ACCA F3 - Financial Accounting
Q.1What are trade accounts receivables?
Receivables that arise from the sale of a company’s products or services
Receivables that include deposits with utilities
Receivables reported in the non-current asset section of the balance sheet
Receivables forming a small part of the total receivables balance
Q.2 LMN plc reported a Net Income of ?25,000 in the year ending 31 December 2006. Other details are:
Determine the cash from operating activities.
Q.3All of the following describe depreciation EXCEPT:
It is a process of valuatin of fixed assets
It is a fund created for replacement of fixed and current assets
It is a process of spreading cost of fixed assets over the working life of the asset
Cash expense that provides a source of free cash flow to purchase more fixed assets
Q.4 An equipment was purchased on 1 January 2006 for ?20,000 . It is to be depreciated at 20% using reducing balance method. What would be the net book value of the asset as at 31 December 2007?
Q.5 Which of the following is true about Profit and Loss Account?
It depicts the state of affairs in a company as on a particular date
It is a snapshot of a company’s overall worth
It is a report of the company’s profit on the sale of goods or the provision of their service over a trading period
It is a is a statement of the total assets and liabilities of the company
Q.6Which of the following statement about a journal is correct?
For a given journal entry, debits always exceed credits
For a given journal entry, credits always exceed debits
A journal is a secondary book of accounts
In a journal transactions and events are converted into debit–credit format
Q.7 Which of the following statement is correct about treatment of capitalised development expenditure?
Must be amortised over a maximum period of three years
Appears as a non-current asset in the balance sheet
Appears as a non-current liability
Appears in the income statement of the year in which the expenditure is incurred.
Q.8 Unicorn plc has the following month-end balances:
What should be the correct ending cash balance?
Q.9 Which of the following is a correct equation?
Net profit - Closing net assets = Drawings – opening net assets+ drawings – capital
Net profit + Drawings = Closing net assets – opening net assets + capital introduced
Net profit + Drawings = Closing net assets – capital introduced + opening net assets
Net profit + capital introduced - drawings= Closing net assets – opening net assets.
Q.10 Entering purchase of machinery in the purchases account is an example of what
type of an error?
Q.11 Which of the following errors would not affect the ability of the trial balance to
(i) Discounts allowed taken for discounts received when entered
(ii) Payment of insurance for ?65 entered in both accounts as ?56
(iii) Cheque of ?135 received from John debited to the account of Jill
(iv) Vehicle purchased debited to vehicle expenses by mistake
(i) and (iii)
(i) and (ii)
(ii) and (iii)
(ii) and (iv)
Q.12 All of the following will improve the current ratio EXCEPT:
Sell common stock to reduce current liabilities
Buy inventory by taking a long–term loan
Take a short term loan to finance additional fixed assets
Sell fixed assets to repay accounts payable
Q.13Which of the following is included in the Balance Sheet of a company?
Assets– Profit on disposal of fixed assets – Liabilities – Loss on disposal of fixed
Capital– Assets– Expenses
Capital– Expenses –Income
Q.14 A company’s plant and machinery ledger account for the year ended 30 September
2002 was as follows:
The company’s policy is to charge depreciation at 20% per year on the straight line basis, with proportionate depreciation in years of purchase and sale. What is the depreciation charge for the year ended 30 September 2002?
Q.15 LMN plc, a supplier of component X used by ABC plc sent its statement of account to ABC plc. As per the statement the balance due to the supplier is $7,160. The amount due is $3,312 as per ABC plc payables ledger account. A closer examination highlighted that LMN plc has not taken into account a cash amount of $3,264 paid by ABC plc. Moreover, a discount of $32 withdrawn by LMN plc has not been adjusted in ABC’s accounts How much difference still remains after the above gaps have been
Q.16 Proposed dividend for the current accounting year will appear in the balance sheet as:
Q.17 At the end of the accounting year outstanding debtors totalled ?24,000. The opening balance on the provision for doubtful debts at the beginning of the accounting year stood at ?1,500. The firm wants to maintain the provision of doubtful debts at 5% of outstanding debtors. What will be the correct entry to record this?
Dr. Provision for Doubtful debts ?1,500, Cr. Profit & Loss Account ?1,500
Dr. Provision for Doubtful debts ?300, Cr. Profit & Loss Account ?300
Dr. Profit & Loss Account ?300, Cr. Provision for Doubtful debts ?300
Dr. Profit & Loss Account ?1,500, Cr. Provision for Doubtful debts ?1,500
Q.18 The trial balance of XYZ plc did not agree. The company opened a suspense account and transferred the difference to the account. At a later date, the following errors were discovered:
; A utility bill of ?320 has been recorded in the utility account as ?230 ; Discount of ?75 given to a customer had been credited to discount received ; Interest received of ?95 has been entered in the bank account only What was the original balance of the suspense account?
Debit Pounds 120
Credit Pounds 120
Debit Pounds 145
Credit Pounds 145
Q.19 Victor and Maria have a partnership firm. The balance sheet of their firm can include goodwill in its list of assets. Is this statement true or false?
Q.20Which of the following is a current liability?
Q.21A bank reconciliation may require adjusting entries. What is the source of such adjustments?
Reconciling the balance as per the bank statement with the adjusted cash balance
Reconciling the cash balance as per the company records with the adjusted cash balance
Both of the above
None of the above
Q.22What does an increase or decrease in cash and cash equivalents appear as in a cash flow?
None of the above
Q.23All of the following statements are incorrect about balance sheet of a business EXCEPT:
A balance sheet is a statement of the total assets and liabilities of an organisation for a particular year
A balance sheet is a statement showing how the Net Assets have been financed
A balance sheet provides a snapshot summary of what a business owns or is owed and what it owes
A balance sheet is a statement of the total income and expenditure of an organization
Q.24What is a firm’s operating cycle equal to?
Inventory turnover in days – Receivables turnover in days
Inventory turnover in days + Receivables turnover in days
Inventory turnover in days – Receivables turnover in days + Payables turnover in days
Inventory turnover in days – Receivables turnover in days – Payables turnover in
Q.25Why is depreciation added back to profit when arriving at the cash flow from operating activities?
Depreciation has no effect on profit
Depreciation is only included in balance sheet
Depreciation is only an estimated amount
Depreciation result in a inflow of cash
Q.26Which of the following is an example of revenue expenditure?
Legal costs incurred on buying property
Delivery costs of a new machine
Installation cost of the new machine
Carriage inwards on spare parts of a machine
Q.27 Listed below are some possible causes of difference between the cash book balance
and the bank statement balance when preparing a bank reconciliation: 1) Cheque paid in, subsequently dishonoured
2) Error by bank
3) Bank Charges
4) Lodgements credited after date
5) Outstanding cheques not yet presented
Which of these items require an entry in the cash book?
1 and 3 only
1, 2, 3, 4, and 5
2, 4 and 5 only
1, 2 and 3 only
Q.28On 1 January 2007, John had prepaid electricity bill of ?200. He paid ?1,200 on 1
March 2007 for the year ended 28 February 2008. How much should be charged to the
Profit & Loss account for the year ended 31 December 2007?
Q.29 A company’s shareholders are personally liable for payment to creditors if the company liquidates. Is the statement True or False?
Q.30 What is the correct double-entry to transfer rent paid for the year to the profit and loss account?
Dr. Profit & Loss Account, Cr. Rent Account
Dr. Rent Account, Cr. Profit & Loss Account
Dr. Rent Account, Cr. Cost of Goods Sold
Dr. Cost of Goods Sold, Cr. Rent Account
Q.31 Calculate the amount of insurance that should be included in the Profit & Loss account for the year ending 31 December 2006.
Q.32 All of the following is reasons for providing for depreciation of fixed assets EXCEPT:
Upward movement in the value of assets
Wear and Tear
Q.33 ABC plc returned defective goods worth ?530 to its supplier. This was incorrectly
recorded as ?350 in the ledger accounts. To correct the error what journal entry will you
Dr Suspense Account Pounds 180, Cr Creditors Account Pounds 180
Dr Creditors Account Pounds 180, Cr Suspense Account Pounds 180
Dr Purchases Account Pounds 180, Cr Suspense Account Pounds 180
Dr Creditors Account Pounds 180, Cr Purchases Returns Account Pounds 180
Q.34 Pat and Peter Inc. has a 12 percent return on total assets. Total assets have a value of $240,000. Net profit margin is 5 percent. What are its sales?
Q.35Which of the following is an accounting concept?
Q.36 What entry is required to record net losses?
Dr. Profit & Loss Account, Cr. Capital Account
Dr. Trading Account, Cr. Profit & Loss Account
Dr. Trading Account, Cr. Capital Account
Dr. Capital Account, Cr. Profit & Loss Account
Q.37 The importance of accruals concept is: