Mock Examination

: ACCA Paper F3 / FIA FFA

Financial Accounting
Session

: June 2014

Set by

: Mr Veeramani

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(F3/ FFA Mock Test)

June 2014
1. What is the meaning of dual concept?
a. Accounts are kept on the double entry basis
b. Profits are calculated on the basis of cash received less cash paid
c. Assets are normally shown at cost price
d. Only items with monetary value are included in the accounts
2. In a traders books the ledger account of J, a customer shows a debit balance of $777.
What does this mean?
a. J has just paid $777 to the business
b. J owes the business $777
c. The business owes J $777
d. The business has paid J $777
3. What is the name for a processing method where processing of data is done only after
accumulating a large enough volume of data?
a. Job processing
b. Batch processing
c. Manual processing
d. Contract processing
4. If the opening stock was $6000, closing stock $10 000, the mark up 20% and sales during the
period were $120 000, then the rate of stock turn was ___________.
a. 10 times
b. 12 times
c. 12.5 times
d. 15 times
5. Which transaction will cause an increase in capital employed?
a. Disposal of a fixed asset for more than its book value
b. Increasing the provision for bad debts
c. Receipt of a loan
d. Receipt of payment from debtor in cash
6. In the case of a club, the accumulated fund shows:
a. The increase in cash over the year
b. The surplus of income over expenditure for the year
c. The total of assets less current and long term liabilities
d. The total subscription received during the year

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7. Which item may be included in a balance sheet at more than historical cost?
a. Goodwill
b. Land and buildings
c. Research expenditure
d. Stock
8. Which is not an appropriation of profit?
a. Partners interest on capital
b. Partners interest on drawings
c. Partners interest on loan
d. Partners share of profit
9. The table shows extracts from a trial balance.
Debit $
Credit $
Prepayments
4620
Accruals
8125
Bank balance
14920
3612
Trade creditors
18148
Loan 10 years
15000
Which total for current liabilities should be disclosed in the Balance Sheet?
a. $26 273
b. $26 380
c. $29 885
d. $44 885
10. If current liabilities exceed current assets there is a shortage of __________.
a. Capital
b. Liabilities
c. Working capital
d. assets
11. A company buys a machine on 1 January 19x3 for $22000. It has an expected life of seven
years and an estimated scarp value of $1000. On 31 December 19x7 the machine is
disposed of for $9000. The companys yearend is 31 December. Calculate the profits or loss
on disposal of the machine.
a. Loss of $3500
b. Profit of $2000
c. Loss of $2000
d. Profit of $4000
12. An asset costs $150 000, has an estimated useful of life of 10 years, after which its scrap value
will be $10 000. If the reducing balance method is used, at the rate of 40% per annum, what
is the assets net book value after one year?
a. $56000
b. $60000
c. $84000
d. $90000
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13. Depreciation on Machinery in a net book value method is

a. a revenue expenditure and debited to the Machinery account
b. a revenue expenditure and credited to the Machinery account
c. a capital expenditure and credited to the Machinery account
d. a capital expenditure and credited to the Capital account
14. A company increases its provision for bad debts by $1600. What will be the effect of this
adjustment on the yearend Balance Sheet?
Net Profit
Net debtors
a. Decrease by $1600
decrease by $1600
b. Decrease by $1600
Increase by $1600
c. Increase by $1600
decrease by $1600
d. Increase by $1600
increase by $1600
15. At the end of the financial year, a business has debtors of $3 250 and a provision for bad
debts of $188. It is proposed to maintain provision for bad debts at 5%. What is the amount of
net debtors in the Balance Sheet?
a. $3 124
b. $3 500
c. $3 088
d. $3 062
16. A business starts trading on 1 May 20X0. The table shows rent paid on the premises.
Date
Period
Amount$
2.5.X0
1.5 30.6
1 000
3.7.X0
1.7 30.9
1 500
2.10.X0
1.10 31.12
1 500
4.1.X1
1.1 31.3
1 560
1.4.X1
1.4 30.6
1 560
Which amount should be shown in the accounts for the year ended 30 April 20X1 for rent
prepayment?
a. $520
b. $1 000
c. $1 040
d. $1 560
17. The sales day book of a business has been overcast by $800. The business maintains control
accounts as part of the double entry book keeping system. The effect of correcting this error
will be to make adjustments to the
a. control account with decrease in profit of $800
b. control account with no effect on profit
c. ledger balances of the individual debtors with a decrease in profit of $800
d. ledger balances of the individual debtors with no effect on profit

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18. The balance on a sales ledger control account is $40 000. The following items are then
discovered:
$
Total of sales day book understated
1 500
Discounts allowed not entered in sales ledger
1 200
Bad debts written off not recorded in sales ledger control
400
Provision for bad debts
2 500
What is the total of the balances in the sales ledger?
a. $37 900
b. $38 600
c. $38 900
d. $41 100
19. A companys working capital was $43 200. Subsequently, the following transactions
occurred:
Creditors were paid $3000 by cheque
A bad debt of $250 was written off
Stock valued at $100 was sold for $230 on credit.
Working capital is now:
a. $46 080
b. $43 080
c. $40 080
d. $42 850
20. Accounting transactions are first recorded in
a. a T-account
b. the journal
c. the general ledger
d. alphabetical order

21. A cash book has separate columns for cash and bank transactions. At 1 June the balance
on the Bank account was $2 000. Transactions during June were:
Cash banked
$3 000
Cheque drawn for cash
$ 700
What was the balance on the bank account at the end of June?
a. $4 300
b. $3 400
c. $4 400
d. $3 300
22. Which book of prime entry is part of the dual concept?
a. Cash book
b. Sales Journal
c. General ledger
d. Returns Inwards book

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23. Which of the following is not types of computers used in businesses?

a. PDAs
b. Mainframe computers
c. Laptops
d. Laser printers
24. The opening stock of a business is $10 000 and the cost of goods sold is $200 000. What value
of closing stock is needed to give a stock turnover of 10 times?
a. $10 000
b. $20 000
c. $30 000
d. $40 000
25. A business has the following current assets and current liabilities:
$
Debtors
6 000
Bank overdraft
1 500
Cash in hand
50
Creditors
5 050
The only other item in the working capital is stock. The current ratio is 2:1. What is the value of
the stock?
a. $2 550
b. $4 050
c. $5 550
d. $7 050
26. A clubs bar stocks at 1 January 19X7 cost $4 750. During the year to 31 December 19X7,
cash receipts from customers of $34 450 were banked. Staff wages of $50 a week were paid
from till receipts. Bar purchases during the year amounted to $26 200. Bar prices are fixed to
achieve a uniform gross profit margin of 40%.
What is the net profit on bar trading to be disclosed in the clubs income and expenditure
account for 19X7?
a. $11 180
b. $12 220
c. $13 780
d. $14 820
27. Which event does require the consideration of goodwill?
a. Starting a new business
b. Admission of a new partner into a business
c. The sale of fixed assets
d. Capital expenditure
28. Which of the following can be a reason for a partnership to be formed?
a. To pool the skills and knowledge of the partners
b. To reduce the cost of operating the business
c. To bear more risks
d. To reduce the capital of the business
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29. Which item would be included in the Balance Sheet as creditors?

a. Amount owing to suppliers
b. Bank loan
c. Motor expenses paid
d. Rental income received
30. What is the effect on working capital when insurance is paid in advance?
a. Increase
b. No effect
c. Decrease
d. More working capital
31. A business purchased a fixed asset on credit at a cost of $80 000. It used its own work force
to install the asset and the labour cost of this work aid was $8 000. The entries needed to
record all this are:
a. Debit asset
$80 000
Credit bank
$80 000
b. Debit asset
Credit bank

$80 000
$80 000

c. Debit asset
Debit wages

$80 000
$80 000

d. Debit asset
Credit creditors
Credit bank

$88 000
$80 000
$8 000

32. Incurred expenditure is either shown as a cost of sale or an expense in the profit and loss
account or as a fixed asset in the balance sheet. In deciding where to disclose the
expenditure, which of the following is not important?
a. The betterment value, if any, of the expenditure
b. The possibility of being able to recover the expenditure in the future accounting
periods
c. The date on which the expenditure was incurred
d. None of the above
33. A companys yearend sales ledger balance are as shown:
Debit
$14 240
Credit
$ 960
When preparing the annual accounts, it was decided to write off bad debts of $200 and to
maintain the provision for doubtful debts at 2 %. What will be the provision for doubtful
debts at the year end?
a. $151
b. $327
c. $332
d. $351

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34. The profit and loss account of a business shows a net profit of $10 055. Bad debts of $4100
should have been written off and a decrease of $750 in the provision for bad debts should
have allowed. Net profit will now be:
a. $6 705
b. $7 050
c. $6 700
d. $5 205
35. In 20X0 a business paid $4 000 for electricity. On January 20X0 $1600 was owed for electricity.
On 31 December 20X0 $2 300 was owed for electricity. How much is charged for electricity in
the Profit and Loss Account for 20X0?
a. $3 000
b. $3 600
c. $4 700
d. $4 300
36. Father Company acquired 70% of the ordinary share capital of Baby Co 5 years ago. The
following information relates to Baby Co for the year ended 31 December 2013.
Sales Revenue $480,000, Cost of sales $270,000. Admin Expenses $90,000 and Taxation
$30,0000
What is the profit attributable to the non-controlling interest in the consolidated income
statement?
a. $27,000
b. $63,000
c. $36,000
d. $84,000
37. Which of the following statements regarding the method of consolidation is true?
(1) Subsidiaries are equity accounted
(2) Associates are equity accounted
a.
b.
c.
d.

Neither statement
Statement 1 only
Both statements
Statement 2 only

38. Lim acquired 80% of the voting equity of Tan. Tan had the following equity at the date of
acquisition.
The cost of the investment was $1,500,000 and the fair value of the non-controlling interest at
acquisition was $360,000. What was the goodwill on acquisition of Tan?
a. $420,000
b. $60,000
c. $300,000
d. $48,000

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39. When accounting or goodwill arising on the acquisition of an ongoing business, which of the
following statements is correct?
a. Goodwill is recorded at its initial value less impairment losses
b. Goodwill is amortised over its estimated useful life
c. Goodwill is amortised over an estimated useful life not exceeding 20 years
d. Goodwill is written off immediately after acquisition
40. Which transaction will cause the balance in Michaels Cash Book to be greater than his Bank
Statement balance?
a. The bank has not notified Michael about a dishonored cheque
b. A error is made in the Cash Book a cheque payment of $101 is recorded as $110
c. A credit transfer a payment is deposited directly into Michaels book
d. A cheque is drawn but not yet presented at the bank for payment
41. Of all the items given, which would be added when attempting a reconciliation starting with
the cash book balance?
a. Cheques not yet credited by the bank
b. Bank charges
c. Cheques not yet presented for payment
d. Standing orders

42.

Silas's Ledger
Dr
20X2
Feb-01 Balances
10 Sales
14 X

Rahab
$
1000
5000
100

20X2
Feb-15 Returns
20 Bank
Discount

Cr
$
800
950
50

What does Returns refer to?

a. Carriage outwards
b. Settlement of debts
c. Purchases returns
d. Returns inwards
43. What is the capital of the business of the assets and liabilities of the business are as follows:
Office equipment
Premises
Stock
Debtors
Cash in hand
Bank Overdraft
Creditors

$
3 700
13 250
700
1 800
325
1 350
3 435
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a.
b.
c.
d.

$14 990
$14 890
$17 690
$18 880

44. Which if the following transactions is recorded on the debit side of the Cash Book?
a. Received cheque from debtors to settle amount owned
b. Purchased officer equipment with company cheque
c. Pay officer salaries with cheque
d. Pay sundry creditors with company cheque
45. Bank overdraft is
a. Amount paid to the bank by the account holder
b. Charges on the amount owing to the bank
c. Cash deposited in the bank
d. Amount of cash overdrawn by the current account holder, which require immediate
settlements
46. Companies should use net realisable value to record assets if which of the following
conditions exist?
a. There are changes in the money measurement
b. When there is a period of rising prices
c. The company is not a going concern
d. When cash basis of accounting is used
47. The accountant is regarded as a steward for the business unit because
a. his reliable and well-kept financial records of the business helps the owner to manage
and control his business
b. the accounts have to follow generally accepted accounting principles
c. he is paid by the owner of the business to prepare his accounts for him
d. he has to abide by what the owner of the business tells him to do
48. What is the normal source document for entering a transaction into a Purchases Journal?
a. Cash bill
b. Delivery note
c. Copy of invoice sent
d. Invoice received
49. W sends back $270 of faulty goods to Ruth. In which book of prime entry will Ruth record this
transaction?
a. Sales Returns Journal
b. General Journal
c. Sales Journal
d. Purchases Journal

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50. X has a 40% shareholding in each of the following three companies:

P: X has the right to appoint or remove a majority of the directors of P.
Q: X has significant influence over the affairs of Q.
R: X has the power to govern the financial and operating policies of R.
Which of the following are subsidiaries of X for financial reporting purposes?
a. Q and R only
b. P and R only
c. P and Q only
d. P, Q and R

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