = ₦32,000
   Profit (loading) = ₦40,000 − ₦32,000 = ₦8,000

   Notice the short cut: on invoice price the profit is 25/125 = 1/5, and 1/5 of ₦40,000 is ₦8,000.

10. 10.Adaobi mistakenly entered ₦7000 as credit sales in Abba's account. This is?
    1. A
       an error of principle
    2. B
       a compensating error
    3. C
       an error of commission
       Correct
    4. D
       an error of original entry
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    Answer: C

    The answer is an error of commission.

    Look carefully at what went wrong. The amount, ₦7,000, is correct. A debit was made and a credit was made, so double entry is complete. The only problem is that the sale belonged to Adaobi's account but was posted into Abba's account. Both are personal accounts of debtors — the same class of account. When the right amount lands in the wrong account of the same class, that is an error of commission.

    Note also that this error will not stop the trial balance from agreeing, because total debits still equal total credits. It is usually discovered when Abba receives his statement and complains. To correct it: Dr Adaobi ₦7,000, Cr Abba ₦7,000.

The questions come from past JAMB, WAEC and NECO papers. We use software to help write the answer options and explanations, and every answer is checked twice before it goes on the site. How we check

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