CIMA CO2 Official Learning System - Fundamentals of Financial Accounting

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Mock Assessment 1

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683

Mock Assessment 1

Certificate in Business Accounting

Fundamentals of Financial Accounting

Illustrative Computer-based Assessment

Instructions: attempt all 50 questions

Time allowed: 2 hours

Do not look at or attempt this illustrative computer-based assessment until you have

fully completed your revision and are about to sit your computer-based assessment.

MOCK ASSESSMENT 1

MOCK ASSESSMENT C2

684

Illustrative computer-based assessment 1: Questions

Question 1

The fundamental objective of an external audit of a limited company is to:

(A) give advice to shareholders.

(B) detect fraud and errors.

(C) measure the performance and ﬁ nancial position of a company.

(D) provide an opinion on the ﬁ nancial statements.

Question 2

A receives goods from B on credit terms and A subsequently pays by cheque. A then dis-

covers that the goods are faulty and cancels the cheque before it is cashed by B.

How should A record the cancellation of the cheque in his books?

(A) Debit payables, credit returns outwards.

(B) Credit bank, debit payables.

(C) Debit bank, credit payables.

(D) Credit payables, debit returns outwards.

Question 3

The proﬁ t of a business may be calculated by using which of the following formulae?

(A) Opening capital  drawings  capital introduced  closing capital.

(B) Closing capital  drawings  capital introduced  opening capital.

(C) Opening capital  drawings  capital introduced  closing capital.

(D) Closing capital  drawings  capital introduced  opening capital.

Question 4

The turnover in a company was $3 million and its receivables were 5 per cent of turnover.

The company wishes to have an allowance for receivables of 4 per cent of receivables, which

would make the provision 33% higher than the current provision. What ﬁ gure would

appear in the income statement?

Debit/Credit $

MOCK ASSESSMENT 1

685

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Question 5

Which of the following should be accounted for as capital expenditure?

(A) the cost of painting a building.

(B) the replacement of windows in a building.

(C) the purchase of a car by a garage for resale.

(D) legal fees on the purchase of a building.

Question 6

A business purchases a machine on credit terms for $18,000 plus sales tax at 15 per cent.

The business is registered for sales tax. How should this transaction be recorded in the

books?

D R C R

$ $

A Machinery 18,000

B Payables 18,000

C Machinery 20,700

D Payables 20,700

E Sales tax 2,700

F Sales tax 2,700

Question 7

Which of the following statements most closely expresses the meaning of ‘ a fair

presentation ’ ?

(A) There is only one fair presentation of a company’s ﬁ nancial statements.

(B) Fair presentation is determined by compliance with European Union directives.

(C) Fair presentation is determined by compliance with company law.

(D) Fair presentation is largely determined by reference to international ﬁ nancial report-

ing standards.

Question 8

On 1st May 20X0, A Ltd pays a rent bill of $2,400 for the period to 30th April 20X1.

What is the charge to the income statement and the entry in the statement of ﬁ nancial

position for the year ended 30th November 20X0?

Income Statement Accrual or Prepayment Statement of

ﬁ nancial position

$ $

MOCK ASSESSMENT 1

MOCK ASSESSMENT C2

686

Question 9

S Ltd exchanged inventories for a delivery vehicle with T Ltd. The inventories had cost S

Ltd $12,000 and the normal selling price was $14,000; the delivery vehicle had cost T Ltd

$11,000 and the normal selling price was $15,000.

How should S Ltd value the vehicle in its statement of ﬁ nancial position?

$...............

Question 10

Z’s bank statement shows a balance of $1,650 overdrawn. The bank statement includes

bank charges of $100 which have not been entered in the cash book. There are unpre-

sented cheques totalling $950 and deposits not yet credited of $1,200. The bank statement

incorrectly shows a direct debit payment of $320 which belongs to another customer.

The ﬁ gure in the statement of ﬁ nancial position should be:

Overdrawn $...............

Question 11

There is $200 in the till at the year end at F Ltd but the accountant suspects that some

cash has been stolen. At the beginning of the year there was $100 in the till and receivables

were $2000. Total sales in the year were $230,000. Receivables at the end of the year were

$3,000. Cheques banked from credit sales were $160,000 and cash sales of $50,000 have

been banked.

How much cash was stolen during the year?

$..................

Question 12

A car was purchased for $10,000 on 1st April 20X0 and has been depreciated at 20 per

cent per annum on straight-line basis. The company policy is to charge depreciation, once

a year at the end of the year, on the cost of an asset in use at the year end. Assume there is

no residual value. The car was traded in for a replacement vehicle on 1st August 20X3 for

an agreed ﬁ gure of $4,900. What was the proﬁ t or loss on the disposal of the vehicle for

the year ended 31st December 20X3?

Proﬁ tor Loss $

MOCK ASSESSMENT 1

687

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Question 13

A company includes in inventories goods received before the year end but for which

invoices are not received until after the year end. Which convention is this in accordance

with?

(A) Historical cost.

(B) Accruals.

(C) Consistency.

(D) Materiality.

Question 14

I Ltd operates the imprest system for petty cash. On 1st July there was a ﬂ oat of $250.

During July the petty cashier received $50 from staff for using the photocopier and a

cheque for $100 was cashed for an employee. In July, cheques were drawn for $600 for

petty cash. It was decided to increase the cash ﬂ oat to $180 from 1st August. How much

cash was paid out by the petty cashier in July?

$..................

Question 15

Which of the following sentences does not explain the distinction between ﬁ nancial state-

ments and management accounts?

(A) Financial statements are primarily for external users and management accounts are

primarily for internal users.

(B) Financial statements are normally produced annually and management accounts are

normally produced monthly.

(C) Financial statements are more accurate than management accounts.

(D) Financial statements are audited by an external audit and management accounts do

not normally have an external audit.

Question 16

When there is inﬂ ation, the historical cost convention has the effect of:

(A) overstating proﬁ ts and understating statement of ﬁ nancial position values.

(B) understating proﬁ ts and overstating statement of ﬁ nancial position values.

(C) understating cash ﬂ ow and overstating cash in the statement of ﬁ nancial position.

(D) overstating cash ﬂ ow and understating cash in the statement of ﬁ nancial position.

MOCK ASSESSMENT 1

MOCK ASSESSMENT C2

688

Question 17

When reconciling the payables ledger control account with the list of payables ledger bal-

ances of M, the following errors were found: the purchase daybook had been overstated by

$600 and the personal ledger of a supplier had been understated by $200.

What adjustment must be made to correct these errors?

Control Account List of Payable Balances

Debit or Credit $ Increase or Decrease $

Question 18

B is a builder with a staff of ten employees. In April 20X0, he paid the following amounts:

Net salaries after employees ’ income tax and social security tax $16,000

Employees ’ income tax and employees ’ social security tax for March 20X0 $7,000

Employer’s social security tax for March 20X0 $3,000

He owes $8,000 for April’s employees ’ income tax and employees ’ social security tax and

$3,500 for April’s employer’s social security tax. What is the correct expense to be included

in April’s income statement?

$..................

Question 19

The following information relates to M Ltd:

At 30th September

20 X 1 20 X 0

$’000 $’000

Inventories of raw materials 70 50

Work in progress 60 70

Inventories of ﬁ nished goods 100 90

For the year ended 30th September 20X1

Purchases of raw materials $165,000

Manufacturing wages $30,000

Factory overheads $40,000

The prime cost of production in the manufacturing account for the year ended 30th

September 20X1 is:

$ ..................

MOCK ASSESSMENT 1

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FUNDAMENTALS OF FINANCIAL ACCOUNTING

Question 20

Are the following statements TRUE or FALSE?

(A) When valuing inventories at cost, inward transport costs should be included.

TRUE/FALSE ………………….

(B) When valuing inventories at cost, production overheads should be included.

TRUE/FALSE ………………….

Question 21

On 30 June 20X0 an electricity ledger account had an accrual of $400 and a credit balance

was brought down on 1 July 20X0. During the ﬁ nancial year electricity invoices totalling

$5,000 were paid, including an invoice for $900 for the quarter ended 31 May 20X1.

What is the income statement charge for electricity payable for the year ended 30 June

20X1?

$..................

Question 22

The allowance for receivables in the ledger of B Ltd at 31 October 20X0 was $11,000.

During the year ended 31 October 20X1 bad debts of $7,000 were written off. Receivable

balances at 31 October 20X1 were $140,000 and the company policy is to have an allow-

ance for receivables of 5 per cent.

What is the charge for bad debts and change in the allowance for receivables in the

income statement for the year ended 31 October 20X1?

$..................

Question 23

The following is an extract from the statement of ﬁ nancial position of IAS plc for the years

ended 31 July 20X0 and 20X11.

20 X 1 20 X 0

$’000 $’000

Inventories 40 90

Receivables 55 10

Payables 45 30

Accruals 15 20

What ﬁ gure would appear in the statement of cash ﬂ ows of IAS plc for the year ended 31

July 20X0 as part of the cash generated from operations?

CIMA CO2 Official Learning System - Fundamentals of Financial Accounting

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