Foundations in Accountancy/ACCA

Financial Accounting (FFA/FA)

Course Examination 1

Questions

Time allowed 1 hour

TOTAL MARKS 50 marks

All questions are compulsory and MUST be attempted.

Instructions:
Please attempt this exam under test conditions.

DO NOT OPEN THIS EXAM UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS

For exams from 1 September 2018 to 31 August 2019

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Question 1
Which of the following statements is/are true?
1. Directors of a company have a duty of care to show reasonable competence in their
management of the affairs of a company.
2. Directors of a company must act honestly in what they consider to be the best interest of the
company.
3. A director's main aim should be to create wealth for the shareholder of the company.
Choose one:
 1 and 2 only
 2 only
 1, 2 and 3 only
 1 and 3 only (2 marks)

Question 2
Which accounting concept states that omitting or misstating this information could influence
users of the financial statements?
Choose one:
 The consistency concept
 The accruals concept
 The materiality concept
 The going concern concept (2 marks)

Question 3
Which one of the following statements about an imprest system of petty cash is correct?
Choose one:
 An imprest system for petty cash controls small cash expenditures because a fixed amount is
paid into petty cash at the beginning of each period.
 The imprest system provides a control over petty cash spending because the amount of cash
held in petty cash at any time must be equal to the value of the petty cash vouchers for the
period.
 An imprest system for petty cash can operate without the need for petty cash vouchers or
receipts for spending.
 An imprest system for petty cash helps with management of small cash expenditures and
reduces the risk of fraud. (2 marks)

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Question 4
Mew Ling has the following transactions:
1. Receipt of cash from R Singh in respect of an invoice for goods sold three weeks ago
2. Receipt of cash from S Kalu for cash sales
What are the ledger entries required to record the above transactions?
Choose one:
 Dr Cash
Cr Sales
 Dr Cash
Cr Sales
Cr Trade Receivables
 Dr Sales
Cr Cash
 Dr Trade Receivables
Dr Sales
Cr Cash (2 marks)

Question 5
A company with an accounting date of 31 October carried out a physical check of inventory on
4 November 20X3, leading to an inventory value at cost at this date of $483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1. Goods costing $38,400 were received from suppliers.
2. Goods that had cost $14,800 were sold for $20,000.
3. A customer returned, in good condition, some goods which had been sold to him in October for
$600 and which had cost $400.
4. The company returned goods that had cost $1,800 in October to the supplier, and received a
credit note for them.
What figure should appear in the company's financial statements at 31 October 20X3 for
closing inventory, based on this information?
Choose one:
 $458,700
 $505,900
 $508,700
 $461,500 (2 marks)

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Question 6
An asset register showed a carrying value of $67,460. A non-current asset costing $15,000 had been
sold for $4,000, making a loss on disposal of $1,250. No entries had been made in the asset register
for this disposal.
What is the correct balance on the asset register?
Choose one:
 $42,710
 $51,210
 $53,710
 $62,210 (2 marks)

Question 7
A company receives rent for subletting part of its office block.
Rent, receivable quarterly in advance, is received as follows:
Date of receipt Period covered $
1 October 20X1 3 months to 31 December 20X1 7,500
30 December 20X1 3 months to 31 March 20X2 7,500
4 April 20X2 3 months to 30 June 20X2 9,000
1 July 20X2 3 months to 30 September 20X2 9,000
1 October 20X2 3 months to 31 December 20X2 9,000
What figures, based on these receipts, should appear in the company's financial statements
for the year ended 30 November 20X2?
Choose one:
Statement of profit or loss Statement of financial position
 $34,000 Debit Rent in arrears (Dr) $3,000
 $34,500 Credit Rent received in advance (Cr) $6,000
 $34,000 Credit Rent received in advance (Cr) $3,000
 $34,000 Credit Rent in arrears (Dr) $3,000 (2 marks)

Question 8
A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The
rent was increased from $90,000 per year to $120,000 per year as from 1 October 20X2.
What rent expense and accrual should be included in the company's financial statements for
the year ended 31 January 20X3?
Choose one:
Rent expense Accrual
$ $
 100,000 20,000
 100,000 10,000
 97,500 10,000
 97,500 20,000 (2 marks)

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Question 9
Buster's draft accounts for the year to 31 October 20X5 report a loss of $1,486. When he prepared
the accounts, Buster did not include an accrual of $1,625 and a prepayment of $834.
What is Buster's profit or loss for the year to 31 October 20X5 following the inclusion of the
accrual and prepayment?
Choose one:
 A loss of $695
 A loss of $2,277
 A loss of $3,945
 A profit of $1,807 (2 marks)

Question 10
At 31 March 20X2 a company had oil in hand to be used for heating costing $8,200 and an unpaid
heating oil bill for $3,600.
At 31 March 20X3 the heating oil in hand was $9,300 and there was an outstanding heating oil bill of
$3,200.
Payments made for heating oil during the year ended 31 March 20X3 totalled $34,600.
Based on these figures, what amount should appear in the company's statement of profit or
loss and other comprehensive income for heating oil for the year ended 31 March 20X3?
Choose one:
 $23,900
 $36,100
 $45,300
 $33,100 (2 marks)

Question 11
A business compiling its financial statements for the year to 31 July each year pays rent quarterly in
advance on 1 January, 1 April, 1 July and 1 October each year. The annual rent was increased from
$60,000 per year to $72,000 per year as from 1 October 20X3.
What figure should appear for rent expense in the business's statement of profit or loss and
other comprehensive income for the year ended 31 July 20X4?
Choose one:
 $69,000
 $62,000
 $70,000
 $63,000 (2 marks)

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Question 12
Which of the following items does the statement below describe?
'A possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the entity's
control'
Choose one:
 A provision
 A current liability
 A contingent liability
 A contingent asset (2 marks)

Question 13
The following items have to be considered in finalising the financial statements of Q, a limited liability
company:
1. The company gives warranties on its products. The company's statistics show that about 5% of
sales give rise to a warranty claim.
2. The company has guaranteed the overdraft of another company. The likelihood of a liability
arising under the guarantee is assessed as possible.
According to IAS 37 Provisions, contingent liabilities and continent assets, what is the correct
action to be taken in the financial statements for these items?
Create a provision Disclose by note only No action
A. 1 2
B. 1 2
C. 1, 2
D. 2 1
Choose one:
 A
 B
 C
 D (2 marks)

Question 14
Which of the following statements about the requirements of IAS 37 Provisions, contingent
liabilities and contingent assets are correct?
1. A contingent asset should be disclosed by note if an inflow of economic benefits is probable.
2. No disclosure of a contingent liability is required if the possibility of a transfer of economic
benefits arising is remote.
3. Contingent assets must not be recognised in financial statements unless an inflow of economic
benefits is virtually certain to arise.
Choose one:
 All three statements are correct
 1 and 2 only
 1 and 3 only
 2 and 3 only (2 marks)

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Question 15
Wanda Co allows customers to return faulty goods within 14 days of purchase. At 30 November 20X5
a provision of $6,548 was made for sales returns. At 30 November 20X6, the provision was re-
calculated and should now be $7,634.
What should be reported in Wanda Co's statement of profit or loss for the year to
31 October 20X6 in respect of the provision?
Choose one:
 A charge of $7,634
 A credit of $7,634
 A charge of $1,086
 A credit of $1,086 (2 marks)

Question 16
William's trial balance at 30 September 20X5 includes the following balances:
Trade receivables $75,943
Receivables allowance $4,751
How should these balances be reported in William's statement of financial position as at
30 September 20X5?
Choose one:
 An asset of $71,192
 An asset of $75,943 and a liability of $4,751
 A liability of $71,192
 A liability of $75,943 and an asset of $4,751 (2 marks)

Question 17
At 31 December 20X2 a company's receivables totalled $400,000 and an allowance for receivables of
$50,000 had been brought forward from the year ended 31 December 20X1.
It was decided to write off debts totalling $38,000 and to adjust the allowance for receivables to 10%
of the receivables.
What charge for receivables expense should appear in the company's statement of profit or
loss for the year ended 31 December 20X2?
Choose one:
 $74,200
 $51,800
 $28,000
 $24,200 (2 marks)

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Question 18
A company has received cash for a debt that was previously written off.
Which of the following is the correct double entry to record the cash received?
Choose one:
Debit Credit
 Irrecoverable debts expense Accounts receivable
 Cash Irrecoverable debts expense
 Allowance for receivables Accounts receivable
 Cash Allowance for receivables (2 marks)

Question 19
W is registered for sales tax. The managing director has asked four staff in the accounts department
why the output tax for the last quarter does not equal 20% of sales (20% is the rate of tax).
Which one of the following four replies she received was NOT correct?
Choose one:
 The company had some exports that were not liable to sales tax.
 The company made some sales of zero-rated products.
 The company made some sales of exempt products.
 The company sold some products to businesses not registered for sales tax. (2 marks)

Question 20
The following information relates to Eva Co's sales tax for the month of March 20X3:
$
Sales (including sales tax) 109,250
Purchases (net of sales tax) 64,000
Sales tax is charged at a flat rate of 15%. Eva Co's sales tax account showed an opening credit
balance of $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of
the month.
What was the total sales tax paid to regulatory authorities during the month of March 20X3?
Choose one:
 $6,470.00
 $11,910.00
 $14,047.50
 $13,162.17 (2 marks)

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Question 21
Alana is not registered for sales tax purposes. She has recently received an invoice for goods for
resale which cost $500 before sales tax, which is levied at 15%. The total value was therefore $575.
What is the correct entry to be made in Alana's general ledger in respect of the invoice?
Choose one:
 Dr Purchases $500, Dr Sales tax $75, Cr Payables $575
 Dr Purchases $575, Cr Sales tax $75, Cr Payables $500
 Dr Purchases $500, Cr Payables $500
 Dr Purchases $575, Cr Payables $575 (2 marks)

Question 22
A supplier sends you a statement showing a balance outstanding of $14,350. Your own records show
a balance outstanding of $14,500.
Which one of the following could be the reason for this difference?
Choose one:
 The supplier sent an invoice for $150 which you have not yet received.
 The supplier has allowed you $150 cash discount which you had omitted to enter in your ledgers.
 You have paid the supplier $150 which he has not yet accounted for.
 You have returned goods worth $150 which the supplier has not yet accounted for. (2 marks)

Question 23
Your payables control account has a balance at 1 October 20X8 of $34,500 credit. During October,
credit purchases were $78,400, cash purchases were $2,400 and payments made to suppliers,
excluding cash purchases, and after deducting settlement discounts of $1,200, were $68,900.
Purchase returns were $4,700.
What was the closing balance?
Choose one:
 $38,100
 $40,500
 $47,500
 $49,900 (2 marks)

Question 24
A receivables ledger control account had a closing balance of $8,500. It contained a contra to the
payables ledger of $400, but this had been entered on the wrong side of the control account.
What should be the correct balance on the control account?
Choose one:
 $7,700 debit
 $8,100 debit
 $8,400 debit
 $8,900 debit (2 marks)

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Question 25
Which of the following items could appear on the credit side of a receivables ledger control
account?
1. Cash received from customers
2. Irrecoverable debts written off
3. Increase in allowance for receivables
4. Contras
5. Sales
6. Credits for goods returned by customers
7. Cash refunds to customers
Choose one:
 1, 2, 4 and 6
 1, 2, 4 and 7
 3, 4, 5 and 6
 5 and 7 (2 marks)
(Total = 50 marks)

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 FINANCIAL ACCOUNTING – COURSE EXAM 1
ANSWER SHEET
Question Options (circle one option only)

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Student self-assessment
Having completed this exam take a few minutes to consider what you did well and what you found difficult.
Use this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning
Did you finish too early? Y/N Go back and check your answers.
Did you overrun? Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind, move on to the next question.

Content
Did you struggle with:
Interpreting the questions? Y/N Learn subject jargon (interactive text index).
Read questions carefully noting all the parts.
Practise as many questions as possible.
Understanding the subject? Y/N Review your notes/text.
Work through easier examples first.
Remembering the notes/text? Y/N Quiz yourself constantly as you study. You need to develop
your memory as well as your understanding of a subject.

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