ACCA PROGRESS TEST

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ACCA-FA
PROGRESS TEST
ACCA PROGRESS TEST

Question: 1
Which groups of people are most likely to be interested in the financial statements of a sole
trader?
(1) Shareholders of the company
(2) The business's bank manager
(3) The tax authorities
(4) Financial analysts
Ans: 2 and 3 only

Question: 2
Mark’s trial balance at 31 July 20X6 includes the following balances:

is inventory at 31 July 20X6 is valued at $15,360.

What value should be reported for current assets in Mark's SOFP at 31 July 20X6?
Ans: 88430
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Question: 3
On 10 May, Amanda bought goods for resale. Her supplier allowed her a credit period of 30 days. To
date, the goods have not been sold.
On 10 May, how is Amanda’s accounting equation affected by the transaction?

Ans: B

Question: 4
Which of the following are correct?

Ans: D. I and IV only

Question: 5
A summary of the transactions of Fiona, who is registered for sales tax at 20% shows the following
for the month of September 20X9.
Sales - $60,000 (inclusive of tax)
Purchases - $35,000 (exclusive of tax)
At the beginning of the period, Fiona owed $2,800 to the tax authorities, and during the period she
has paid $2,100 to them.
At the end of the period the amount owing to the tax authorities is:
Ans: 3700
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Question: 6
Which of the following statements about prudence is correct?
A. Prudence requires assets to be carried at their lowest possible valuation
B. When prudence is applied, income is not recognised until the cash has been received
C. A prudent decision will mean lower expenditure
D. Prudence does not allow for overstatement of liabilities

Question: 7
A company bought a property on 1 January 20X1 for $300,000. Since then property prices have risen
substantially and the property has been revalued at $450,000 at 1 January 20X4. The property was
estimated as having a useful life of 15 years when it was purchased. On revaluation there was no
change to the overall useful economic life.
The company has also chosen to make an annual transfer of the excess depreciation on revaluation
between the revaluation surplus and retained earnings.
What is the balance on the revaluation surplus reported in the statement of financial position
as at 31 December 20X4?
Ans: 192500

Question: 8
Information is relevant if it is capable of making a difference in decision made by users.
According to the Conceptual Framework, financial information is capable of making a
difference in decisions if it has which of the following?
(i) Predictive value
(ii) Comparative value
(iii) Historic value
(iv) Confirmatory value
Ans: i and iv
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Question: 9
On 1 August, Lancaster made the following transactions:
1. He made a cash sale of $4,200.
2. He received cash of $2,760 in relation to a credit sale in the previous month.
Both transactions were inclusive of sales tax at 20%.
How much sales tax would be recorded in the cash book for the above transactions?
Ans: 700

Question: 10
The following information relates to Anna's hairdressing business in the year ended 31 December
20X6:

What is the sales figure for the business?

Ans: 38900

Question: 11
A company purchased an asset on 1 January 20X5 at a cost of $800,000. It is depreciated over 25
years by the straight line method (nil residual value), with a proportionate charge for depreciation in
the year of acquisition and the year of disposal.
At 31 December 20X9 the asset was re-valued to $1,100,000. There was no change in the expected
useful life of the asset. The asset was sold on 30 June 20Y0 for $1,250,000.
What profit on disposal of the asset will be reported in the statement of profit or loss of the
company for the year ended 31 December 20Y0?
Ans: 177,500
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Question: 12
Lotto Co purchased a building on 30 June 20X9 for $950,000. At acquisition, the useful life of the
building was 50 years. Depreciation is calculated on the straight-line basis. 10 years later, on 30 June
20Y9, the building was revalued to $2,000,000.
Lotto Co has a policy of transferring the excess depreciation on revaluation from the revaluation
surplus to retained earnings.
Assuming no further revaluations take place, what is the balance on the revaluation surplus at
30 June 20Z0?
Ans: 1,209,000

Question: 13
On 1 July 20X7, Michelin Co revalued a property. As a result, the annual depreciation charge
increased by $10,000 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:
Revaluation surplus $300,000
Retained earnings $770,000
What should be the balance on the retained earnings and revaluation surplus accounts after
the transfer?

Ans: D
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Question: 14
The debit side of a trial balance totals $800 more than the credit side.
Which one of the following errors would fully account for the difference?
A. $400 paid for plant maintenance has been correctly entered in the cash book and credited to
the plant asset account
B. Credit note issued to a customer of $400 has been debited to trade receivables
C. A receipt of $800 for commission receivable has been omitted from the records
D. The petty cash balance of $800 has been omitted from the trial balance

Question: 15
Listed below are five potential causes of difference between a company's cash book balance and its
bank statement balance as at 31 December 20X6:
(1) Interest credited by the bank but no entry is made in the cashbook
(2) A cheque paid in before 31 December 20X6 but subsequently dishonoured by the bank
(3) An omission of a direct debit payment
(4) An error by the bank in crediting to another customer's account a lodgement made by the
company
(5) Cheques recorded and sent to suppliers before 31 December 20X6 but not yet presented for
payment
Which of the following alternatives correctly analyses these items into those requiring an entry
in the cash book and those that would feature in the bank reconciliation?

Ans: A
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Question: 16
Brendan plc correctly records $7,851 as the cash in bank balance in its statement of financial position
at 30 April 20X8 after performing a bank reconciliation at that date. The bank statement showed
bank charges of $88 and a direct credit from a customer of $9,506 which had not initially been
recorded in the cash book.
On the bank reconciliation the bookkeeper includes unpresented cheques of $4,666 and uncleared
lodgements of $3,598.
BEFORE the reconciliation was performed:
A. the cash book balance was $1,743 credit and the bank statement balance was $8,919 credit
B. the cash book balance was $1,743 credit and the bank statement balance was $6,783 credit
C. the cash book balance was $1,567 credit and the bank statement balance was $6,783 credit
D. the cash book balance was $1,567 credit and the bank statement balance was $8,919
credit

Question: 17
IAS 38 Intangible Assets governs the accounting treatment of expenditure on research and
development.
Which of these four statements are correct?
1 All capitalised development expenditure must be amortised.
2 If all the conditions specified in IAS 38 are met, development expenditure may be capitalised if the
directors decide to do so.
3 Capitalised development costs are shown in the statement of financial position under the heading of
non-current assets.
4 Amortisation of capitalised development expenditure will appear as an item in a company's
statement of profit or loss.
Ans: 3 and 4
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Question: 18
The usual selling price of an item included in year-end inventories is $18.50 per unit. The current
cost of the item is $12.80 per unit but the items in year-end inventories were purchased by the
company at an original cost of $12.00 per unit. Carriage inwards of $1.00 per unit was also incurred.
Due to changes in the market, the items can only be sold at the usual selling price after modifications
are made after the year end at a cost of $3.50 per unit.
The scrap value of the items is $9.50 per unit.
In accordance with IAS 2 Inventories, at what amount should the items be included in the
financial statements?
Ans: 13

Question: 19
Meghan made an error when he calculated the value of her closing inventory, which means that the
inventory is over-valued.
How is her net profit for the year and net assets at the end of the year affected by this error?

Ans: A
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Question: 20
Winnie has built a new factory incurring the following costs:

What will be the total amount capitalised in respect of the factory?

Ans: 6950000

Question: 21
Which pair of the following items would appear on the same side of the trial balance?
A. Drawings and accruals
B. Carriage outwards and purchases return
C. Discount received and sales return
D. Carriage inwards and carriage outwards

Question: 22
The Conceptual Framework identifies four enhancing qualitative characteristics of financial
information.
For which of these characteristics is disclosure of accounting policies particularly important?
A. Verifiability
B. Timeliness
C. Comparability
D. Understandability
ACCA PROGRESS TEST

Question: 23
Samantha has extracted a trial balance and created a suspense account with a debit balance of $340 to
make it balance. Samantha found the following:
1. The sales account is undercast by $900.
2. A payment of $1,500 has been posted correctly to the cashbook but no other entry has been made.
3. A credit purchase of $223 has only been debited to the purchases account.
What is the remaining credit balance on the suspense account after these errors have been
corrected?
Ans: 37

Question: 24
A business can make a profit and yet have a reduction in its bank balance. Which one of the
following might cause this to happen?
A. The sale of non-current assets at a loss
B. The charging of depreciation in the statement of profit or loss
C. The lengthening of the period of credit given to customers
D. The lengthening of the period of credit taken from suppliers

Question: 25
Which of the following statements about accounting concepts and policies is/are correct?
(1) It may sometimes be necessary to exclude information that is relevant from financial statements
because it is too difficult for some users to understand.
(2) Information in financial statements should be presented so as to be understood by users with a
reasonable knowledge of business and accounting.
(3) In times of rising prices, the use of historical cost accounting tends to understate assets and
overstate profits.
(4) To comply with the law, the legal form of a transaction must alwas be reflected in financial
statements.
Ans: 2 and 3
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Question: 26
The following items of expenditure take place during the first month of a transport business.

What is the total capital expenditure?

Ans: 21100

Question: 27
The plant and equipment account in the records of a company for the year ended 31 December 20X7
is shown below:
Plant and machinery (Cost)

The company’s policy is to charge depreciation on a straight-line basis at 20% per year, with
proportionate depreciation in years of purchase and sale.
What should be the depreciation charge for the year ended 31 December 20X7?
Ans: 156500
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Question: 28
What adjustment would be made to the closing inventory if it was discovered that goods that cost
$5,000 and with a net realisable value of $3,000 had been omitted from the year-end inventory
count?
A. An increase of $5,000
B. An increase of $3,000
C. An increase of $2,000
D. An decrease of $2,000

Question: 29
On 1 July 20X5, Queensbay Co purchased a property for $300,000. The property had a useful life of
50 years and was depreciated on a straight-line basis. On 1 July 20Y0, the property was revalued to
$585,000. There is no change to the useful life upon revaluation. The company wishes to make the
allowed transfer of excess depreciation between the revaluation surplus and retained earnings.
Which of the following correctly records the transfer at 30 June 20Y1?

Ans: C
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Question: 30
The following information is available for the year ended 31 October 20X2:

On 1 November 20X1, the company revalued the property to $150,000.

The company’s policy is to charge depreciation on a straight-line basis over 50 years. On revaluation
there was no change to the overall useful economic life. It has also chosen not to make an annual
transfer of the excess depreciation on revaluation between the revaluation surplus and retained
earnings.
What should be the depreciation charge as shown in the financial statements for the year ended
31 October 20X2?
Ans: 3750

Question: 31
Which of the following statements about the treatment of inventory and work in progress in
financial statements are correct?
1. During period of falling prices, closing inventory and profit are lower using FIFO rather than
weighted average cost.
2. Depreciation of factory plant should be included as part of the cost of finished goods inventory.
3. Inventory items can be valued using either first in, first out (FIFO) or weighted average cost.
4. A company’s financial statements must disclose the accounting policies used in measuring
inventories.
Ans: All four items
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Question: 32
Gizzy only buys inventories on credit. At the end of May 20X8, the payables control account and the
list of payables ledger balances fail to agree.
It was later discovered that a discount allowed from Brett of $90 has been omitted from the control
account, but has been recorded twice in the personal ledger.
Which of the following adjustments is correct?

Ans: C

Question: 33
Balls plc has 40 units of spongy balls in inventory as at 30 November 20X7. The product costs $5 per
unit to manufacture and can be sold for $15 per unit. Half of the units in inventory at the year end
have been damaged and will require rectification work costing $10 per unit before they can be sold.
Selling cost are $1 per unit.
The value of inventory at 30th Nov 20X7 is:
Ans: 180

Question: 34
The suspense account shows a debit balance of $100.
What could this balance be due to?
A. Entering $50 received from A Turner on the debit side of A Turner's account
B. Entering $50 received from A Turner on the credit side of A Turner's account
C. Undercasting the sales day book by $100
D. Undercasting the purchases account by $100
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Question: 35
The trial balance of Cat Co, a limited liability company, did not agree and a suspense account was
opened for the difference. The following errors were subsequently found:
1. Sales return were mistakenly debited to the purchases returns account.
2. Cash received from the sale of a non-current asset was correctly entered in the cash book but was
debited to the disposal account.
3. The balance on the rent account was omitted from the trial balance.
4. Some of the cash received from customers had been used to pay sundry expenses before banking
the money.
Which of the above errors would require an entry to the suspense account as part of the
process of correcting them?
Ans: 2 and 3

Question: 36
Trevor used the following balances to prepare his final accounts as at 30 June 20X7.

The business does not hold inventory. No further adjustments were required.
What is Trevor's opening capital figure as at 1 July 20X7?
Ans: 2000
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Question: 37
Funnel, a limited liability company, has non-current assets with a carrying value of $4,100,000 on 1
January 20X7.
During the year ended 31 December 20X7, the following occurred:
• Depreciation of $405,000 was charged to the statement of profit or loss
• Land and buildings with a carrying value of $750,000 were revalued to $1,200,000
• An asset with a carrying value of $180,000 was disposed of for $230,000

The carrying value of non-current assets at 31 December 20X7 was $5,250,000.

What amount should be shown for the purchase of non-current assets for the year ended 31
December 20X7?
Ans: 1285000

Question: 38
Which of the following statements regarding non-current asset is correct?
A. Non-current assets form part of the working capital of the business.
B. Non-current assets should be revalued if the market value is increasing.
C. All non-current assets should be revalued regularly.
D. Non-current assets may be revalued at the discretion of management. Once revaluation
has occurred it, all the non-current assets in the same class should be revalued.

Question: 39
On 31 December 20X9, Kathay, a limited liability company, owned a building that cost $1,000,000
on 1 January 20X0. It was being depreciated at 5% per year on a straight-line basis.
On 1 January 20Y0 , the building was revalued at $1,300,000. On this date, the building had a
remaining useful life of 10 years.
What should be the balance on the revaluation surplus and the depreciation charge as shown in
the financial statements for the year ended 31 December 20Y0?

Ans: D
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Question: 40
The following information is available for a sole trader who keeps no accounting records:

Using this information, what is the trader’s profit for the year ended 30 June 20X1?
Ans: 257000

Question: 41
Venice's receivables ledger balances totalled up to $160,500, which does not agree with her trade
receivables control account. The following errors were found:
(1) An invoice for $650 was completely omitted.
(2) A contra entry of $2,000 was entered in the receivables ledger and payables ledger, but no entry
was made in the control account for this.
(3) A credit note for $250 was recorded twice in the receivables ledger
What should be the total of the balances on her receivables ledger after correcting the above
errors?
Ans: 161,400

Question: 42
Which of the following statements about bank reconciliations is correct?
A. A difference between the cash book and the bank statement must be corrected by means of a
journal entry.
B. Interest charged on bank overdraft on the bank statement must be credited in the cash
book.
C. An error by the bank must be corrected by an entry in the cash book.
D. An overdraft is a credit balance in the bank statement.
ACCA PROGRESS TEST

Question: 43
IAS 2 Inventories defines the items that may be included in computing the value of an inventory of
finished goods manufactured by a business.
Which one of the following lists consists only of items which may be included in the statement of
financial position value of such inventories, according to IAS 2?
A. Supervisor's wages, carriage inwards, carriage outwards, raw materials
B. Plant depreciation, import duties, raw materials, supervisors’ wages
C. Raw materials, carriage inwards, costs of storage of finished goods, plant depreciation
D. Carriage outwards, raw materials, supervisors’ wages, plant depreciation

Question: 44
Which of the following items should be disclosed for tangible non-current assets according to
IAS 16 Property, Plant and Equipment?
(1) Depreciation methods used and the total depreciation allocated for the period
(2) A reconciliation of the carrying amount of non-current assets at the beginning and end of the
period
(3) For revalued assets, whether an independent valuer was involved in the valuation
(4) For revalued assets, the effective date of the revaluation
Ans: All of the above

Question: 45
A company purchased a machine for $50,000 on 1 January 20X1. It was judged to have a five-year
life with a residual value of $5,000. During 20X3, the market for the product declined and the
machine was sold on 1 January 20X4 for $7,000.
What was the loss on disposal of the machine?
Ans: 16,000
ACCA PROGRESS TEST

Question: 46
Ariel Co's transactions for the month of February 20X8 were as follows:

Ariel Co is registered for sales tax at 20%. On 1 February 20X8, the sales tax account showed sales
tax payable by Ariel Co of $10,000.
What was the balance on the sales tax account on 28 February 20X8?
Ans: 44,000 Cr

Question: 47
Josh bought a new car for $22,125. He paid for the new car by taking out a loan of $21,000 and
trading in his old car. The old car originally cost $8,500 and had been depreciated by $6,850 at the
time of the trade in.
What is the gain or loss on disposal of the old car?
Ans: -525

Question: 48
Which of the following errors would cause a trial balance not to balance?
1 The purchase daybook was undercast
2 A cash sale was wrongly treated as a credit sale
3 Repair of motor vehicle was wrongly debited into motor vehicle account
4 Goods taken by the proprietor of a business recorded by debiting purchases and crediting drawings
account
Ans: 1 only
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Question: 49
The following figures relate to inventory held at 30 June 20X7:

Modifications costing $8 per unit would need to be made to product B to achieve the selling price of
$30.
What is the value of inventory held at 30 June 20X7 in accordance with IAS 2 Inventories?
Ans: 21600

Question: 50
Which of the following can be recognised as an intangible asset in the statement of financial
position?
A. A payment of $10,000 to ABC University for original research.
B. $50,000 spent on applied research to develop a new discovery into a possible new product.
C. $22,000 spent on developing a product that was then found to be non-viable.
D. $17,000 spent on purchasing brand name from a competitor.