Q1: Which of the following are characteristics of a limited liability company?

(1)Dividends may be paid to the equity shareholders

(2)Profits are shared between the directors on an annual basis
(3)It has a separate legal identity from its owners

1, 2 and 3
1 and 2 only
2 and 3 only
1 and 3 only

Q2: If an accounting standard is being applied inconsistently which accounting body will issue a
statement to clarify how the standard should be applied?

The International Financial Reporting Standards Interpretations Committee

The International Financial Reporting Standards Foundation
The International Accounting Standards Board
The International Financial Reporting Standards Advisory Council

Q3: Where one company has control over another company, consolidated financial statements
presenting the group as one single entity are produced.

Which accounting concept is being applied?

Going concern
Verifiability
Business entity
Substance over form

Q4: Which of the following statements regarding double-entry bookkeeping is correct?

Dr Increase in capital
Cr Increase in a liability

Dr Increase in an asset
Cr Increase in an expense

Dr Decrease in an asset
Cr Increase in an expense

Dr Decrease in a liability
Cr Increase in capital
Q5: The following information relates to Candy Co's financial statements for the year ended 31 May
20X9:

$
Credit balance on payable control account at 1 June 20X8 141,588
Cash paid to credit suppliers 172,506
Cash purchases 22,100
Credit purchases 165,487
Contra with receivables ledger 8,102
Early settlement discounts received 1,117
Purchase returns 1,094

What should the balance on the payables control account be at 31 May 20X9?

Answer: _______________.

Q6: Space Co had issued share capital of 100,000 $0.50 shares at 1 January 20X9. On the same date the
balance on the share premium account was $25,000. The following transactions occured in the year
ended 31 December 20X9:

(1) On 1 March 20X9 Space Co made a rights issue of one new share at a price of $1 for every five
existing shares held
(2) On 1 September 20X9 Space Co made a bonus issue of one new share for every ten held using the
share premium account

What should the balances be on the share capital and share premium accounts at 31 December 20X9?

Share premium $66,000 $65,000

Share capital $29,000 $20,000
_______ _______ _______ ______
_______ _______ _______ _______

Q7: Which of the following statements about control accounts is true?

Control accounts are memorandum accounts used to record detailed transactions

Control accounts are not part of the double entry accounting system
Control account reconciliations are not needed if day books are kept
Control accounts can be used to check that the underlying accounts are correct

Q8: Which of the following statements defines a contingent liability according to IAS 37 Provisions,
Contingent Liabilities and Contingent Assets?

A liability of uncertain timing or amount

A possible obligation arising from past events whose existence will be confirmed by the occurence or
not of uncertain future events
A present obligation arising from past events, the settlement of which will result in an outflow of
economic benefits
A possible asset arising from past events whose existence will be confirmed by the occurence or not of
uncertain future events

Q9: Lux Co has discovered that the profit on sale of a non-current asset has not been included in the
financial statements correctly. An item of plant with a carrying value of $15,800 was sold for $14,200
during the year. The only accounting entry has been to:

$
Dr Cash 14,200
Cr Profit on disposal 14,200

What will the effect on non-current assets and profit be if this error is not corrected?

Overstated Understated
Non-current assets __________ ___________

Profit __________ ___________

Q10: Freddie has not kept full accounting records during the current financial year. He had opening
inventory of $15,000 and purchased goods for resale costing $82,000 during the year. At the year end he
had $12,000 of these goods left in inventory.

Goods are sold at a mark-up on cost of 25%.

What is Freddie's sales revenue for the financial year?

Answer: ______________.

Q11: During the year ended 31 March 20X2 one of Ariel Co's customers commenced legal action as Ariel
Co supplied them with faulty equipment. The customer has claimed $100,000 of damages.

Prior to the year end Ariel Co took legal advice which stated that the customer had a good chance of
winning the case.

The case was heard in court on 15 April 20X2 and the customer was awarded damages of $80,000. The
financial statements were signed on 1 June 20X2.
According to IAS 10 Events after the reporting period how should this information be treated in the year
ended 31 March 20X2?

$100,000 should be accrued in the financial statements

The financial statements do not need to account for or disclose anything
The legal claim should be disclosed but not accrued
$80,000 should be accrued in the financial statements
Q12: The following figures relate to Banyan Co for the year ended 31 March 20X9:

$
Interest receivable at 1 April 20X8 11,120
Interest receivable at 31 March 20X9 16,180
Interest income in statement of profit or loss 28,140

What amount should be shown in Banyan Co's statement of cash flows for interest received?

Answer: _____________.

Q13: The following extract is from the statement of profit or loss of Gearing Co for the year ended 30
April 20X7:

$
Profit before tax 68,000
Tax (32,000)
Profit for the year 36,000

In addition to the profit above :

(1) Gearing Co paid a dividend of $21,000 during the year

(2) A gain on revaluation of land resulted in a surplus of $18,000 in the revaluation reserve

What total amount will be added to retained earnings at the end of the financial year?

Answer: __________________.

Q14: Siobhan owns the following inventory at 31 May 20X0:

Cost per unit ($) Number of units Net realisable value ($)
Product A 14.20 4,100 48,960
Product B 11.10 2,600 35,500
Product C 8.50 5,200 43,800

What value should be shown in Siobhan's financial statements for inventory at 31 May 20X0?

Answer: ___________________.

Q15: Which of the following statements is correct?

A rights issue of shares offers new shares to existing shareholders in proportion to their shareholding
The revaluation surplus is reported as a non-current liability on the statement of financial position
A bonus issue of shares is a method of raising cash for the expansion of a business
A share premium account can be used as a distributable reserve
Q16: Gary purchased a vehicle on 1 January 20X6. The vehicle cost $20,000 and was depreciated on a
straight-line basis over four years with no residual value. On 1 January 20X9 Gary part-exchanged the
vehicle for a new one costing $25,000. Gary paid cash of $18,000 towards the purchase of the vehicle.
What is the profit on disposal of the old vehicle to be included within the financial statements for the
year ended 31 December 20X9?

Answer: ______________________.

Q17: Florrie purchased a non-current asset on 1 June 20X8 for $40,000. The asset is depreciated using
the reducing balance method at 20% per annum with a pro rata charge in the year of purchase. Florrie's
accounting year end is 30 November.
What is the total accumulated depreciation on the asset at 30 November 20X9?

$14,400
$16,000
$12,000
$11,200

Q18: During October 20X9 Mabel made sales with a list price of $50,000 to Poppy and $20,000 to Daisy.
Mabel offers a trade discount of 8% on sales and an early settlement discount of 5% if payment is
received within one week of invoice. Only Poppy took advantage of the early settlement discount.
How much discount allowed should be recorded in Mabel's ledger accounts for October 20X9?

$7,900
$2,300
$2,500
$8,820

Q19: Kitty has trade receivables of $125,000. At 31 October 20X9 she discovered that one of her
customers, Mr Fable, is bankrupt and cannot pay any of his $8,000 debt.

Another customer, Mrs Storey, is in financial difficulty and Kitty has agreed that only half of the debt of
$12,500 should be paid.

What journal entry does Kitty need to post to record the above?

Dr Irrecoverable debts $20,500

Cr Allowance for receivables $20,500

Dr Irrecoverable debts $8,000

Dr Sales $6,250
Cr Receivables $14,250

Dr Receivables $14,250
Cr Irrecoverable debts $14,250
Dr Irrecoverable debts $14,250
Cr Receivables $14,250

Q20: Peach Co is preparing its financial statements for the year ended 30 November 20X9. Peach Co
estimates its income tax expense as $145,000 for the year.

The trial balance shows a debit balance on the tax account of $22,000. This represents the balance after
the prior year's tax liability was paid.
What is the income tax expense in the statement of profit or loss for the year ended 30 November
20X9?

Answer: ________________.

Q21: Which TWO of the following assets are non-current assets?

An item of plant and machinery that is currently not in use

A motor vehicle for sale in a car showroom
A new office building that has been acquired but is not yet occupied
Short-term investments

Q22:
Q23: On 1 November 20X9 Christophe had 400 units of opening inventory with a cost of $2,400.

The following transactions occured during the month:

8 November Sales 100 units at $8.50 per unit

19 November Purchases 300 units at $6.45 per unit
24 November Sales 400 units at $8.75 per unit

Using the first-in first-out method of inventory valuation what should the closing balance of inventory be
at 30 November 20X9?

Answer: ___________________.

Q24: Which of the following errors would lead to the creation of a suspense account?

Purchases from the purchases daybook have been credited to sales and dealt with correctly in the
payables control account
The total of the sales daybook has been added incorrectly before being posted to the ledger accounts
Sales returns were credited to the purchase returns account and debited to receivables
Discounts allowed have been dealt with correctly in the receivables account, but debited to the
purchases account

Q25: French Co has incurred the following research and development expenditure in the financial year
ended 30 November 20X9:
$
Research expenditure 40,000
Development expenditure on project A 100,000
Development expenditure on project B 32,000

Both project A and project B meet the criteria for capitalisation in IAS 38 Intangible Assets.

Project A started commercial production on 1 December 20X8 and has a life of four years.

Project B commenced in October 20X9 and has not yet started production.
What is the total charge to the statement of profit or loss for research and development expenditure in
the year ended 30 November 20X9?

$72,000
$172,000
$40,000
$65,000
Q26: Jonas is preparing his bank reconciliation. The balance on the bank statement is $653 debit. There
are uncleared lodgements of $268 and unpresented cheques of $613. The bank has also credited his
account with $25 in error.
What is the cash book balance?

$998 Dr
$1,023 Cr
$653 Cr
$283 Dr

Q27: Which TWO of the following will a journal be used for?

To check that the trial balance is in balance

To record non-routine transactions
To record goods purchased
To record the depreciation charge for the year

Q28: Jasbinda has prepared draft financial statements for the year ended 30 November 20X7. The
following items still require adjustment:

(1) The accounts do not include a cost for electricity for November 20X7 which is expected to be $750
(2) The accounts include a payment of $780 for rent made on 1 July 20X7; the payment is for the 12
months to 30 June 20X8
What is the net impact on profit when the appropriate adjustments are made for these items?

Reduction of $1,205
Reduction of $295
Increase of $295
Increase of $425

Q29: Flora extracted a trial balance which did not balance. The totals were:
Dr ($) Cr ($)
76,159 74,215
She opened a suspense account for the difference and then discovered the following errors:

(1)
Purchase returns of $120 have been debited to the purchases account and credited to the purchase
ledger control account
(2)
One page of transactions from the sales daybook with a total of $360 has been posted to the general
ledger, but has not been posted to the sales ledger
After correcting these errors what should the balance on the suspense account be?

$2,064 Dr
$1,944 Cr
$1,944 Dr
$1,464 Cr
Q30: Which of the following correctly describes a trial balance?

The ledger where all of the individual accounting transactions are posted
A check that no errors exist in the ledger account balances
A control account where summarised accounting information is recorded
A memorandum record that lists the ledger account balances

Q31: If an investor wished to examine only the liquidity and adaptability of an entity, which TWO of the
following financial statements would be useful?

Statement of profit or loss

Statement of cash flows
Statement of changes in equity
Statement of financial position

Q32: X Co has sales of $28,000 and cost of sales of $21,280.

What is X Co's gross profit margin?

Answer: ____________%.

Q33: Mint has the following working capital ratios:

20X2 20X1
Current ratio 1.3 : 1 1.5 : 1
Receivables days 80 65
Payables days 40 55
Inventory days 45 36
Which of the following statements is correct?

Mint is receiving cash from customers more quickly in 20X2 than in 20X1
Mint's liquidity and working capital have improved in 20X2
Mint is suffering a worsening liquidity position in 20X2
Mint is taking longer to pay suppliers in 20X2 than in 20X1

Q34: Which of the following statements is/are correct?

(1) A liability is a present obligation, arising from past events, the settlement of which is expected to
result in an outflow of economic resources
(2) An uncertain liability may be called a provision
(3) A contingent liability is recognised in the financial statements

2 and 3 only
1 only
1 and 2 only
1, 2 and 3
Q35: The following information relates to the accounts of Helter Co for the month of April 20X0:

$
Cash at bank on 1 April 20X0 882 Dr
Sales on credit 42,773
Purchases on credit 38,050
Cash at bank at 30 April 20X0 918 Dr

Cash received from credit customers amounted to $28,112 and payments to credit suppliers were
$38,622.
Assuming there were no other cash transactions what were Helter Co's cash sales for April 20X0?

Answer: __________________.
Q36:
Q37: