ACCA FA Practice Assessment 1

Practice assessment (online only)

1 Mason has received a statement from a supplier. This shows that the balance outstanding is
$18,650. Mason’s payables ledger shows that the amount owed to this supplier is $19,550.
Which of the following could explain the difference?
 Mason has returned goods to the supplier but the supplier has not yet issued a credit
note.
 The supplier statement includes an invoice for $900 which Mason has not yet received.
 Mason has recently made a payment which the supplier has not yet accounted for.
 The supplier statement shows an invoice amount as $4,500, while Mason has recorded
the amount as $5,400.

2 La La issued 200,000 50c ordinary shares at a premium of 25c per share and 100,000 25c 8%
redeemable preference shares at a premium of 25%. The balance on the share premium
account prior to these transactions was $150,000. What is the balance on the share premium
account after the issue of these shares?
$

3 Extracts from the statements of financial position of A and B are as follows:

A B
$ $
Share capital at acquisition and reporting dates 50,000 20,000
Retained earnings at acquisition date 104,000 22,000
Retained earnings at reporting date 172,000 68,000

B is a wholly owned subsidiary of A and, during the year ended 31 December 20X0, sold goods
to A for $12,000 at a mark up of 50%. At the year end, half of these goods remained in A’s
inventory. What is the figure for retained earnings to be included in the consolidated statement
of financial position at 31 December 20X0?
 $218,000
 $216,000
 $215,000
 $212,000

4 Which of the following are objectives of International Financial Reporting Standards?

1 To assist in producing financial statements that present an entity’s results and financial
position fairly
2 To aid comparability of financial statements produced in different countries
 1 and 2
 1 only
 2 only
 Neither 1 nor 2
2 Practice Assessment ACCA FA

5 An item must be owned by a business in order for it to be recognised as an asset in its statement of
financial position.
 True
 False

6 The following balances were extracted from the books of Po as at 31 March year 8:
$
Operating profit 145,000
Finance costs (5,000)
Profit before tax 140,000

Po had total capital employed of $200,000 and long term borrowings of $50,000 at that date.
What is Po’s return on capital employed?
 58%
 56%
 36.25%
 35%

7 Which of the following illustrates the effect of a contra?

 Accounts payable increase, accounts receivable increase
 Accounts payable increase, accounts receivable decrease
 Accounts payable decrease, accounts receivable decrease
 Accounts payable decrease, accounts receivable increase

8 Which of the following are intangible assets?

1 Research costs
2 A building owned by a company and used for research purposes
3 A licence to operate a rail service
4 Development costs
5 A building owned by a company and rented out
 1 and 4
 1, 2 and 4
 3 and 4
 2, 3, 4 and 5

9 Maki sells goods with a list price of $20,000 to a credit customer. The customer is entitled to a
trade discount of 5% and a further 2% settlement discount if payment is made within 14 days of
the invoice date. The customer is not expected to take advantage of the settlement discount.
What amount should be credited to revenue in the statement of profit or loss?
 $19,600
 $19,000
 $18,620
 $18,600
ACCA FA Practice Assessment 3

10 A company’s trial balance includes the following figures:

Land and buildings $180,000
Bank loan $40,000
Cash at bank $18,000
Trade payables $57,000
Trade and other receivables $82,000
Plant and equipment $64,000
What should be the total for current assets in the company’s statement of financial position?

11 On 1 February year 9 Alan took out a loan of $90,000 at a rate of 8% interest per annum,
payable quarterly in arrears. What is the total amount owing by Alan in relation to the loan at
31 May year 9?
$

12 On 1 May year 5, Adam purchased a new computer system at a cost of $36,000. Installation
costs of $5,000 and staff training costs of $2,800 were incurred. Adam’s policy is to depreciate
computer equipment on a reducing balance basis at a rate of 25% per annum, with a
proportionate charge being made in the years of acquisition and disposal. What is Adam’s
depreciation charge for the year ended 31 December year 5?
 $7,300
 $6,833
 $6,000
 $5,979

13 Red’s bank statement shows a debit balance of $10,220 at 31 December. In preparing the bank
reconciliation the following is discovered:
 Overdraft interest of $300 has not been recorded in the cash at bank account
 There are uncleared payments to suppliers totalling $8,700
 Uncredited receipts amount to $4,500
 A customer cheque for $420 was dishonoured by the bank on 28 December but had not
been adjusted for in the cash at bank account
What is the uncorrected cash at bank figure in Red’s accounts at 31 December?
$ Dr/Cr

14 A company purchases a building on 31 July 20X5 for $70,000. The building is expected to be
used for a period of 20 years and the company policy is to depreciate buildings on a straight line
basis. On 1 August 20X8, the building is revalued to $102,000. What is the charge for
depreciation for the year ended 31 July 20X9?
$
4 Practice Assessment ACCA FA

15 Edie has opening net assets of $52,000 and closing net assets of $81,500 for the year ended
31 December 20X3. Capital introduced was $10,000 and Edie took drawings of $4,000 per
month throughout the year. What was Edie’s profit or loss for the year?
$

16 Which TWO of the following transactions would have the same effect on cash and on profit
when recorded?
 Write off of an irrecoverable debt
 Purchase of computer equipment for cash
 Payment of staff wages by BACS
 Receipt of bank interest

17 Ringo is a sole trader. One of his credit customer’s personal accounts shows the following amounts.
Opening balance at 1 October year 9 DR $18,000
Cash received $63,000
Interest on overdue payments $860
Contra entry $4,300
Credit sales $72,000

What amount does Ringo’s customer owe him at 30 September year 10?
$

18 A business has 1,200 units of inventory on hand at 30 April. Each unit originally cost $25 and
requires additional work costing $15 per unit to be ready for sale at a price of $50 each. The
business will incur selling expenses of 5% of the sales value. What amount for inventory should
be included in the statement of financial position at 30 April?
$

19 For which TWO of the following reasons might potential lenders NOT use financial statements?
 To analyse the value of security for loans
 To decide whether to buy shares in the company
 To assess the likelihood of debt repayment
 To assess the level of return on investment
ACCA FA Practice Assessment 5

20 The following personal accounts are extracted from the memorandum ledgers of a business:
Gabriel Oona
$2,000 $400 $4,200 $5,700
$750 $1,750 $3,600 $1,800
$650 $175
Are the balances on Gabriel and Oona’s accounts receivable or payable?
Receivable Payable
Gabriel  
Oona  

21 The financial statements of Xeni for the year ended 31 March 20X0 were authorised for issue on
20 June 20X0 and were approved by the shareholders at the annual general meeting on 19 July
20X0. The following significant events occurred after the year end:
1 A factory was destroyed by fire on 3 May 20X0
2 An asset was sold during the year ended 31 March 20X0 and the proceeds from the sale
were finally determined on 28 June 20X0.
Which of the above events would be classified as non-adjusting events?
 1 only
 2 only
 1 and 2
 Neither event

22 Roly set up a pharmaceutical company called Rol-Pharm three years ago. Which TWO of the
following might Roly be able to capitalise as intangible non-current assets?
 License to sell a new painkiller under the brand name Rol-Pharm
 Research expenditure on a new slimming tablet
 A patent on new medication to combat stress that has passed clinical trials and is ready
for market
 Costs of construction of a new research and development facility

23 George is planning to buy some shares and is comparing the accounts of the following two
companies:
Company A Company B
Interest cover 12 3
Return on capital employed 22% 10%
Net profit margin 20% 25%
Current ratio 1.5:1 2:1
Gearing ratio 40% 80%

Which company should George invest in if his main aim is to earn an income from his
investment?
 Company A
 Company B
6 Practice Assessment ACCA FA

24 The trial balance of Z included a suspense account. It was subsequently discovered that:
I A purchase invoice for $820 had been recorded in both purchases and payables as $280.
II Z received cash of $1,400, which was correctly recorded in the cash at bank account. No
other entry was made. It was discovered that this amount was a payment from a credit
customer.
What is the net effect on the profit of Z for the year upon correction of the errors?
 Decrease of $540
 Increase of $540
 Increase of $860
 Decrease of $860

25 When a motor vehicle is purchased it is capitalised as a non-current asset and depreciated over
its economic useful life, rather than writing the cost off in full in the statement of profit or loss.
Which accounting concept is being applied here?
 Accruals
 Substance over form
 Materiality
 Separate entity

26 Jessie sells all her goods at a mark-up of 25% on cost price. During the year the following
transaction totals were recorded:
Sales $650,000
Purchases $480,000
Opening inventory was valued at $70,000. What is the value for closing inventory?
 $30,000
 $50,000
 $62,500
 $100,000

27 Included in Frankie’s inventory at 31 May are 300 identical items that cost $10 each plus
delivery inwards costs of $100. In order to sell these items at a mark-up of 10% Frankie incurs
sales commission $250. The same items can be purchased for a total of $3,200. What is the
correct valuation to be used in preparing Frankie’s financial statements to 31 May?
 Historical cost
 Replacement cost
 Net book value
 Net realisable value

28 Where, in a company’s financial statements complying with international financial reporting

standards, would you find dividends paid?
1 Statement of financial position
2 Statement of changes in equity
3 Statement of profit or loss and other comprehensive income
4 Statement of cash flows
 1 and 3
ACCA FA Practice Assessment 7

 2 and 3
 1 and 4
 2 and 4

29 The statement of profit or loss of Buzz for the year ended 30 June year 3 shows electricity
expense of $8,200. Payments for electricity in the year amounted to $7,600 and there was an
accrual at 1 July year 2 of $1,200. What accrual is required for electricity expense as at 30 June
year 3?
$

30 At 30 September 20X9, the balance on the receivables control account is $644,000. The
accountant is preparing draft financial statements and must make the following adjustments:
I Write off debts totalling $24,000
II Record a receipt of $12,000 in respect of a balance which had previously been written off
as irrecoverable
III Make an allowance for receivables equivalent to 2% of trade receivables at 30 September
20X9. At 1 October 20X8, the allowance for receivables was $9,600.
What amount should be recognised in current assets in respect of receivables in the statement
of financial position at 30 September 20X9?
$

31 A company has prepared its bank reconciliation at 30 September 20X9 taking the following
information into account:
$
Outstanding lodgements 12,000
Uncleared payments to suppliers 14,700
Dishonoured cheque not entered in the cash at bank account 2,600

The bank statement shows that the company has an overdrawn balance of $1,280.
What should be the adjusted cash at bank account balance per the bank reconciliation at 30
September 20X9?
 $6,580 Dr
 $6,580 Cr
 $3,980 Dr
 $3,980 Cr
8 Practice Assessment ACCA FA

32 Danya owns a small shop and the following information concerns the heat and light account for
the year to 30 September 20X9:
Gas Electricity
$ $
At 30 September 20X8 1,000 prepayment 500 accrual
At 30 September 20X9 2,000 accrual 1,200 prepayment
During the year, Danya made payments of $5,000 for gas and $7,800 for electricity.
What is the total heat and light expense for the year ended 30 September 20X9?
$

33 On 1 October 20X8, F Co revalued a property. As a result, the annual depreciation charge

increased by $20,000 as compared to depreciation based on historical cost. The company
wishes to make the allowed transfer of excess depreciation between the revaluation surplus
and retained earnings in accordance with IAS 16 Property, plant and equipment. Immediately
before the transfer was made, retained earnings and the revaluation surplus were as follows:
$
Retained earnings 875,000
Revaluation surplus 200,000

Using the information above, which TWO of the following statements are true following the
transfer?
 The balance on the retained earnings is $855,000
 The balance on the retained earnings is $895,000
 The balance on the revaluation reserve is $180,000
 The balance on the revaluation reserve is $220,000

34 The following cash transactions were recorded during the year ended 30 September 20X9:
I Payment of an annual insurance premium of $12,000. This covered the period to 31
December 20X9.
II Receipt of $6,000 in respect of rent from a tenant covering the three month period to 30
November 20X9.
What is the impact on the profit and net assets of making the year end adjustments for prepaid
income and expenditure at 30 September 20X9?
 Profit decreases by $1,000
 Profit decreases by $7,000
 Net assets decrease by $7,000
 Net assets decrease by $1,000
ACCA FA Practice Assessment 9

35 On 31 October 20X8, Yellow, a limited liability company, has issued share capital of $50,000 (25c
ordinary shares). The company also has an investment of 50,000 50c shares in Blue, a limited
liability company.
The following is an extract from Yellow’s ledger accounts:
Dividend
$ $

1 April 20X9 Bank 5,000

Which of the following statements are true/false?

True False
Yellow has paid an interim dividend of 5c per share  
Yellow has received a 20% interim dividend  
Yellow has received a 10% interim dividend  
Yellow has paid a 10% interim dividend  
10 P r a c t i c e A s s e s s m e n t ACCA FA

Multi-task questions

36 FLUFFY
Fluffy, a limited company, has an accounting year-end of 31 March. Fluffy is preparing its financial
statements as at 31 March 20X5. A trial balance has been prepared.
(a) Which of the following items belong on the statement of financial position for the year ended
31 March 20X5?
DR CR Belong?
$000 $000 Yes/No
Revenue 34,500
Purchases 23,450
Fixtures and fittings at cost 2,650
Fixtures and fittings accumulated depreciation 850
as at 1 April 20X4
Plant and machinery at cost/revalued amount 11,290
Plant and machinery accumulated depreciation 2,450
as at 1 April 20X4
Share capital 500
Dividends paid 500
Share premium account 1,000
Taxation payable 1,200
Inventory at 1 April 20X4 1,540
Distribution costs 2,560
Administrative expenses 4,350
Development costs capitalised 2,200
Finance cost 200
Trade receivables 2,680
Trade payables 3,140
Revaluation reserve 1,340
Cash in hand 10
Bank overdraft 240
Patents 600
Bank loan 1,500
Provision for redundancies 220
Retained profits 5,090
52,030 52,030

(6 marks)
ACCA FA Practice Assessment 11

(b) At 31 March 20X4, a customer of Fluffy, Darwin, owed Fluffy $110,000. Because of uncertainties
over Darwin’s financial position, Fluffy made an allowance of $80,000 against this debt. During
the year ended 31 March 20X5, Darwin became insolvent. Darwin had not paid Fluffy any
money during this year, but Fluffy had not made any further sales to Darwin.
Accounts relating to transactions with Darwin are given below. Using the information above,
prepare the double entry, stating whether the entry relating to Darwin’s insolvency is debit,
credit or no debit or credit.
Debit
Credit
Amount No debit or credit
$000
Revenue
Trade receivables
Bad and doubtful debt expense
Allowance for bad and doubtful debts

(4 marks)
(c) If inventory held at 31 March 20X5 was $1,690,000, calculate Fluffy’s gross profit for the year
ended 31 March 20X5.
$
(2 marks)
(d) Fluffy’s directors are considering revaluing a major item of plant and machinery. The item was
purchased on 1 April 20X3 for $1,000,000 and expected to have a 10 year useful life. The asset
was depreciated on a straight-line basis and its expected residual value was $100,000. A
valuation at 31 March 20X5 indicated that the item was now worth $1,100,000 with a residual
value of $160,000. The estimate of the total life of the asset was unchanged.
Required:
Accounts relating to non-current assets are given below. Using the information above, prepare
the double entry, stating whether the entry into the account is debit, credit or no debit or
credit.
Debit
Credit
Amount No debit or credit
$000
Plant and machinery cost/revalued amount
Fixtures and fittings accumulated depreciation
Revaluation surplus

Calculate the annual depreciation charge for the item for the remaining years of its life.
$
(3 marks)

(15 marks)
12 P r a c t i c e A s s e s s m e n t ACCA FA

37 EDTED
(a) The accountant of Edted, a limited liability company had been preparing the annual accounts
for the year ended 31 December 20X6, but was called away whilst he was drafting the non-
current asset note. He left an incomplete proforma behind and some notes on Edted’s
treatment of non-current assets.
Edted depreciates buildings at 4% on cost and plant and equipment at 10% reducing balance.
During the year plant and equipment that had originally cost $200,000 and had accumulated
depreciation of $50,000 was disposed of for $170,000. Edted charges a full year’s depreciation
in the year of acquisition and none in the year of disposal.
On 31 December the buildings were revalued to $2,100,000.
Required:
Fill in the numbers in the proforma where indicated by the letters A to D.
Plant and
Buildings equipment
$000 $000
Cost at 1 January 20X6 1,950 1,530
Additions – 230
Revaluation in year (A) –
Disposal – (200)
Cost/valuation at 31 December 20X6 – –
Accumulated depreciation at 1 January 20X6 340 650
Charge for the year (B) (C)
Released on revaluation (D)
Released on disposal – (50)
Accumulated depreciation at 31 December 20X6 – –
Carrying amount at 31 December 20X6 – –
Carrying amount at 31 December 20X5 1,610 880

(6 marks)
(b) Where would the revaluation of buildings and the gain on the sale of plant and equipment be
shown in the statement of profit or loss and other comprehensive income?
Other
comprehensive Not shown in
Profit or loss income either
Revaluation of buildings   
Gain on sale of plant and equipment   

(2 marks)
ACCA FA Practice Assessment 13

(c) Edted has decided to switch from using the indirect method of preparing a statement of cash
flows to the direct method. Would the following items be included in a statement of cash flows
prepared using the direct method?
Included Not included
Depreciation  
Interest paid  
Cash receipts from customers  
Purchase of non-current assets  
Profit on sale of non-current assets  
Cash paid to suppliers and employees  
Change in inventories  
Repayment of loan  
(4 marks)
(d) During the year Edted issued 30,000 $2 shares at a cost of $3.00 per share.
Edted paid a dividend of $132,000 during the year. Edted’s directors proposed, and Edted’s
shareholders approved, two other dividends in relation to the year ended 31 December 20X6.
A dividend of $88,000 was proposed and approved in November 20X6 but had not been paid by
31 December 20X6. A dividend of $44,000 per share was proposed and approved in January 20X7.
Required:
Below is an incomplete statement of changes in equity for Edted in the year ended 31
December 20X6. Fill in the gaps A, B and C from the choices given to complete the table.
Share Share Revaluation Retained
capital premium surplus earnings Total
$000 $000 $000 $000 $000
At 31 December 20X5 300 390 – 2,570 3,260
Total comprehensive 568 430 998
income
Dividends A
Issue of share capital B C
A
 132
 220
 264
B
 30
 60
 90
C
 0
 30
 60
(3 marks)

(15 marks)
14 P r a c t i c e A s s e s s m e n t ACCA FA