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1

The skill and efficiency of the workforce of a business has increased during the financial period. The owner of the business wants to record a value for this in the financial statements. His accountant advises against this idea. Which accounting concept is the accountant applying?

1. Financial accounting (AS Level)  →  1.2. The accounting system

1. Financial accounting (AS Level)  →  1.6. Analysis and communication of accounting information

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2

On 1 January 2020, Marek bought some machinery. He paid a total of $50 000. Of this, $6000 was for maintenance of the machinery until 31 December 2022. Marek depreciates his machinery at the rate of 10% per annum. How was the expenditure recorded in Marek’s financial statements for the year ended 31 December 2020?

1. Financial accounting (AS Level)  →  1.3. Accounting for non-current assets

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3

Which statements about depreciation are correct?

1. Financial accounting (AS Level)  →  1.3. Accounting for non-current assets

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4

An item of revenue expenditure is wrongly treated as capital expenditure. What is the effect of this error?

1. Financial accounting (AS Level)  →  1.3. Accounting for non-current assets

1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification

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5

When preparing a bank reconciliation statement, the following information is available. $ bank balance shown...

1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification

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6

Why does a business keep both a sales ledger control account and individual sales ledger accounts for credit customers?

1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification

1. Financial accounting (AS Level)  →  1.2. The accounting system

Open

7

A businessman suspects some of his inventory has been stolen. The following information is available. $ sales revenue 45 600 purchases 33 600 inventory at 1 May 2020 8 300 inventory at 30 April 2021 4 500 All goods are marked up at a rate of 33 %. What was the value of inventory stolen?

2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

Open

8

At the end of the year, Barack’s draft accounts showed a capital account balance of $4300. His drawings account included a debit entry of $150 for goods taken for his own use. Barack realised that this entry had been recorded in error at selling price rather than cost price. He sells goods with a mark-up of 50%. What is the correct closing capital account balance?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

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9

The following information is available for a sole trader at 31 December 2020. $ goods taken by owner for own use 1 000 inventories 1 January 2020 10 000 31 December 2020 12 000 purchases 75 000 returns debit balance 3 000 credit balance 4 000 What was the cost of sales?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

Open

10

Which items only appear on the credit side of a partner’s capital account?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

11

A sole trader has a draft profit for the year of $47 500. No entries have been made in respect of the following. At the end of the year trade receivables were $5600 more than the previous year. However, an irrecoverable debt of $360 had not been written off. The trader maintains a provision of doubtful debts of 5%. A machine had been sold for $4000. It had a net book value of $3500. What will be the correct profit for the year?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

12

A sole trader had trade receivables of $21 650 at the start of the year. During the year there were irrecoverable debts of $450 written off. Cash received from customers was $42 670. At the year end, the statement of financial position showed trade receivables of $25 745 after deducting a provision for doubtful debts of 5%. What were the sales for the year?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

13

L, M and N are in partnership, sharing profits and losses equally. On 31 December 2020 N retired. At that date: N’s capital account balance was $30 000 and his current account had a debit balance of $5400. Profit for the year was $21 000 before paying L’s salary of $6000. The goodwill was valued at $18 000 but is not to remain in the books of account. Other assets are to be revalued upwards by $6000. How much will N be entitled to on his retirement?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.3. Accounting for non-current assets

Open

14

Charlie and Daphne are in partnership, sharing profits and losses in the ratio 2 : 1. Their fixed capital account balances at 31 December 2019 were $20 000 and $13 000 respectively. They changed the terms of the partnership on 1 January 2020 to introduce interest on capital at the rate of 10% per annum. Which effect did this change have on Charlie’s total share of profit for the year ended 31 December 2020?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

15

What will be debited in the appropriation account of a partnership?

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

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16

A company made a rights issue of ordinary shares at a premium. How will this be treated in the financial statements?

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

17

The income statement of X Limited for 2020 showed an incorrect profit figure because $10 000 of goods had been counted twice when closing inventory was valued. This incorrect inventory value was carried forward as the opening inventory for 2021. In February 2021 the directors paid a dividend equal to 40% of the profit for 2020. What were the effects of the error in inventory valuation?

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

1. Financial accounting (AS Level)  →  1.4. Reconciliation and verification

Open

18

A company has the following items in its statement of financial position. $ ordinary shares of $0.50 each 900 000 retained earnings 450 000 long-term bank loan 30 000 The company then issues 100 000 bonus shares of $0.50 each to its shareholders. What is the total equity after the issue of the bonus shares?

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

19

Which ratios are usually calculated to measure the efficiency of a business?

1. Financial accounting (AS Level)  →  1.6. Analysis and communication of accounting information

Open

20

The following information is available for a limited company at the end of its financial year. $ ordinary shares of $1 each 400 000 retained earnings (including profit for the year $94 500) 250 000 8% debenture (2028) 100 000 bank overdraft 20 000 What is the return on capital employed?

1. Financial accounting (AS Level)  →  1.5. Preparation of financial statements

Open

21

What is a stepped cost?

2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour

4. Cost and management accounting (A Level)  →  4.1. Activity based costing (ABC)

Open

22

Which business would use a batch costing system?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

4. Cost and management accounting (A Level)  →  4.2. Standard costing

Open

23

Details of a company’s fixed overhead in a period were as follows. budgeted actual direct labour hours Total budgeted fixed overhead was $50 000. Overheads over-absorbed for the period were $4000. What was the actual fixed overhead incurred in the period?

4. Cost and management accounting (A Level)  →  4.3. Budgeting and budgetary control

4. Cost and management accounting (A Level)  →  4.2. Standard costing

Open

24

How might an under-absorption of overheads arise?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

4. Cost and management accounting (A Level)  →  4.3. Budgeting and budgetary control

Open

25

Which statements explain why it is important for a business to know the contribution per unit for its production?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

Open

26

The following information is available for a month. $ sales revenue 150 000 direct materials 45 000 direct labour 28 000 variable overheads 7 000 fixed overheads 21 000 What is the contribution to sales ratio?

3. Financial accounting (A Level)  →  3.5. Analysis and communication of accounting information

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

Open

27

A company had the following results. $ sales revenue 230 000 variable costs 92 000 fixed costs 60 000 profit 78 000 What was its margin of safety in dollars?

2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

3. Financial accounting (A Level)  →  3.5. Analysis and communication of accounting information

Open

28

A company has total fixed costs of $400 000. It manufactures and sells a single product for $25 per unit and has a contribution to sales ratio of 80%. How many units does it need to produce and sell to make a profit of $200 000?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

2. Cost and management accounting (AS Level)  →  2.1. Costs and cost behaviour

Open

29

A trader makes and sells a single product. It has a selling price of $90 and a contribution per unit of $30. When 800 units are sold, the profit is $9600. What is the profit if 1000 units are produced and sold?

2. Cost and management accounting (AS Level)  →  2.2. Traditional costing methods

3. Financial accounting (A Level)  →  3.1. Preparation of financial statements

Open

30

Why might a business prepare a budget?

4. Cost and management accounting (A Level)  →  4.3. Budgeting and budgetary control

Open