F3….

8
Q No.1
What is excluded from the calculation of the quick (acid test)?
 Taxation liability
 Inventory
 Cash balance
 Bank overdraft

Q No.2
Which of the following are characteristics of a limited liability company?
1. There are two or more owners who work in the business and share the profits between them by
agreement
2. The owner or owners hold shares in the business which entitle them to vote at general meetings
3. The business is recognised in law as a separate legal entity to its owners

 1 and 2 only
 3 only
 1, 2 and 3
 2 and 3 only

Q No.3
Which of the following should be included as shareholders’ equity on a company’s statement
of financial position?
1. Authorized share capital
2. Issued share capital
3. Revaluation surplus
4. Redeemable preference shares
5. Retained earning

 2 and 5 only
 2, 3 and 5
 1, 2 and 4
 1, 3, 4 and 5
Q No.4
Which TWO accounting concepts is a business following when it records closing inventory at
cost in the financial statement to be carried forward to the next financial year?
 Going concern
 Accruals
 Substance over form
 Materiality

Q No.5
A business has recorded purchase returns of $30 as sales return and also recorded sales returns of $40
as purchase returns.

How will the profit be affected as a result of these errors?

 Understated by $70
 Understated by $10
 Overstated by $20
 Overstated by 10

Q No.6
The following is an extract from Maureen’s trial balance for the year ended 30 September 20X8:

Dr Cr
$ $
Opening inventory 4,270 -
Revenue - 17,206
Purchase 8,750 -
Deprecation 2,000 -
Rental income - 3,900
Sundry expenses 1,338 -

If the closing inventory is $3,875, what is the gross profit for the period?
$.....................................:

Q No.7
Romeo Chocolate, a limited liability company, has several projects in progress.
Which of the following could be capitalized according to IAS 38 Intangible Assets?
 Investigation into a new recipe of chocolate icing
 Applied research on a project into non – melting chocolate
 A new machine to be used in the development laboratory producing a new chocolate bar
 Expenditure in developing a new white chocolate bar due to start commercial production next year
Q No.8
Kalla Co had a bank ledger account balance of $22,750 (debit) at 1 January 20X1. During the year to 31
December 20X1, Kalla Co had receipts of $117,500 and received a loan of $11,000. Kalla Co made payments to
suppliers for purchases and expenses of $119,250.

What is the balance on Kalla Co’s bank ledger account at 31 December 20X1?
 $ 13,500 Dr
 $ 13,500 Cr
 $ 32,000 Dr
 $ 32,000 Cr
Q No.9
The trial balance of a business did not balance, so a suspense account was created. Subsequent checking found
that the purchases account had been overcast by $200 and the interest income account had been undercast by
$100.
How should these errors be corrected?

 Dr suspense account $100 Dr latest income $100 Cr Purchases $200

 Dr Purchases $200 Dr Interest income $100 Cr Suspense account $300
 Dr Purchases $200 Cr Suspense account $100 Cr interest income $100
 Dr Suspense account $100 Cr Purchases $200 Cr Interest income $100

Q No.10
Which TWO of the following statements about a debit not are correct?
 It is a formal request for a credit note to be issued
 It is raised by the seller of goods
 It is raised by the purchaser of goods
 It is an agreement to sell goods or services

Q No.11
At the end, a business had a bank balance in its cash book of $22,500 debit. A subsequent check of the bank
statements for the year found that:

1. Bank charges of $2,000 had been omitted from the cash book
2. A cheque received for $1,000 from a credit customer had been Dishonoured and not reversed in the
cash book
3. The bank had incorrectly credited the business bank account with a cheque for $4,000
4. A cheque for $800, which had been paid to a supplier and recorded in the cash book, had not yet been
presented to the bank

What is the bank balance that should be reported in the statements of financial positions of
the business?
$.................................:
Q No.12
Which TWO general ledger account would be affected when a company pays an equity
dividend?
 Investment income
 Cash
 Finance cost
 Receivables
 Retained earnings
 Revaluation reserve

Q No.13
In accordance with IAS 2 Inventories which of the following should be included in the cost of
work in progress inventory?
1. Carriage inwards
2. Settlement discounts received
3. Production labour
4. Cost of complete

 1 and 3 only
 1 and 2 only
 2, 3 and 4
 1, 2, 3 and 4

Q No.14
Should the following items be included in cash and cash equivalents in a statement of cash
flows?
Yes No
Long – term investments

Bank overdraft

Liquid investments

Cash in hand
Q No.15
Jerome’s trial balance as at 31 December 20X2 is shown below:

$ $

Current assets 4,500 -

Capital at 1 January 20X2 - 11,200

Profit for the year - 6,700

Drawings 4,300 -

Non – current assets 12,400 -

Current liabilities - 3,300

Totals 21,200 21,200

What is the capital balance at 1 January 20X3?

 $ 17,900
 $ 13,600
 $ 11,200
 $ 16,900

Q No.16
Which of the following is an underlying assumption of the IASB’s Concept Framework
for Financial Reporting?
 Materiality
 Comparability
 Going concern
 Timeliness

Q No.17
Gamma Co’s receivables control account at 30 June 20X9 is as follows:

Receivables control account

$ $
Balance brought forward 39,900 Cash receipts 61,600
Credit sales 55,500 Balance carried forward 33,800
95,400 95,400

Which is the balance for receivables in the trial balance at 30 June 20X9?
 $ 33,800 Dr
 $ 39,900 Dr
 $ 33,800 Cr
 $ 39,900 Cr
Q No.18
Which TWO of the following items should be treated as capital expenditures when
accounting for the purchase of a non – current assets?
 Annual insurance
 Maintenance charge
 Delivery charge
 Installation charge

Q No.19
Erin’s business charges sales tax of 15% on sales of goods and a zero rate of sales tax on sales of services. During
the first quarter Erin sold goods of $92,000 and services of $32,000. She also made purchases of $65,000. All
figures are net of sales tax. Sales tax of 15% is reclaimable on all purchases.

What is the net amount of sales tax that Erin owes at the end of the first quarter?
$.................................:

Q No.20
Malena is completing the reconciliation of her accounts receivable control account. At the end of the period the
balance on the control account is higher than the list of balances extracted from the individual receivable ledger
accounts.

Which of the following could explain the reason for this difference?
 The allowance for irrecoverable debts had not yet been accounted for
 An individual ledger account balance had been included twice
 An irrecoverable debt had been accounted for twice in the individual ledger account
 A contra between accounts receivable and payable control accounts had been posted twice

Q No.21
A company’s financial statements for the year to 31 December 20X5 included a building at its carrying amount of
$280,000. The date, it was half – way through its estimated useful life of 50 years. On 1 January 20X6 it was
revalued to $360,000. The company has a policy of straight – line depreciation. There was no amendment to the
estimate of the building’s remaining useful life.

Which figure will appear for accumulated depreciation in the statement of financial position
as at 31 December 20X6?
 $ 11,200
 $ 14,400
 $ 294,400
 $ 291,200
Q No.22
Which TWO of the following ratios would help the owner of a business understand its
profitability?
 Return on capital employed
 Current ratio
 Interest cover
 Gearing
 Inventory days
 Gross margin

Q No.23
When preparing financial statements it is important that they are complete, neutral and free from error.

Which of the following qualitative characteristics does the above statement support?
 Comparability
 Faithful representation
 Relevance
 Understandability

Q No.24
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets which TWO
of the following terms are used in the definition of a provision?
 Liability
 Uncertain timing
 Possible obligation
 Certain amount

Q No.25
Which of the following statements are true regarding disclosure of events after the reporting
period?
1. Non – adjusting events are disclosed if non – disclosure would affect the ability of users to make proper
evaluations and decisions
2. Any new information received between the end of the reporting period and the financial statements
are authorized for issue, relating to conditions existing before the end of the reporting period, does not
need to be disclosed or adjusted

 Statement 2 only
 Neither Statement is true
 Statement 1 only
 Statement 1 and Statement 2
Q No.26
IAS 10 Events after the Reporting Period, describes events which occur between the reporting
data and which of the following dates?
 The data on which the financial statements are issued to the entity’s shareholders
 The date on which the financial statements are submitted to the government authorities
 The date on which the entity pays income tax on its profit for the period
 The date on which the financial statements are authorized for issue to the entity’s shareholders

Q No.27
A company is preparing its financial statements for the year ended 30 April 20X8. Rent is paid quarterly in
advance on 1 March, 1 June, 1 September and 1 December each year. The annual rent is $180,000 per year.

What amounts should appear in the company’s financial statements for the year ended 30
April 20X8?
 Statement of profit or loss: $180,000 Statement of financial position: $15,000
 Statement of profit or loss: $180,000 Statement of financial position: $30,000
 Statement of profit or loss: $165,000 Statement of financial position: $15,000
 Statement of profit or loss: $195,000 Statement of financial position: $30,000

Q No.28
Which of the following errors would give rise to the creation of a suspense accounts?
 A cash sale for $100 had been debited to the sales account and credited to the cash account
 The sale of a motor van used for deliveries for $2,000 had been omitted from the accounts
 The debit side of the purchases account had been overcast by $100 when it was being balanced off at
the end of the year
 Cash received from a credit customer of $600 had been incorrectly recorded as $400 in the cash book

Q No.29
CST has the following information available for the year ended 31 October 20X7:

1. Authorized share capital of 2,000,000 ordinary shares: $0.25 each 500,000

2. Issued share capital of 1,000,000 ordinary shares: $0.25 each 250,000

At 31 October 20X7 the company proposed a dividend of 2.8c per share

What is the total dividend to be paid?

$...........................................:
Q No.30
How should the following measures be classified?

Profitability Efficiency
Net profit margin

The cash operating cycle

Trade payable payment period

Asset turnover

Q No.31
The following extracts are taken from the Christopher’s records:

Receivables at 31 December 20X6 $36,800

Allowance for receivables at 31 December 20X5 $1,460

On reviewing the receivables account it was found that an irrecoverable debt of $600 had not been written off.

Christopher wishes to make an allowance of 6% of receivables at the year end.

What should the total receivables expense in the statement of profit or loss be for the year
ended 31 December 20X6?
$......................................................:

Q No.32
Ben sells all his goods at a mark – up of 25% on cost price. During the year the following took place:

Sales 450,000

Purchases 365,000

Opening inventory was $48,500.

What is the closing inventory figure?

 $ 21,000
 $ 76,000
 $ 53,000
 $ 43,500
Q No.33
Hanna operates an imprest petty cash system. At the end of each month it is agreed that the cash float should
be $250. During the current month month Hanna had the following petty cash transactions:

Postage

Newspaper 20

Window cleaner 5

Window cleaner 10

Cash repaired employee for personal expenses 3

How much cash should be paid into petty cash at the end of the month?
$..............................................:

Q No.34
Which TWO of the following should be classified as revenue expenditures?
 The building of an extension to a factory
 Cost of training staff to operate a new machine
 Replacing roof tiles that had blown off the factory in a storm
 Legal costs on the acquisition of land

Q No.35
Colin has not kept proper accounting records during the year. He has the following information:

Payables at 1 July 20X4 43,550

Cash paid to suppliers 162,000

Discounts received from suppliers 6,100

Payables at 30 June 20X5 32,250

What were Colin’s purchases for the year ended 30 June 20X5?
$..............................................:
 BACKGROUND

Muhammad has prepared a draft statement of profit or loss for his business for the year ended 31
March 20X7.

After reviewing the draft information, Muhammad needs to correct several errors and omissions from
the financial statements.

Error Amount of Increase or

adjustment decrease to
needed profit
$
1. inventory of $600 was not included in the count of the year end
2. Rent paid of $430 for the six months to 30 June 20X7 had
Been included in expenses
3. An irrecoverable debt of $76 had been written off in the
previous year. During the current year the customer had paid a
final settlement of $50. No accounting entry had been made.
4. Sales returns of $160 for goods purchased on credit had not
been accounted for
5. Motor vehicle depreciation of 20% on a reducing balance basis
had not been charged for the delivery van. The van cost $20,000
and accumulated depreciation at the beginning of the year was
$4,000.
6. A transposition error has been made recording a sale
transaction – the amount was entered into both the sales and
receivables ledgers ad $450 rather than $540.
7. Mohammad’s electricity bill is usually $45 per month. He pays
the bill quarterly, but had not received a bill since the quarter
ended 31 December 20X6.
8. Muhammad offers a one year warranty on $20,000 worth of
sales. The warranty provision needs to be adjusted to 5% of the
sales value. The opening balance of the warranty provision was
$1,500.

TASK 1.
Calculate the amount that needs to be adjusted and whether this adjustment will increase
Muhammad’s profit for the period.
TASK 2.
Muhammad also needs to include the correct bank balance in his financial statements. His
bank statement at 31 March 20X7 states he has a cash balance of $3,880.

His cash book at 31 March 20X7 states that the balance is $3,800 debit.

Muhammad also the following information:

1. The cash book has been incorrectly added up and payments have been overstated by $120
2. Bank interest paid of $50 was on the bank statement but not been entered in the accounting
records
3. Due to bank error, direct debit payments of $35 had not yet been deducted from the bank
account
4. The bank had incorrectly charged fees of $25

What is the correct cash book balance?

$.........................................:

What amount should be included in the financial statements of 31 March 20X7 for cash?

TASK 3.
Muhammad purchased an item of machinery on 1 January 20X5 for $25,000. The machine had an
estimated useful life of five years and a residual value of $3,000.

On 31 March 20X7, Muhammad sold the machine for $14,500. Depreciation is charged monthly on a
pro rata basis over the life of the asset.

What is gain or loss on disposal of the machine for the year ended 31 March 20X7?
 BACKGROUND

The following are the summarised statements of financial positions of two companies, Sylan
and Tor, as at the end of their most recent financial year.

Assets Sylan Tor

Non – current assets $m $m
Property, plant and equipment 60 30
Investments, at cost 39 5
99 35
Current assets
inventories 30 20
Trade receivables 40 25
Other current assets 15 5
85 50
Total assets 184 85

Equality and liabilities

Equality
Ordinary share capital ($1 shares) 70 30
Retained earnings 64 25
134 55
Current liabilities
Trade payables 35 25
Other current liabilities 15 5
50 30
Total equity and liabilities 184 85

Sylan purchased 80% of the ordinary share capital of Tor for $39m several years ago. The retained
earnings of Tor at the date of acquisition were $15m and the non – controlling interest had a fair of
$8m.

During the most recent financial year Sylan sold inventory costing $13m to Tor for $18m. Tor still had
to sell 20% of this inventory as the date of the statements of financial positions. Tor also had invoices
outstanding in respect of these purchases totaling $6m.
TASK 1.
Which of the following are indicators of one company being a subsidiary of another?
Yes No

Owning more than 50% of the voting rights in a company

Having significant influence in a company

Buying more than 50% of its inventory from a company

Owning 50% of the shares in a company

TASK 2.
Complete the consolidated statement of financial position for Sylan

Sylan - consolidated statement of financial position

Assets $m
Non – current assets
Intangible asset: goodwill
Property, plant and equipment
Investment at cost

Current assets
Inventories
Trade receivables
Other current assets

Total assets

Equity and liabilities

Equity attributable to owners of the parent company
Ordinary share capital ($1 shares)
Retained earnings

Non – controlling interest

Total equity
Current liabilities
Trade payables
Other current liabilities

Total equity and liabilities