1.

A company experiences an increase in inventory of $250, a decrease in the bank balance of $400 and an
increase in trade payables of $1200
What would be the movement in working capital?
A) A decrease in working capital of $1050
B) A decrease in working capital of $1350
C) An increase in working capital of $1350
D) An increase in working capital of $1050

2. On 1 January 20X8 new premises were acquired at a cost of $750,000. Also on 1 January 20X8 additional
associated costs incurred were as follows:
Legal costs of purchase $7,500
Architect’s fees $9,200
Annual maintenance contract $6,000
Alterations to property $25,000
The premises is to be depreciated over its useful life of 20 years. The company prepares financial
statements at 31 December each year.
What is the carrying amount of the premises in the statement of financial position as at 31 December
20X8?

3. The following events occurred after 31 December 20X5, Omega Co’s year end date, but before the
financial position statements were authorised for issue on 1 March 20X6:
1) A competitor introduced a new product which meant that a material amount of Omega Co’s
inventory at 31 December 20X5 became obsolete.
2) There was a fire at Omega Co’s factory. The plant, which had a carrying amount of $750,000, was
destroyed. The going concern concept is still considered to be applicable to Omega Co.
In accordance with IAS 10 Events after the Reporting Period, how should these events be classified in
Omega Co’s financial statements for the year to 31 December 20X5?
Adjusting events Non-adjusting events
Loss on inventory
Destruction of plant

4. Alpha Co’s motor vehicles cost account at 31 March 20X7 is as follows:

Motor vehicles (at cost)
$ $
Balance brought forward 100,300 Disposals 56,600
Additions 80,600 Balance carried forward 124,300
180,900 180,900
What amount should be included for motor vehicles in the trial balance at 1 April 20X7?
А) $124,300 Cr
B) $180,900 Dr
C) $124,300 Dr
D) $180,900 Cr

5. Jamie has a credit balance of $500 as per his bank statement for September 20X1
What does this balance represent?
A) Jamie has paid a total amount of $500 in September
B) Jamie has an overdraft of $500 at the bank
C) Jamie has received a total of $500 in September
D) Jamie has $500 in his bank account

6. During the year ended 30 June 20X8 Marta made sales of $88,000 with purchases of $60,000. At 20 June 20X8
her year-end trade receivables balance is $18,000 and payables balance is $14,000.
What is Marta’s trade receivables days ratio (to the nearest day)?
А) 85 days
B) 75 days
C) 58 days
D) 110 days
7. A company bought an asset on 1 January 20X4 for $200,000. Depreciation is charged on a reducing balance
basis at 20%. On January 20X7 the asset is revalued to market value of $250,000.
How much should be recorded in the revaluation reserve at 1 January 20X7?
А) $50,000
B) $147,000
C) $122,000
D) $170,000

8. Claude’s cash book shows a credit balance of $100 brought down at the end of March 20X7.
What does this balance represent?
А) The total of cash paid out by Claude in March is $100
B) Claude has an overdraft at the bank
C) Claude has money at the bank
D) Claude received cash of $100 in March

9. Which TWO of the following are examples of ’intangible assets’?

A) Advertising expenditure
B) Capitalised development costs
C) Revalued property
D) Goodwill

10. Which of the following errors should be highlighted be performing a receivables control account
reconciliation?
1) The list of customer balances has been totalled incorrectly
2) The items on a sales invoice have been totalled incorrectly
3) An entry has been omitted from an individual customer’s account
4) An entry has been made twice in the purchases daybook
A) 1,2 and 3
B) 2 and 4
C) 1,3 and 4
D) 1 and 3 only

11. Sonja’s opening inventory on 1 May 20X4 was 200 units costing $12 per unit. She made the following
sales and purchases of inventory in May 20X4:
1) 6 May Purchased 1,000 units at $15 per unit
2) 18 May Sold 600 units at $22 per unit
3) 24 May Purchased 400 units at $13 per unit
What is the value of Sonja’s closing inventory using the FIFO method of inventory valuation end of May
20X4?

12. What is the purpose of disclosure notes in the financial statements?

1) To present information about the basis of preparation and the specific accounting policies used
2) To disclosure supporting information for items presented in the primary financial statements
3) To provide other information that is not presented in the primary financial statements, but is necessary
for an understanding of them
A) 1 and 3 only
B) 1, 2 and 3
C) 2 only
D) 1 and 2 only

13. A company operates an accounting system, which includes a general ledger, payables ledger and
receivables ledger.
Which TWO of the following transactions will the company need to enter in the receivables ledger?
А) Recorded the return of goods to a supplier
B) Corrected an entry where a credit sale was originally recorded as a cash sale
C) A customer’s debt of $40 was no longer recoverable
D) The allowance for receivables was increased for $1,200
 14. Why would the following items be identified when preparing a bank reconciliation?
It is on the bank statement but not in It is in the cash book but not on
the cash book bank statement

A direct debit
An unpresented cheque

15. Jody was owed $500 from a customer who has gone bankrupt. Jody has been informed that she will
receive 50c for every $1 owed. Jody also needs to increase her allowance for receivables by $275.
How much will Jody’s profit be reduced by when the items have been accounted for?

16. Jacob is the proprietor of a small business.

At 31 December 20X7, Jacob had non-current assets of $16,200; current assets of $8,400 and liabilities of
$6,400.
The balance on Jacob’s capital account at 1 January 20X7 was $14,000. He withdrew $7,500 from the business
during the year.
How much profit did Jacob make in the year ended 31 December 20X7?

17. The following information relates to light and heat costs:

$
Accrued light and heat costs at 31 July 20X5 1,200
Payments of invoices for light and heat costs during the year ended 31 July 20X6 9,400
Paid in September 20X6, an invoices for light and heating costs for period 1 July 20X6 – 3,030
31 August 20X6
What should be included in the statement of profit or loss for the year ended 31 July 20X6 for light and heat?
А) $11,420
B) $11,230
C) $8,580
D) $10,220

18. Which TWO of the following errors would lead to the creation of a suspense account?
А) Vehicle repairs invoices debited to the non-current assets account
B) An invoices for rent debited to the heat and light account
C) Cash sales recorded in the cash book and nowhere else
D) An overdraft debited to the trial balance

19. On 6 June 20X6, a fire in a copmany’s offices destroyed various accounting records. The accounting staff
were able to piece together the following information from the undamaged records:
1) Inventories held at 31 December 20X5 were $58,100
2) Purchases from 31 December 20X5 until the date of the fire were $93,400
3) Inventories held at the date of the fire were $48,600
4) All sales were made at a uniform gross profit margin of 25 per cent
What was the sales revenue for the period from 31 December 20X5 until 6 June 20X6?

20. Michael is the general manager of Stern Co. His analysis and interpretation of Stern Co’s financial
statements can help him to assess which TWO of the following?
А) The annual growth in the company’s revenue
B) The productivity of individual employees
C) The average length of time it takes customers to make a payment
D) The remaining useful economic life of individual non-current assets

21. A business began operations with $800 in the cash till. During the first year, all sales were cash sales and
$42,000 was banked. Before making any bankings, sundry expenses of $200 per month were paid from the
cash till and the owner also withdrew $400 per month from the cash till for living expenses. The cash in the
till at the end of the first year was $300.
What is the cash sales figure for the first year of operations?
 22. Which TWO of the following are expenses?
A) Increase in warranty provision
B) Decrease in allowance for receivables
C) Irrecoverable debt written off
D) Increase in owner’s drawings

23. The trial balance of Hepburn does not agree by $2,000. Hepburn maintains sales and purchases ledger
control accounts.
Which of the following errors could by itself account for the difference?
А) A cheque for $2,000 received from a customer had been credited to the wrong account in the accounts
receivables ledger
B) A cheque for $2,000 paid to a supplier had been credited to the accounts payables ledger control
account, although correctly recorded in the cash account
C) A non-current asset costing $1,000 had been correctly recorded in the cash account and credited to the
purchases account
D) An electricity payment of $1,000 had been correctly recorded in the cash account and debited to a non-
current asset account

24. Drus, a limited liability company, is being sued by a customer and it is probable that damages and costs
of $10,000 will be payable. Drus is also suing a supplier, and it is probable that damages and costs of $5,000
will be received.
According to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, how should these items be
treated in the statement of financial position?
А) Provide $10,000 payables and disclose $5,000 receivable
B) Disclose $10,000 payable and disclose $5,000 receivable
C) Disclose $10,000 payable, but do not disclose $5,000 receivable
D) Provide $10,000 payable and provide $5,000 receivable

25. Are the following statements true or false?

True False
Suspense accounts are used when an accounts preparer is unsure of an entry to be made
Suspense accounts help to identify errors of omission

26. Chalie’s machinery at cost ledger account is as follows:

Machinery Cost

20X6 $ 20X6 $
1 January balance b/d 500 1 Febuary Disposal 300
1 April bank addition 200 1 March Disposal 100
31 December balance c/d 300

The company’s policy is to charge depreciation at 20 % per annum, using the straight-line method. A full year’s
charge is made in the year of acquisition and none in the year of disposal. None of the assets have been held for
more than five years
What is the depreciation charge for the year ended 31 December 20X6 ?
_________$

27. Joe had the following transactions regarding sales this month:
1. Cash sales of $ 4 560 were made
2. Cash of $ 7 890 was received relating to sales made in the previous months
3. Goods were sold to customers on credit of $ 8 650
4. Irrecoverable debts of $ 670 were written off
What revenue figure should be reported this month ?
A. 12 540
B. 13 210
C. 20 430
D. 13 880
28. Lee purchased some inventory at cost of $ 100 000 (excluding sales tax). It cost $ 3 000 (excluding sales tax)
to transport the inventory to Lee’s premises and he paid $ 10 000 non-recoverable sales tax. In addition, when
the inventory is sold it will cost Lee $ 1 000 to deliver the item to his customer’s premises. Lee always makes a
large profit on his transactions and he always offers free delivery to his customers.
At what value should the inventory be included in Lee’s financial statements?
A. 113 000
B. 103 000
C. 114 000
D. 112 000

29. At 31 December 20X8 a company had the following capital structure:

Share capital 100 000 $ 1.00 shares $100 000
Share premium account $20 000
During the year ended 31 December 20X9 the company made the following share issues:
31 March An issue of 10 000 shares at $ 1. 50 per share
30 September A right issue of one share for every five in issue at $ 1. 50 per share
At what amount should the share premium account be stated in the company’s statement of financial position
at 31 December 20X9?
_________$

30. ABC incorrectly treated the purchase of the a non-current asset costing $ 40 000 as a repair expense. The
asset should been depreciated at 25 % straight line with a full year’s charge in the year of acquisition.
Are the following statements relating to the impact of the impact of the error true or false?
True False
The net assets figure in the statement of financial position will be
understated by $ 30 000
The profit for the year in the statement of profit or loss and other comprehensive
income will be overstated by $ 30 000

31. Principal Co has a financial year end of 30 June. The following information is available:
20X7 20X6
$ $
Loan notes 700 000 490 000
Ordinary 1 $ shares 500 000 200 000
Share premium 450 000
A right issue took place during the year on the basis of three shares for every two held 1 Luly 20X6, at a price of
2.50 $
What is the net cash inflow from financing activities for the year ended 30 June 20X7?
___________$

32. On the 1 January 20X6, Clarence receives a loan from his bank of $ 11 500. The loan is repayable in five equal
annual instalments starting on 1 January 20X7.
How much of the loan capital is shown as a non-current liability in Clarence’s statement of financial position at
31 December 20X6?
________?

33. Magic Co had the following share capital in issue for the year ended 31 December 20X4:
7 % $ 1 Irredeemable preference shares $ 30 000
5 % $ 1 Redeemable preference shares $ 60 000
$ 1 Ordinary shares $ 100 000
Magic Co paid all the preference dividends owed and also paid an interim ordinary dividend of $ 0.05 per share
during the year.
What should be shown as dividends paid in the statement of changes in equity?
A. 8 000
B. 10 100
C. 5 000
D. 7 100
34. Which of the following parties have ultimate responsibility for the preparation of a company’s annual
financial statements?
A. The company’s internal auditors
B. The company’s board of directors
C. The company’s bookkeeper
D. The company’s external auditors

35. Busy Co has decided to change its method of inventory valuation from FIFO to average cost. 31st December
20X7, the inventory using average cost is much lower than its FIFO valuation.
When considering the effect of the inventory valuation, which accounting concept should the users of Busy Co’s
financial statements consider ?
A. Consistency
B. Going concern
C. Accruals accounting
D. Substance over form

36. The accountant of Heto Co, a limited liability company, is preparing the financial statements for the year
ended 30 November 20X6.
The summary trial balance as at 30 November 20X6 is as follows:

Dr Cr
$ $
Draft profit for the year 27.000
Bank 30.000
Bank loan repayable 20X8 100.000
Inventory at 30 November 20X6 12.000
Trade receivables 20.000
Trade payables 15.000
Property, plant & equipment (PPE) at cost 220.000
Accumulated depreciation on PPE at 1 December 20X5 40.000
Development costs 25.000
Accumulated depreciation on development costs at 1 December 20X5 5.000
Ordinary share capital 50.000
Share premium 11.000
Retained earnings at 1 December 20X5 59.000
307.000 307.000

The above trial balance was extracted before the following information became available and consequently
some further adjustments may be necessary:

(1) A bank reconciliation revealed differences between the general ledger and the bank statement due to
unpresented cheques amounting to $3.700, outstanding lodgements totaling $4.500 and $500 of bank charges
that have not been recorded in the accounting records of Heto Co.

(2) Non-current assets:

A machine, which had a carrying amount of $4.000, was sold for cash proceeds on 30 November 20X6 and the
profit on disposal was $300. The accountant put the cash in the company safe on the same day.

The following table provides details of other expenses associated with non-current assets that have not yet
been accounted for:

$
Depreciation expense 13.500
Amortisation expense 5.200
(3) On 30 November 20X6 a one for five rights issue was made at $1.50 per share. The issue was fully
subscribed and all cash received by that date.

(4) In December 20X6 the company declared an ordinary dividend of $3.400

Task 1 14.5 marks

Using the trial balance and the information contained in notes (1) to (4) above, calculate the adjusted profit for
the year ended 30 November 20x6:

$
Draft profit per trial balance
Add/Subtract Bank reconciliation adjustment(s)
Add/Subtract Adjustments relating to non-current assets

Using the trial balance and the information contained in notes (1) to (4) above, calculate the adjusted cash and
bank balance as at 30 November 20x6:

$
Bank balance per trial balance
Add/Subtract Proceeds from disposal of machine
Add/Subtract Proceeds from rights issue

Using the trial balance and the information contained in notes (1) to (4) above, calculate the following amounts
to be reported in the statement of financial position of Heto Co as at 30 November 20x6:

$
Property, plant and equipment
Intangible assets
Ordinary share capital
Share premium
Retained earnings

Task 2 0.5 mark

During the first week in December 20X6 (before the financial statements for the year ended November 20x6
were authorized for the issue) Heto Co suffered a fire at its main warehouse. Inventory valued at $4,000 was
destroyed and this loss was not insured.
What further adjustment, if any, would have to be made to the figures in the financial statements of Heto Co
for the year ended November 20x6?
A) Dr Profit for the year Cr Provision
B) No adjustment is necessary, but there should be a disclosure if it is considered material
C) Dr Profit for the year Cr Inventory asset
37. Martin Dawson works in the accounts department of Stringer, a limited company with a year end of 31
December 20X9. Martin has been asked to prepare the non-current asset disclosure note and to prepare the
retained earnings ledger account.

He has been given the following extracts from the trial balance as at 31 December 20X9.

$’000 $’000
Plant and machinery at cost as at 1 January 20X9 1,200
Plant and machinery accumulated depreciation as at 1 January 20X9 40
Land and buildings at cost as at 1 January 20X9 3,500
Land and buildings accumulated depreciation as at 1 January 20X9 350
Ordinary share capital $1 shares 2,500
Share premium 1,000
5% redeemable preference shares 500
Retained earnings as at 1 January 20X9 705
Inventory as at 1 January 20X9 332
Trade receivables 320
Allowance for receivables 6
Cash 137
Trade payables 189
Dividends paid 40
Draft profit for the year(before accounting for the additional information) 239
5,529 5,529

Additional information:

(1) On 1 January 20X9 plant was acquired for $400,000 cash and the land and buildings were revalued to
$4,000,000, of which $3,600,000, relates to the buildings. Neither has yet been recorded in the ledger accounts.

(2) The depreciation policy is:

*2% straight-line on buildings
*10% straight-line on plant and machinery
A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. The depreciation
expense is posted to the cost of sales account.

(3) The dividend paid is the interim dividend on the ordinary share capital; the preference dividend has not yet
been accounted for.

Task 1 1 mark
When land and buildings are revalued upwards which TWO of the following ledger accounts would be debited?
A) Plant and machinery accumulated depreciation account
B) Plant and machinery cost account
C) Land and buildings cost account
D) Land and buildings accumulated depreciation account
E) Revaluation surplus

Task 2 1 mark
When land and buildings are revalued upwards which ONE of the following ledger accounts would be credited?
A) Land and buildings accumulated depreciation account
B) Plant and machinery accumulated depreciation account
C) Revaluation surplus
D) Plant and machinery cost account
E) Land and buildings cost account
Task 3 1 mark
Which ONE of the following ledger accounts would be debited to record the depreciation charge for the year?
A) Revaluation surplus
B) Plant and machinery accumulated depreciation account
C) Cost of sales
D) Land and buildings accumulated depreciation account
E) Administrative expenses

Task 4 7 marks
Prepare the non-current asset disclosure note. If there is nothing to record in a particular box, then enter 0

Land and Buildings Plant and Machinery

$`000 $`000
Cost or valuation as at 1 January 20x9
Add: Additions
Revaluation
Cost or valuation as at 31 December 20x9
Accumulated depreciation as at 1 January 20x9
Less: Revaluation
Add: Charge for the year
Accumulated depreciation as at 31 December 20x9
Carrying value as at 31 December 20x9

Task 5 5 marks
Should each of the following items be reported in the statement of changes of equity?
Yes No
Share premium
Dividend on ordinary shares
Dividend on 5% redeemable preference shares
Surplus on revaluation of non-current assets
5% redeemable preference shares