Foundation Level

Financial Accounting Fundamentals

1
INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions

FAFN
23 May 2001 Day 3 – morning

You are allowed three hours to answer this question paper. Answer the ONE question in section A (this has 25 sub-questions). Answer the TWO questions in section B. Answer ONE question ONLY from section C. Write your examination number in the boxes provided on the front of the answer book. Write FAFN on the line marked "Subject" on the front of the answer book. Write your examination number on the special answer sheet for section A which is on page 3 of this question paper booklet. Detach the sheet from the booklet and insert it into your answer book before you hand this in. Do NOT write your name or your student registration number anywhere on your answer book. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

TURN OVER

© The Chartered Institute of Management Accountants 2001

FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com

SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH
Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer. Question One 1.1 A B C D The fundamental objective of an external audit of a limited company is to give advice to shareholders. detect fraud and errors. measure the performance and financial position of a company. provide an opinion on the financial statements.

1.2

A receives goods from B on credit terms and A subsequently pays by cheque. A then discovers 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 B C D Debit creditors Credit bank Debit bank Credit creditors Credit returns outwards Debit creditors Credit creditors Debit returns outwards

1.3 A B C D

The profit of a business may be calculated by using which one of the following formulae? Opening capital - drawings + capital introduced - closing capital Closing capital + drawings - capital introduced - opening capital Opening capital + drawings - capital introduced - closing capital Closing capital - drawings + capital introduced - opening capital

1.4

The turnover in a company was £2 million and its debtors were 5% of turnover. The company wishes to have a provision for doubtful debts of 4% of debtors, which would make the provision 33% higher than the current provision.

What figure would appear in the profit and loss account in respect of doubtful debts? A debit £1,000. B credit £1,000. C debit £1,333. D credit £1,333.

FAFN

2

May 2001

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1.5 A B C D

Which one of the following should be accounted for as capital expenditure? The cost of painting a building. The replacement of windows in a building. The purchase of a car by a garage for re-sale. Legal fees incurred on the purchase of a building.

1.6

A business purchases a machine on credit terms for £15,000 plus value added tax (VAT) at 15%. The business is registered for VAT. How should this transaction be recorded in the books? Dr Cr

A

Machinery Creditors

15,000 15,000 17,250 17,250 15,000 2,250 17,250 17,250 2,250 15,000

B

Machinery Creditors

C

Machinery VAT Creditors

D

Machinery VAT Creditors

1.7

Which one of the following statements most closely expresses the meaning of “true and fair”? There is only one true and fair view of a company’s financial statements. True and fair is determined by compliance with accounting standards. True and fair is determined by compliance with company law. True and fair is largely determined by reference to generally accepted accounting practice.

A B C D

1.8

On 1 May 2000, A Ltd pays a rent bill of £1,800 for the period to 30 April 2001. What are the charge to the profit and loss account and the entry in the balance sheet for the year ended 30 November 2000? £1,050 charge to profit and loss account and prepayment of £750 in the balance sheet. £1,050 charge to profit and loss account and accrual of £750 in the balance sheet. £1,800 charge to profit and loss account and no entry in the balance sheet. £750 charge to profit and loss account and prepayment of £1,050 in the balance sheet.

A B C D

May 2001

3

FAFN

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£540 overdrawn. How much cash was stolen during the year? A £18.000.000 and the normal selling price was £12. Cheques banked from credit sales were £160. which have not been entered in the cash book.000. The stock had cost S Ltd £10. At the beginning of the year there was £50 in the cash till and debtors were £2. The bank statement includes bank charges of £50. B £19. 1. How should S Ltd value the vehicle in its balance sheet? A £9.000.000. FAFN 4 May 2001 FOR FREE CIMA. The bank statement incorrectly shows a direct debit payment of £160.9 S Ltd exchanged stock for a delivery vehicle with T Ltd. The figure for the bank balance in the balance sheet should be A B C D £590 overdrawn. B £10. £790 overdrawn. assuming no residual value.400. D £20. The car was traded in for a replacement vehicle on 1 August 2000 for an agreed figure of £5. C Loss £200.000.000 have been banked.000 on 1 April 1997 and has been depreciated at 20% each year straight line.000.050. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.11 There is £100 in the cash till at the year end at F Ltd.10 Z’s bank statement shows a balance of £825 overdrawn. B Loss £1. Debtors at the end of the year were £3.com . There are unpresented cheques totalling £475 and deposits not yet credited of £600.000 and the normal selling price was £13. Total sales in the year were £230.12 A car was purchased for £12. D Profit £200. C £12.000.000. which belongs to another customer.200. but the accountant has discovered that some cash has been stolen. C £19.000.950. What was the profit or loss on the disposal of the vehicle for the year ended 31 December 2000? A Loss £2.000. the delivery vehicle had cost T Ltd £9. The company policy is to charge a full year’s depreciation in the year of purchase and no depreciation in the year of sale.000 and cash sales of £50. £840 overdrawn.1. 1.blogspot.950.000. D £13. 1.

How much cash was paid out as cash expenses by the petty cashier in July? A £385.000 (1. but for which invoices are not received until after the year end.000 1. cheques were drawn for £500 for petty cash. the petty cashier received £25 from staff for using the photocopier and a cheque for £90 was cashed for an employee. This is in accordance with A B C D the historical cost convention.000 2. the consistency concept. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. the accruals concept.com .14 I Ltd operates the imprest system for petty cash. At 1 July there was a float of £150. During July.000 (3. 1.500 8.13 A company includes in stock goods received before the year end.16 The movement on the plant and machinery account for X Ltd is shown below: £ Cost b/fwd Additions Disposals Cost c/fwd Depreciation b/fwd Charge for the year Disposals Depreciation c/fwd Net book value b/fwd Net book value c/fwd 10. D £615. Financial accounts are more accurate than management accounts. What figures would appear in the cash flow statement of X Ltd? May 2001 5 FAFN FOR FREE CIMA.15 Which one of the following sentences does NOT explain the distinction between financial accounts and management accounts? A B C D Financial accounts are primarily for external users and management accounts are primarily for internal users. but it was decided to increase this to £200 from 1 August onwards.1.000 7. 1.000 2. B £435.500 The profit on the sale of the machine was £500. C £515.500) 1. In July. the materiality concept.000) 9.blogspot. 1. Financial accounts are audited by an external auditor and management accounts do not normally have an external audit. Financial accounts are normally produced annually and management accounts are normally produced monthly.

understating cash flow and overstating cash in the balance sheet. current liabilities (net) What figure would appear in the cash flow statement of CFS Ltd for the year ended December 2000 in respect of net cash flow from operating activities? FAFN 6 May 2001 FOR FREE CIMA. What adjustment must be made to correct these errors? Control account A B C D Cr £500 Dr £500 Dr £400 Cr £400 List of creditor balances decrease by £400 increase by £400 increase by £500 decrease by £500 1.17 When there is inflation.000 and proceeds on sale of plant £2. debtors.blogspot.000. 1.18 When reconciling the creditors’ ledger control account with the list of creditors’ ledger balances of M. 1. overstating cash flow and understating cash in the balance sheet. Purchase of plant £2. the historical cost convention has the effect of A B C D overstating profits and understating balance sheet values. the following errors were found: • • the purchase day book had been overstated by £500 and the personal ledger of a supplier had been understated by £400. Movement on plant account £500 and proceeds on sale of plant £2.com . understating profits and overstating balance sheet values.A B C D Movement on plant account £500 and profit on disposal of £500.000 and profit on disposal of £500.19 Extracts from the financial statements of CFS Ltd are set out below: Profit and loss account for the year ended 31 December 2000 £000 Turnover Cost of sales Gross profit Profit on sale of fixed asset Expenses Depreciation Net profit 15 30 45 180 Balances at 31 December 1999 2000 £000 £000 40 50 31 £000 300 150 150 75 225 Stock. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000. Purchase of plant £2.

000. B £170.000. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.500. C £215.blogspot.20 B is a builder with a staff of ten employees. 1.000 1999 £000 45 70 90 The prime cost of production in the manufacturing account for the year ended 30 September 2000 is A £165. 1.400 He owes the following amounts in respect of tax and national insurance for April 2001: tax and employees’ national insurance employer’s national insurance £6.000.400.000 £1.000.A £125.000.000. C £210.000 £50. C £20. B £20. 1.000 £40.000 £5. D £270. D £21. In April 2001. which of the following shows the correct method of arriving at cost? Include inward transport costs A B C D Yes No Yes No Include production overheads No Yes Yes No May 2001 7 FAFN FOR FREE CIMA.500 The correct expense for employee costs to be shown in the profit and loss account for April 2001 is A £19. B £145.000 £1.com . D £235. he paid the following amounts: • • • • • net salaries after tax and national insurance tax and employees’ national insurance for March 2001 employer’s national insurance for March 2001 £14.22 When valuing stock at cost.21 The following information relates to M Ltd: At 30 September Stock of raw materials Work-in-progress stock Stock of finished goods For the year ended 30 September 2000 Purchases of raw materials Manufacturing wages Factory overheads 2000 £000 75 60 100 £150.

a schedule of the cost and other information about each individual fixed asset.25 In a debtors’ report. which one of the following would you NOT expect to see? A B C D Total debtor balances outstanding for current and previous months. a list of the physical fixed assets rather than their financial cost. a profit and loss account is prepared for a manufacturing business and an income and expenditure account is prepared for a non-manufacturing business. Sales to date. a profit and loss account is prepared on an accruals basis and an income and expenditure account is prepared on a cash flow basis. Total = 50 marks FAFN 8 May 2001 FOR FREE CIMA. a schedule of planned maintenance of fixed assets for use by the plant engineer.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.24 The difference between a profit and loss account (which may also be referred to as an “income statement”) and an income and expenditure account is that A B C D an income and expenditure account is an international term for a profit and loss account.23 A fixed asset register is A B C D an alternative name for the fixed asset ledger account. Debtor balances excluding VAT. Credit limit.1. a profit and loss account is prepared for a business and an income and expenditure account is prepared for a not-for-profit making organisation.com . 1. 1.

000 50. at 31 July 2000 was as follows: £ Capital Plant and machinery: Cost Provision for depreciation to 1 August 1999 Trade debtors Trade creditors Stock at 1 August 1999 Cash at bank Sales Drawings Provision for doubtful debts at 1 August 1999 Bank loan – repayable 2006 Purchases Selling and distribution expenses Administration expenses Interest £ 100.000 The following final adjustments are required: (i) (ii) (iii) (iv) (v) Stock at 31 July 2000 was valued at £12.000 10. Selling and distribution expenses of £4. Administration expenses of £6.000 40.000 3. debtor days. The provision for doubtful debts is to be adjusted to 5% of debtors. profit and loss account for the year ended 31 July 2000 and a balance sheet at that date. (6 marks) (Total = 20 marks) FAFN 10 M2001 FOR FREE CIMA.000 35.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 were prepaid.000 are to be accrued.000 1.000 20. as at 31 July 2000: • • • current ratio.600 325.400 150.000 15.000 2. gearing.000 50.SECTION B – 30 MARKS ANSWER BOTH QUESTIONS Question Two The trial balance of FRS.000 15. Depreciation on the plant and machinery is £15.000 for the year to 31 July 2000. a sole proprietor.000 325.com . (14 marks) (b) Calculate the following. Required: (a) Prepare a trading.000 3.000 155.000.

(4 marks) (b) Explain why financial controls are necessary and give TWO examples. (6 marks) (Total = 10 marks) M2001 11 FAFN FOR FREE CIMA.000 had been debited to the machinery repairs account.000 received from a debtor had been credited to the sales account and debited to the bank account.blogspot. A machine costing £5. Machinery is depreciated at 10% on cost and no residual value is assumed. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The cash book had been undercast by £250.Question Three The trial balance of E Ltd did not balance and the following errors have been discovered: (i) (ii) (iii) A cheque for £1. Required: (a) Correct the above errors by showing which ledger accounts should be debited or credited.com .

000.000. On 1 April 1999. Required: Write up the following ledger accounts: • • • motor vehicles at cost account.000 to the transport company. less a part-exchange allowance on car (C) of £15.blogspot. (4 marks) You should include entries for each relevant year. if a vehicle is owned for part of a year. truck (B) was purchased for £90. Truck (A) was destroyed in a road accident on 1 March 1999 and the insurance company paid out £60. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (6 marks) disposal of motor vehicles account. On 1 August 2000. On 1 July 1999. The year end of the company is 31 December.com . and work to the nearest £. The depreciation policy of the company is: • • • • depreciate trucks at 40% each year on the reducing balance. (4 marks) provision for depreciation on motor vehicles account. (Total = 20 marks) FAFN 12 M2001 FOR FREE CIMA. (2 marks) (b) State the purpose of depreciation. car (C) was purchased for £20.000. assume a residual value for cars of 10% of the original cost. depreciate cars at 25% each year using a straight-line basis. calculate depreciation according to the number of months for which the vehicle is owned. (4 marks) (c) A transport company started business on 1 January 1998 and purchased truck (A) for £80.SECTION C – 20 MARKS ANSWER ONE QUESTION ONLY Question Four (a) Define depreciation.000. car (C) was traded in for car (D) which cost £25.000.

(8 marks) (c) The trading account of T Ltd is set out below: T Ltd trading account for the year ended 30 April 2001 £000 Turnover Opening stock Purchases Closing stock Cost of goods sold Gross profit 200 700 900 300 600 400 £000 1. (2 marks) (b) Explain the purposes of the rule for valuing stock. On a LIFO basis. on the LIFO basis. using the average method.Question Five (a) State the rule for valuing stock. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. the opening and closing stock would have been valued at £180. (5 marks) (Total = 20 marks) End of paper M2001 13 FAFN FOR FREE CIMA. (3 marks) (iii) Identify and explain any change in the gross profit and in "stock days" as a consequence of using LIFO rather than FIFO to value stock. (2 marks) (ii) Calculate "stock days".blogspot.com . Required: (i) Calculate gross profit if the trading account was prepared using a stock valuation basis of LIFO.000 and £270.000 The opening and closing stock was valued on a FIFO basis. on the assumption that stock is valued: • • on the FIFO basis.000 respectively.

FAFN 21 November 2001 Day 3 – morning Answer the ONE question in section A (this has 25 sub-questions and is on pages 2 – 8). Detach the sheet from the booklet and insert it into your answer book before you hand this in. Write your examination number in the boxes provided on the front of the answer book. © The Chartered Institute of Management Accountants 2001 FOR FREE CIMA.Foundation Level Financial Accounting Fundamentals 1 INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions You are allowed three hours to answer this question paper. Answer the TWO questions in section B (these are on pages 9 and 10). Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.blogspot. Write FAFN on the line marked "Subject" on the front of the answer book. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. Do NOT write your name or your student registration number anywhere on your answer book. Write your examination number on the special answer sheet for section A.com . Answer ONE question ONLY from section C (these questions are on page 12).

2 A B C D The principal duty of an external auditor is to check that a company’s accounts agree with the accounting records. What is the charge to the profit and loss account and the entry in the balance sheet for the year ended 31 December 2000? $1.400.1 At 30 June 2000.900 C $4.400 profit and loss account and no entry in the balance sheet. $1.000 profit and loss account and prepayment of $1.com . given below. to ensure that a company’s systems and controls are adequate to ensure the reliability of the accounting records. helps to reconcile the cash book with the bank statement.400 for the year to 31 May 2001. including an invoice for $600 for the quarter ended 31 May 2001.1 to 1.SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.700 B $3.000.blogspot. helps to control petty cash.000.400 profit and loss account and accrual of $1. an electricity ledger account had an accrual of $300 and a credit balance was brought down at 1 July 2000.000 were paid. to provide a report to the shareholders. has only ONE correct answer. A B C D 1. electricity invoices totalling $4.25 inclusive. to prevent fraud and errors. What is the profit and loss account charge for electricity payable for the year ended 30 June 2001? A $3.4 A B C D An imprest system records the use of a company’s seal.100 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. FAFN 2 November 2001 FOR FREE CIMA.3 On 1 June 2000.400 profit and loss account and prepayment of $1. is part of computerised accounting.000 D $4. $1. 1. $2. During the financial year. H paid an insurance invoice of $2. Question One 1.

000 C $5.000 November 2001 3 FAFN FOR FREE CIMA.000 and the company policy is to have a general provision of 5%.000 Profit $10. The company uses the straight-line method for depreciation and it charges a full year’s depreciation in the year of purchase and none in the year of sale.000.blogspot. During the year ended 31 October 2001.000. What is the profit or loss on disposal of the machine? A B C D Loss $13. assets and liabilities are recorded at current values.000. bad debts of $5. On 31 March 2001. The machine had an expected life of eight years and an estimated residual value of $4.000 B $3.000 Profit $7.000 were written off.000 1. 1.7 A company bought a machine on 1 October 1996 for $52. financial statements are prepared in accordance with generally accepted accounting practice.1. The company’s year end is 31 December. the machine was sold for $35.6 A B C D A "true and fair view" occurs when financial statements are presented in accordance with prescribed formats. Debtor balances at 31 October 2001 were $120.000 Profit $13. What is the charge for bad and doubtful debts in the profit and loss account for the year ended 31 October 2001? A $2. financial statements have been audited.com .000 D $8.5 The provision for doubtful debts in the ledger of B Ltd at 31 October 2000 was $9. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000.

200.000 1. B $19. FAFN 4 November 2001 FOR FREE CIMA.000 8.800 C Furniture VAT Supplier 8.1.200 9.200 6.000 and excludes goods supplied to a customer on a sale or return basis. The customer still has 30 days within which to return the stock. D $21.000 and were invoiced at a mark-up of 25%. The value of SOR Ltd’s stock should be A $13. 1.200 CR $ 9.000 1.000 1.200 A Furniture Supplier B Furniture VAT Supplier 8. What is the correct account entry? DR $ 9. The depreciation charge on machinery had been credited to the cost of machinery account. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.com .blogspot. C $20.000. bought furniture on credit terms at a cost of $8. The goods on sale or return were purchased by SOR Ltd for $6. plus value added tax of $1. Goods returned inwards had been debited to the sales ledger account of the customer.200 D Furniture Supplier 8.000. which is registered for purposes of value added tax.000. A cheque from a customer had been credited to the purchase ledger account of the customer.9 SOR Ltd’s stock was valued at $13.000.8 S Ltd. Which ONE of the following errors may be the cause of this failure to balance? A B C D The purchase of a machine had been debited to the machine repairs account.10 A Ltd’s trial balance does not balance.500.

000 The cash flow statement for the year ended in 2001 shows dividends paid of $27.000 inflow $25. The working papers of an auditor.000 outflow $10.200 Tax $500 Tax $550 National insurance $100 National insurance $110 Net pay $1.000 B $2.14 Which ONE of the following provides the best definition of an "audit trail"? A B C D The marks left by an auditor when a document has been inspected.060 C $2. His pay details for January and February are as follows: January: February: Gross salary $2. How much cash did T Ltd pay out in February in connection with S’s wages? A $2.200 1.140 D $2.000 inflow 1.000 B $27.000 2000 $25. What were the dividends in the profit and loss account for the year ended 2001? A $22.1.540 Tax and national insurance are payable to the government one month after they are deducted from employees’ salaries. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. November 2001 5 FAFN FOR FREE CIMA.000 C $28. The pursuit of a fraud by an auditor.000 outflow $10.000 D $32.com .400 Net pay $1.13 The following is an extract from the balance sheets of FRC plc for the years ended 31 July 2001 and 31 July 2000: 2001 $000 50 60 35 5 2000 $000 80 50 30 20 Stock Debtors Creditors Accruals What figure would appear in the cash flow statement of FRC plc for the year ended 31 July 2001 as part of the cash flow from operations? A B C D $25.000 1.12 S is employed by T Ltd.11 The current liabilities of CFS Ltd include the following: Dividends payable 2001 $30.blogspot. The trail of a transaction from source document to financial statement.000 Gross salary $2.000.

16 Which ONE of the following might explain the debit balance on a purchase ledger account? A B C D The company took a cash discount to which it was not entitled and paid less than the amount due.17 In a period of inflation. The objective is to provide support to the external auditor. The transportation costs were $1. N plc depreciates machinery at 10% each year on cost. The machine broke down at the end of the first month in use and cost $400 to repair. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.18 Which ONE of the following provides the best explanation of the objective of an internal audit? A B C D The objective is to assist directors of a company in the effective discharge of their financial responsibilities towards the members.1. FAFN 6 November 2001 FOR FREE CIMA.525 D $15.000. to the nearest dollar? A $13.850 C $15.15 N plc purchased a machine for $15.885 1.500 B $14. assuming no residual value.com . The objective is to audit the financial statements. 1. which ONE of the following methods of charging stock issues to production will give the lowest profit figure? A B C D Average cost LIFO FIFO Replacement cost 1.500 and installation costs were $750. What is the net book value of the machine after one year. The book-keeper failed to post a cheque paid to the account. The company mistakenly paid too much. The book-keeper failed to enter a contra with the sales ledger.blogspot. The objective is to detect fraud and error.

000 30.000 Subscriptions for 2001 paid during the year ended 31 December 2000 1. which has a year end of 31 December 2000: $ Subscriptions for 1999 unpaid at January 2000 300 Subscriptions for 1999 paid during the year ended 31 December 2000 250 Subscriptions for 2000 paid during the year ended 31 December 2000 6. The directors.com . 1.000 A Bank Share capital Share premium Bank Share premium Bank Share capital Bank Share premium Share capital B C D November 2001 7 FAFN FOR FREE CIMA.AT 1.20 Who has the responsibility for ensuring that a company maintains proper accounting records? A B C D The shareholders. net profit margin (NPM) and asset turnover (AT)? A B C D ROCE = NPM ÷ AT ROCE = NPM + AT ROCE = NPM x AT ROCE = NPM .000 150.000 180.1.000 180.000 180.250 1.blogspot.000 120.250 B $6. What amount should be credited to the income and expenditure account for the year ended 31 December 2000? A $6.000 30.22 The correct ledger entries to record the issue of 150.750 C $7.000 CR $ 150.050 D $7.21 Which ONE of the following formulae correctly expresses the relationship between the return on capital employed (ROCE).000 180. The auditors.19 The following information at 5 January 2001 relates to a club.000 Subscriptions for 2000 unpaid at 31 December 2000 750 It is the club’s policy to write off overdue subscriptions after one year. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The company secretary.000 $1 ordinary shares at a premium of 20% and paid by cheque is: DR $ 180.

What was the difference on the trial balance? A $500 B $800 C $5.175.800 1. which had cost $12. The following errors were discovered: • • • Insurance of $500 prepaid at 31 May 2000 had not been brought down as an opening balance on the insurance account.000 1.com .000 at a profit of $2. At the end of his financial year he valued his equipment at $8. What is the revised balance on the fixed asset register? A $113. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 had been incorrectly debited to the purchases account.000.000 D $127. A fixed asset. Wages of $5. The book-keeper had failed to accrue $300 for the telephone invoice owing at 31 May 2001.24 M plc’s trial balance did not balance at 31 May 2001. At the beginning of his financial year he valued his equipment at $10.blogspot.000.250 B $3. He calculates his depreciation using the revaluation method.525 (Total = 50 marks) FAFN 8 November 2001 FOR FREE CIMA. was sold for $9.23 A fixed asset register had a balance of $125.1.25 S is a builder who has numerous small items of equipment.700 D $11.500 D $5. he bought equipment costing $3.525 C $5.000.000 B $118. What is his depreciation charge on equipment for the year? A $2.000.450 and he sold equipment valued at $2.250.000 C $125.

000 90.000 90.000 30. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 3.000 2.000 450.000 50.000 400.000 35.500 $6.000 62.blogspot.000 18.000 80. trading and profit and loss account for the year ended 31 July 2001 and a balance sheet at that date.000 15. (14 marks) November 2001 9 FAFN FOR FREE CIMA.000 40.000 8.000 7.SECTION B – 30 MARKS ANSWER BOTH QUESTIONS Question Two The balances extracted from the nominal ledger of RHG Ltd for the year ended 31 July 2001 were as follows: $ Stock of raw materials at 1 August 2000 Work-in-progress at 1 August 2000 Stock of finished goods at 1 August 2000 Direct factory wages Office salaries Directors' salaries Purchases of raw materials Depreciation charge on factory machinery Depreciation charge on office machinery Factory overheads Advertising Sales Factory machinery Office machinery Provision for depreciation on factory machinery at 31 July 2001 Provision for depreciation on office machinery at 31 July 2001 Debtors Creditors Bank overdraft 10% debenture Issued share capital: ordinary shares of $1 Share premium account Profit and loss account reserve The valuation of stock at 31 July 2001 was as follows: • • • raw materials work-in-progress finished goods $3.com .000 Required: (a) prepare a manufacturing.000 35.000 250.000 60.000 40.000 25.000 200.000 4.000 $1.

300 150.100 130.300 450 7. Balance in the cash book (Cr) Bankings in the cash book.700 Required: (b) Prepare a sales ledger control account for July 2001.com . not on the bank statement Bank charges on the bank statement.500 2. to be cancelled Standing order from a customer on the bank statement. carrying down the balance at 31 July 2001. (2 marks) (2 marks) (2 marks) (Total = 20 marks) Question Three The following information relates to C Ltd's cash book and bank statement on 30 June 2001. not in the cash book $ 2. debtor days. Sales ledger balances at 1 July Sales day book Bad debts written off Cheques received from debtors Set off against purchase ledger Cheques dishonoured $ 18.500 800 3. not in the cash book Unpresented cheques less than six months old Unpresented cheque more than six months old. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.600 Required: (a) Calculate the balance on the bank statement at 30 June 2001. finished goods stock days.500 12.250 5. (5 marks) (Total = 10 marks) FAFN 10 November 2001 FOR FREE CIMA. (5 marks) The following information relates to D Ltd for the month of July 2001.(b) Calculate: • • • the gearing ratio.400 6.blogspot.

SECTION C – 20 MARKS ANSWER ONE QUESTION ONLY Question Four (a) Identify four potential user groups of financial statements. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (5 marks) (c) Consistency.com . (5 marks) (b) Accruals.blogspot. (8 marks) (c) Identify and explain three characteristics of useful financial information. (8 marks) (Total = 20 marks) Question Five Explain each of the following four accounting concepts. and give an example of its application: (a) Going concern. (5 marks) (Total = 20 marks) End of paper November 2001 11 FAFN FOR FREE CIMA. Choose two examples of user groups and give the specific information they require and the purpose for which they would require it. and state the information they require. (4 marks) (b) Explain why user groups in general need accounting information. (5 marks) (d) Prudence (or conservatism).

You are allowed three hours to answer this question paper. which has 25 sub-questions. You are NOT permitted to leave the examination hall with this booklet. You should spend no more than 85 minutes in total answering the ONE question in section A. TURN OVER For office use only Marks awarded (First marker) for each question Marks awarded (Second marker) for each question © The Chartered Institute of Management Accountants 2002 Total One Two Three Four FOR FREE CIMA. and also for workings where questions require them. For section B questions. All questions are compulsory. Please note that you will NOT receive marks for your workings. Do NOT write your name or your student registration number anywhere on this booklet.blogspot. you must write your answers in the shaded space provided. Avoid the use of correction fluid. Sufficient space has been provided for you to write your answers. You should spend no more than 85 minutes in total answering the THREE questions in section B. Hand this entire booklet to the invigilators at the end of the examination. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. Do NOT remove any sheets from this booklet: cross through neatly any work that is not to be marked.Examination Question and Answer Book Write here your full examination number Centre Code: Hall Code: Desk Number: Foundation Level Financial Accounting Fundamentals 1 INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions FAFN 22 May 2002 Day 3 – morning THIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.com . Additional blank pages (20-23) are included towards the back of this booklet if you require more space for notes or workings. Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-11) Answer the THREE questions in section B (these are on pages 12-19) You are advised to spend 10 minutes reading through the paper before starting to answer the questions.

1. an audit process.SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1. block out your first answer completely and then circle another letter. Question One 1.blogspot.1 1. Sufficient space has been provided for you to do your workings where these sub-questions require them. has only ONE correct answer.2 A B C D Which ONE of the following is correct? All limited companies are required by law to have an external audit. given below.com . automatic agreement of the cash book and bank statement. B. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. An external audit for a limited company is voluntary. You will NOT receive marks if more than one letter is circled. If you wish to change your mind about an answer.25 inclusive.2 FAFN 2 May 2002 FOR FREE CIMA. a method of controlling petty cash. REQUIRED: Place a circle “O” around the letter A. Only public limited companies are required by law to have an external audit.1 A B C D An imprest system is accounting computer software. C or D that gives the correct answer to each sub-question. Please note that you will NOT receive marks for any workings to these sub-questions. Only limited companies above a certain size are required by law to have an external audit. For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question Total 1.1 to 1.

4 1.200 Space for workings to 1. the directors. rent paid was $4.com .700 Space for workings to 1.100 D $4. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.900 C $4.800 B $12.1. accrued rent payable was $300. the external auditors.200.4 A B C D The responsibility for internal control rests with the internal auditors.blogspot. What is the profit and loss account charge for insurance for the year ended 31 December 2001? A $11. What is the profit and loss account charge for rent payable for the year ended 31 March 2002? A $3.600 D $13.5 TURN OVER For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question May 2002 3 Total 1.3 1.5 FAFN FOR FREE CIMA.200 for the quarter ended 30 April 2002.3 At 31 March 2001. which is 10% more than the previous year. During the year ended 31 March 2002.300 B $3. the shareholders. 1.540 C $12.5 The annual insurance premium for S Ltd for the period 1 July 2001 to 30 June 2002 is $13. including an invoice for $1. Insurance premiums are paid on 1 July.000.3 1.

blogspot.6 1.150 C Credit $1. Factory insurance.7 FAFN 4 May 2002 FOR FREE CIMA. Office salaries.6 1. what is the balance in the cash book before any adjustments? A Debit $250 B Credit $1.000 overdrawn.1.6 A bank reconciliation showed the following differences between the bank statement and the cash book: Unpresented cheques of $750 Outstanding deposits of $500 Bank charges of $100 If the balance on the bank statement is $1. For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question Total 1.7 A B C D Which ONE of the following expenses should be included in prime cost in a manufacturing account? Repairs to factory machinery.500 Space for workings to 1. Direct production wages.250 D Credit $1.com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.

it will require to be modified at a cost of $150.500 $4.000 $3.9 TURN OVER For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question May 2002 5 Total 1.com . How should this item be valued in stock? A $950 B $1.8 The entries in a sales ledger control account are: Sales Bank Returns Bad debts Returned unpaid cheque Contra purchase ledger account $250.000 D $27.000 $2.200.9 FAFN FOR FREE CIMA.000 C $25.blogspot.000 What is the balance on the sales ledger control account? A $12.000 C $1.000 and can be sold for $1.000 B $19. However. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.100 Space for workings to 1.000 $225.050 D $1.500 $3.8 1.8 1.9 A Ltd has an item in stock which cost $1. before it can be sold.1.000 Space for workings to 1. The expected selling costs of the item are an additional $100.

What is the charge for depreciation for the year ended 31 December 2001? A $7. 1.12 B Ltd purchased a machine for $120.000 D $30.11 Which ONE of the following statements regarding a fixed assets register is NOT correct? A B C D A fixed assets register enables reconciliations to be made with the nominal ledger.blogspot. a voluntary audit by an unregistered auditor.000 Space for workings to 1.11 1.000. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. a review of expenditure to ensure effectiveness. efficiency and economy. 1.12 For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question FAFN 6 Total 1.1. A fixed assets register enables depreciation charges to be posted to the nominal ledger.12 May 2002 FOR FREE CIMA. The estimated useful life is 4 years with a residual value of $4.com .10 1. B Ltd uses the straight-line method for depreciation and charges depreciation on a monthly basis.000 on 1 October 2001. none of these. A fixed assets register records the physical location of an asset.10 A “value for money audit” is A B C D an external audit with limited scope. A fixed assets register agrees with the fixed asset nominal ledger account.250 B $7.500 C $29.

including subscriptions relating to the previous year of $800 and subscriptions in advance of $600.000 and subscriptions in advance of $500. During the year ended 31 March 2002. net of VAT." At 31 March 2001.14 Which of the following statements concerning a "true and fair" view is correct? A B C D True and fair has a precise definition which is universally accepted. If the rate of VAT is 10%.13 In the quarter ended 31 March 2002.13 1.100 B $8. net of VAT.000 receivable C $1.000 and taxable inputs.000 payable Space for workings to 1.900 Space for workings to 1.000 were received. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.800 payable D $2. What amount should be included for subscriptions in the year ended 31 March 2002? A $8. there were subscriptions owing of $1.000.15 TURN OVER For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question May 2002 7 Total 1. True and fair is mainly determined by compliance with generally accepted accounting practice. subscriptions in advance are accounted for on a matching basis.13 1.1. of $90.900 C $9.com . True and fair means the financial statements are accurate. how much VAT is due? A $1. 1.blogspot.15 The M Club discloses the following note to its Income and Expenditure Account: "Subscriptions in arrears are accounted for when received.14 1.800 receivable B $2. C Ltd had VAT taxable outputs.100 D $9.15 FAFN FOR FREE CIMA. of $72. subscriptions of $10. There can only be one true and fair view of a company's financial statements.

the total gross salaries. 1. For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question FAFN 8 Total 1.19 May 2002 FOR FREE CIMA.18 The net profit percentage in a company is 12% and the asset turnover ratio is 2. a feature of internal control.18 1.16 The total cost of salaries charged to the profit and loss account is A B C D the total gross salaries plus employer's national insurance contributions.19 Which of the following are used in a coding system for accounting transactions? A B C D Department code. Product code. 1.16 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. the total net salaries plus employer's national insurance contributions. Nominal ledger code.17 1. the total net salaries. two staff sharing one job. What is the return on capital employed? A 6% B 10% C 14% D 24% Space for workings to 1. All of the above.17 The segregation of duties is A B C D delegation of duties by a manager. all of the above.com .blogspot.18 1.1.

21 Which of the following errors will cause the trial balance totals to be unequal? A B C D Errors of transposition. TURN OVER For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question May 2002 9 Total 1.000 C $13. Plant and machinery Cost $000 25 15 (10) 30 Depreciation $000 12 4 (8) 8 Net book value $000 13 11 (2) 22 Opening balance Additions/charge Disposals Closing balance The additional machinery was purchased for cash.20 1.blogspot.21 FAFN FOR FREE CIMA.20 1.com . A machine was sold at a profit of $2. What is the net cash outflow for plant and machinery? A $9.000 Space for workings to 1.000 D $15.000 B $11. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. All of the above.1.20 APM Ltd provides the following note to fixed assets in its balance sheet. Errors of principle.000. Errors of omission.

000 per month as drawings. For office use only Marks awarded (First marker) for each sub-question Marks awarded (Second marker) for each sub-question FAFN 10 Total 1. The sales day book. A sales ledger control account.000 from the sale of a business car. All the sales are cash sales and during the year $50.22 1.blogspot.23 1. The trial balance.900 B $81. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. 1.23 P is a sole proprietor whose accounting records are incomplete. What were the sales for the year? A $80. An imprest system.1. A suspense account. including $5.000 C $81.24 May 2002 FOR FREE CIMA.100 Space for workings to 1.com . He paid $12.23 1.000 was banked.000 wages in cash from the till and withdrew $2.100 D $86. The sales ledger. The cash in the till at the beginning and end of the year was $300 and $400 respectively.22 Which ONE of the following is a record of prime entry? A B C D The nominal ledger.24 Which of the following is NOT helpful in detecting an error? A B C D A bank reconciliation.

25 FAFN FOR FREE CIMA. Donation to a charity.1. (Total = 50 Marks) End of Section A Section B begins on page 12 TURN OVER For office use only Marks awarded (First marker) for the sub-question Marks awarded (Second marker) for the sub-question May 2002 11 Total 1. Loan interest. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com .25 Which ONE of the following is an appropriation by a limited company? A B C D Directors' salaries. Dividends.

THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS INDICATED. The accountant has prepared a schedule of adjustments which need to be made before the financial statements can be prepared.blogspot.355 250 100 150 60 100 25 5 30 800 200 50 250 70 $000 FAFN 12 May 2002 FOR FREE CIMA. The trial balance of QME plc at 31 December 2001 was as follows: $000 Buildings – at cost Provision for depreciation on buildings Equipment at cost Provision for depreciation on equipment Patent – at valuation Stock at 1 January 2001 Debtors/creditors Provision for doubtful debts at 1 January 2001 Bank Sales Purchases 10% Debentures Debenture interest paid Interim dividend Directors' remuneration Administration expenses Selling and distribution expenses Ordinary shares of 50 cents each Profit and loss account reserve General reserve 1.355 5 10 40 130 160 200 50 25 1. BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. Question Two The bookkeeper at QME plc has prepared the trial balance set out below from the nominal ledger.SECTION B – 50 MARKS ANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR CORRECTLY COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.com .

000 taxation was paid. The buildings are revalued at $300. The provision for doubtful debts is to be increased to 8% of debtors. Accruals: Administration expenses $30.000.000. Depreciation: Buildings: 2% of revised value Equipment: 20% of net book value at the year end.000. (viii) (ix) (x) Required: (a) Complete the missing figures and words (in the shaded boxes) of the financial statements set out below.000 and this revised value is to be included in the accounts. The directors declare a final dividend of 5 cents per share. In September 2001. The directors decide to transfer $15. The tax advisers estimate that the taxation for the year ended 31 December 2001 will be $10. Do not write in these columns below QME plc Trading. but accounts have not yet been submitted to the tax authorities. Profit and Loss and Appropriation Account Year ended 31 December 2001 $000 Sales Cost of sales Gross profit Administration expenses Selling and distribution expenses Doubtful debts Depreciation charge Directors’ remuneration Operating profit Debenture interest Profit before tax Taxation Profit after tax Dividend Transfer to general reserve Retained profit $000 Marks available For use by the second marker For use by the first marker 1 1 1 1 1 1 1 The Balance Sheet is overleaf TURN OVER May 2002 13 FAFN FOR FREE CIMA.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000. The 10% Debenture was issued in 1999. redeemable 2006.000 to the general reserve.Schedule of adjustments: (i) (ii) (iii) (iv) (v) (vi) (vii) Stock at 31 December 2001 was valued at $70. $30.com . Prepayments: Selling and distribution expenses $20.

blogspot.Space for workings and/or notes for Question Two QME plc – Balance Sheet at 31 December 2001 $000 Cost or valuation $000 Depreciation $000 Marks available For use by the second marker For use by the first marker Fixed assets 1 Current assets 1 Current liabilities 1 Capital and Reserves 2 Sub-total: 12 FAFN 14 May 2002 FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.com .

blogspot.com . in the shaded area below) Marks available For use by the second marker For use by the first marker 3 (ii) the going concern concept was not applied? (Use no more than 30 words.(b) The accountant at QME plc is preparing a report to the directors on the financial statements. in the shaded area below) Marks available For use by the second marker For use by the first marker 3 Question Two Total = 20 Marks Section B continues overleaf TURN OVER May 2002 15 FAFN FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The report will include key ratios. Required: Complete the missing words below (in the shaded boxes): Do not write in these columns below Marks available For use by the second marker For use by the first marker Stock days = Debtor days = / / x 365 x 365 1 1 Subtotal: 2 (c) How would the financial statements of QME plc change if: (i) the accruals concept was not applied? (Use no more than 30 words.

Required: (a) Complete the missing information (in the shaded boxes) from the schedule set out below which was prepared by the accountant.200 The accountant decided to write off the bad debts.com .250 $1.200 The accountant decided to write off the bad debts.750 $2. The accountant and the sales ledger clerk met again on 28 February 2002.000 $1.000 1 Specific provision for doubtful debts Debtors after bad debts and specific provision General provision for doubtful debts Total doubtful debts 1 1 1 SubTotal: 4 The bookkeeper will enter the information from the accountant’s schedule into the ledger accounts. FAFN 16 May 2002 FOR FREE CIMA.000 Z Ltd $2.750 $900 $1. and make a general provision of 5% at 28 February 2001.000 Bad debts written off Marks available For use by the second marker For use by the first marker 28/2/ 2002 $ 30.000 • • in his opinion the following debts were bad: he considered the following debts doubtful: A Ltd B Ltd X Ltd Y Ltd Z Ltd $1.200 $1.250 $1. and make a general provision of 5% at 28 February 2002.Question Three The accountant and the sales ledger clerk at ILT Ltd met to discuss the debtors on 28 February 2001. The sales ledger clerk reported that: • • • • the debtors in the ledger were in his opinion the following debts were bad: he considered the following debts doubtful: the following had paid their debts in full: X Ltd L Ltd Y Ltd P Ltd A Ltd $30. The sales ledger clerk reported that: • the debtors in the ledger were: $25.000 $1. make a specific provision for all the doubtful debts. make a specific provision for all the doubtful debts. Please do not write in these columns below Schedule of bad and doubtful debts 28/2/ 2001 $ $ $ Debtors 25.500 $1.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.

by completing the relevant shaded boxes.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. Please do not write in these columns below For use by the second marker For use by the first marker Bad debts account $ $ Marks available 3 Provision for doubtful debts account $ $ Marks available For use by the second marker For use by the first marker 3 Subtotal: 6 Question Three Total = 10 Marks Space for workings and/or notes for Question Three Section B continues overleaf TURN OVER May 2002 17 FAFN FOR FREE CIMA.(b) Complete the missing information for the period 1 March 2001 to 28 February 2002 in the two ledger accounts set out below.com .

000 and asks for your advice. Please do not write in these columns below For use by the second marker For use by the first marker Marks available (i) Asset 2 (ii) Liability 2 (iii) Capital receipt 2 (iv) Capital expenditure 2 Subtotal: 8 Part (b) of Question Four is on page 19 FAFN 18 May 2002 FOR FREE CIMA. He therefore believes that his profit must be $2. Required (a) Define the four terms in no more than 30 words each using the shaded areas below.000 in his bank account and that at the end of the year he had $12.com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. He informs you that at the beginning of the year he had $10. Q is confused by these terms and asks you to explain them to him.blogspot.Question Four Q is a sole trader who has been trading for one year. He also informs you that his revenue was $40.000.000.000 and his expenditure $38. You reply that in order to calculate his profit you need to know whether he had any other assets and liabilities at the beginning and end of the year and whether the revenue and expenditure included any capital items.

com .blogspot.Do not write in these columns below Required Marks available For use by the second marker For use by the first marker (b) Give an example of each of the four terms you have defined above and explain why it conforms to your definition in no more than 30 words each in the shaded areas below. (i) Asset 3 (ii) Liability 3 (iii) Capital receipt 3 (iv) Capital expenditure 3 Sub-total: 12 Question Four Total = 20 Marks End of Question Paper TURN OVER FOR ADDITIONAL SPACE FOR WORKINGS AND NOTES May 2002 19 FAFN FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.

com .blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.You may use this sheet for workings (no marks are awarded for workings) FAFN 20 May 2002 FOR FREE CIMA.

ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.You may use this sheet for workings (no marks are awarded for workings) May 2002 21 FAFN FOR FREE CIMA.blogspot.com .

ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com .You may use this sheet for workings (no marks are awarded for workings) FAFN 22 May 2002 FOR FREE CIMA.

com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.DO NOT WRITE ON THIS SHEET May 2002 23 FAFN FOR FREE CIMA.blogspot.

1 FAFN Financial Accounting Fundamentals Day 3 – morning FAFN 24 May 2002 FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com .

Sufficient space has been provided for you to write your answers. You are allowed three hours to answer this question paper. You should spend no more than 85 minutes in total answering the ONE question in section A.com . You are NOT permitted to leave the examination hall with this booklet.blogspot. Hand this entire booklet to the invigilators at the end of the examination. Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-13) Answer the THREE questions in section B (these are on pages 14-21) You are advised to spend 10 minutes reading through the paper before starting to answer the questions. Do NOT write your name or your student registration number anywhere on this booklet.  The Chartered Institute of Management Accountants 2002 FOR FREE CIMA. Do not exceed the stated number of words. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. and also for workings where questions require them. Please note that you will NOT receive marks for your workings. You should spend no more than 85 minutes in total answering the THREE questions in section B. For section B questions. All questions are compulsory.Examination Question and Answer Book Write here your full examination number Centre Code: Hall Code: Desk Number: Foundation Level Financial Accounting Fundamentals 1 INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions FAFN 20 November 2002 Day 3 – morning THIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET. which has 25 sub-questions. you must write your answers in the shaded space provided.

ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. given below. Ensuring the recording. Managing cash. preparing the financial statements. ensuring that the accounts show a true and fair view. Sufficient space has been provided for you to do your workings where these sub-questions require them. REQUIRED: Place a circle “O” around the letter A.1 to 1. controlling and safeguarding of assets. block out your first answer completely and then circle another letter.SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.blogspot. If you wish to change your mind about an answer.1 A B C D Which ONE of the following best describes the stewardship function? Ensuring high profits. Ensuring high dividends to shareholders. You will NOT receive marks if more than one letter is circled.25 inclusive. B. FAFN 2 November 2002 FOR FREE CIMA. 1. detecting errors and fraud. C or D that gives the correct answer to each sub-question.com . Question One 1. Please note that you will NOT receive marks for any workings to these sub-questions. has only ONE correct answer.2 A B C D External auditors are primarily responsible for writing a report to the shareholders expressing an opinion on the financial statements.

000 was paid for utility expenses. a cheque from a customer for $400.000 was prepaid at the year end. a journal entry was raised to accrue for utility expenses of $3. receipts of $1. has now been returned by the bank as "dishonoured".600 Space for workings to 1.200. The balance on Z Limited’s bank statement is A B C D overdrawn $2.com . This journal entry was reversed in January 2001. bank charges of $300 not entered in the cash book.4 Z Limited’s cash book shows a credit balance of $2.1. A comparison with the bank statement showed the following: • • • • unpresented cheques totalling $600. The charge to the profit and loss account for utility expenses for the year ended December 2001 was $22.100 overdrawn $2. of which $4.500 Space for workings to 1.3 A B C D 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.200 not yet cleared by the bank. which had been entered in the cash book when received. $30.4 November 2002 3 FAFN FOR FREE CIMA.blogspot.300 overdrawn $2. During the year ended December 2001.600.900 overdrawn $3.400 $37.600 $30.3 At the year end of SED Ltd in December 2000.400 $29.

000.000 1. 1.000 21.000.000 15.com .000 Space for workings to 1.blogspot.6 23. it proves the individual ledger accounts are correct.000 25. ensuring value for money.000 22.1. to cover the following year.000 24. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. On the first day of Month 8. the most important reason for extracting a trial balance prior to preparing financial statements is that it proves the arithmetical accuracy of the ledgers. it provides a summary of the financial statements. it reveals how errors have been made.000 36. in full. it paid. reporting to management on the accounting systems.6 A B C D On the first day of Month 1.7 A B C D In a manual accounting system. the annual insurance invoice of $36. supporting the work of the external auditors.5 A B C D The role of the internal auditors is best described as auditing the financial accounts. FAFN 4 November 2002 FOR FREE CIMA. a business had prepaid insurance of $10. The amount charged in the profit and loss account and the amount shown in the balance sheet at the year end is: Profit and loss account Balance carried forward $ $ 5.

1.8

JSL Ltd operates the imprest system for its petty cash with a float of $750. At the end of July, the cashier prepared a spreadsheet for the petty cash expenses with a total column and analysis columns. A cash voucher for petrol for $50 was incorrectly entered as $5 in the total column and also in one of the analysis columns in the spreadsheet. The total column was posted to the cash account, the analysis columns were posted to the relevant nominal ledger accounts and cash was drawn from the bank for the total of the cash expenditure on the spreadsheet. The effect of this error would be

A B C D

a petty cash balance of $705. petrol expenses overstated by $45. an imbalance on the trial balance. a petty cash balance of $750. Space for workings to 1.8

1.9 A B C D

Financial statements are required to show a true and fair view. Which ONE of the following statements is the most appropriate explanation of a true and fair view? The accounts are approved by the shareholders. The accounts are set out in the correct format. The accounts conform to accounting concepts and conventions. The accounts comply with generally accepted accounting practice.

November 2002

5

FAFN

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1.10

SSG Ltd bought a machine for $40,000 in January 1998. The machine had an expected useful life of six years and an expected residual value of $10,000. The machine was depreciated on the straight-line basis. In December 2001, the machine was sold for $15,000. The company has a policy in its internal accounts of combining the depreciation charge with the profit or loss on disposal of assets. The total amount of depreciation and profit/loss charged to the internal profit and loss account over the life of the machine was

A B C D

$15,000 $20,000 $25,000 $30,000 Space for workings to 1.10

1.11

DEF plc has a supplier, M Ltd, and the balance on M Ltd’s purchase ledger account at 31 July 2002 was a credit balance of $2,000. On 5 August 2002, DEF plc received the July statement from M Ltd showing a balance due of $3,000. The purchase ledger supervisor investigates the difference and discovers that: an invoice for $2,000 from M Ltd dated 31 July was not entered in the purchase ledger • account until 3 August 2002, but appears on M Ltd’s July statement. • a cheque for $600 sent from DEF plc to M Ltd on 25 July 2002 in payment of a July invoice does not appear on M Ltd’s July statement. This cheque was presented by M Ltd on 31 July 2002. The purchase ledger supervisor at DEF plc contacts the sales ledger supervisor at M Ltd and correctly says that there is a difference between the ledger accounts of

A B C D

$400 $1,000 $1,400 $1,600 Space for workings to 1.11

FAFN

6

November 2002

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1.12

On 1 October 2002, the debtors’ balance at G Ltd was $80,000. A summary of the transactions in the month of October is set out below. $ Cheques received 100,000 Contra creditors 6,000 Sales 90,000 Returns inwards 4,000 Discounts allowed 10,000 The debtors’ balance at 31 October was

A B C D

$50,000 $58,000 $62,000 $70,000 Space for workings to 1.12

1.13 A B C D

Financial controls are primarily needed to minimise the risk of fraud and error. comply with legal requirements. improve the efficiency of the business. reduce the expense of the external auditors.

November 2002

7

FAFN

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000 Space for workings to 1.15 SAD plc paid £240. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. Employees had contributed £6. Should the internal auditor A B C D instruct the cashier to pay cheques in more promptly? disregard.000 to be deducted for charitable giving.16 A B C D Which ONE of the following attributes is the most important for any code to possess in order to be of use in an accounting system? Easy to change the code number. FAFN 8 November 2002 FOR FREE CIMA. A combination of letters and digits to ensure input accuracy.000. The amount to be charged to the profit and loss account in August 2002 for wages is A B C D £285.000.1.15 1.000 £293.000 £296. employees’ national insurance was £12.blogspot.000 £299.000 in net wages to its employees in August 2002. expenditure and capital.000 and employer’s national insurance was £14.14 The internal auditor at ILT plc has noticed that cheques from customers are being paid into the bank account approximately one month after the date on the cheque. liabilities. because all cheques have been accounted for? ask customers to pay more promptly? inform senior management there may be a fraud? 1. income.000 to a pension scheme and had voluntarily asked for £3. Each code is a unique number.com . Linked to assets. Employees’ tax was £24.

Separate staff to deal with the bank reconciliation and the cash book. During Period 6.blogspot.1. 1.18 November 2002 9 FAFN FOR FREE CIMA. Separate staff to maintain the personal and nominal ledger accounts.com . Separate staff to deal with the trial balance and the preparation of accounts.17 A B C D Which of the following functions would most benefit from segregated duties of staff? Separate staff to maintain the sales and purchase ledgers.18 At the beginning of Period 6. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. the closing stock at the end of Period 6 was A B C D $5·00 $5⋅50 $6·00 $7·00 Space for workings to 1. the following stock movements occurred: Day 5 Day 10 Day 14 Sold 15 items for $5·00 each Bought 8 items for $6·00 each Sold 12 items for $7·00 each Using the FIFO method of stock valuation. XYZ Ltd had opening stock of 20 units of product X valued at $4·00 each.

000 Share capital Profit and loss account Space for workings for 1. Profit and loss account for the year ended 30 November 2002 $000 Turnover Opening stock Purchases Closing stock Cost of sales Gross profit Operating expenses Operating profit Balance sheet at 30 November 2002 $000 Fixed assets Current assets Stock Debtors Bank Current liabilities Trade creditors $000 3.000 2.21 are on the next page FAFN 10 November 2002 FOR FREE CIMA.com .250 (250) 1.blogspot.000 300 900 50 1.000 4.000 (500) 1.000 2.000 4.19 to 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 200 3.The following information is required for sub-questions 1.100 (300) (3.19 to 1.000) 2.21 The accounts for SPA plc are set out below.21 Questions 1.500 $000 5.19 to 1.

ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.20 A B C D The fixed asset turnover ratio in SPA plc is 1 : 1·67 1·25 : 1 2·5 : 1 1·67 : 1 1.19 A B C D The return on capital employed in SPA plc is 75·0% 37·5% 50·0% 100·0% 1.com .21 A B C D The quick ratio (acid test ratio) in SPA plc is 2·4 : 1 3·8 : 1 4·8 : 1 5·1 : 1 November 2002 11 FAFN FOR FREE CIMA.1.blogspot.

100 Cr $3.com .23 FAFN 12 November 2002 FOR FREE CIMA.700 Dr $2. • the proceeds of $1. In August 2002 the insurance company sent a cheque for $6.100 Space for workings to 1. The correct journal entry to record this information was entered in the books in July 2002.000.500 6. The following errors are discovered: the single column manual cash book receipts column was undercast by $600.22 500 C D Bank Bank 1.000 on the sale of a fixed asset had been credited to sales. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The net book value of the company car was $8. The journal entry to record this is: Dr Cr $ $ Bank 6.500.23 The trial balance of EHL plc does not balance and the debits exceed the credits by $2.1.300.000. • discount received of $400 had been debited to the interest payable account. the balance on the suspense account would be A B C D Cr $900 Cr $2.500 Bank Sundry debtor Disposal of fixed assets account 6. but the company expects the insurance company to pay only $6. • Following the correction of these errors.000 500 500 Disposal of fixed assets account 500 500 Sundry debtor Space for workings to 1.500 Sundry debtor 6.22 A B The year end for ABC Ltd is July 2002 and in that month a company car was stolen.blogspot.

25 (Total = 50 Marks) November 2002 13 FAFN FOR FREE CIMA.850 Cr £9. Assume that the rate of VAT is 15%.24 At the beginning of the year in GHI Ltd.000 $902. The purchases in July 2002.000. Space for workings to 1. a company sold goods at standard value added tax (VAT) rate with a net value of £200.000 The closing work-in-progress was 350.000 and goods at zero VAT rate with a net value of £25. which were all subject to VAT. During the year. goods exempt from VAT with a value of £50.000 none of these. including VAT. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000.25 In July 2002.000 Cr £5.000 $610. the following expenditure was incurred: $ Prime cost 720.000 Factory overheads 72. The difference between VAT input tax and VAT output tax is A B C D Dr £9.000 Space for workings to 1.000.000 $682.000 The factory cost of goods completed during the year was A B C D $538.com . were £161. the opening work-in-progress was $240.000.1.blogspot.24 1.

000 (1.000 1. He does not understand financial statements and therefore never uses this part of the software.000 Capital 82.000 50.000) (1. Unfortunately. and this is set out below.000) 82. Question Two S owns a small business and keeps all the accounting records himself on a computer using basic accounting software.SECTION B – 50 MARKS ANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN.000) 18. regularly print out the analysis of the receipts and payments in and out of his bank account.000 25.000) 17. Balance sheet at 31 July 2001 $ Fixed assets (net book value) Vehicles Machinery Current assets Stock Debtors Provision Prepayment advertising Bank Current liabilities Trade creditors Accrual – vehicle expenses Net current assets Long-term liabilities Loan 10% (10.blogspot.000) (17.000 92.000 75. THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS INDICATED. the previous year end. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 (16. his computer was stolen and his accountant now wants to prepare his accounts. DO NOT EXCEED THE STATED NUMBER OF 30 WORDS IN THE SHADED BOXES.000 12.000 $ $ FAFN 14 November 2002 FOR FREE CIMA. however. He does.000 19.000 34. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS. BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS.com . The accountant has the balance sheet at 31 July 2001.000 3.

000 2. after bad debts have been written off.000 Sale of old vehicle 2. but not presented by that date: $ General expenses 600 Vehicle expenses 300 At 31 July 2002: debtors were creditors were stock was $ 21.000 18.000 (S also took goods from the business worth $2.000) 202.000 New vehicle 12. (ii) Depreciation is charged on the net book value at the year end: Vehicles 25% Machinery 20% (iii) A general provision is made for doubtful debtors of 5% of debtors. 4. The following payments appeared on the bank statement in the year ended 31 July 2002: $ Payments to suppliers 135.000 (this includes a prepayment of $1.000 The accountant has the following information on his file: (i) The net book value of the old vehicle which was sold was $3.The accountant has asked S for some additional information and S has prepared the following schedule. Space for workings to Question Two The requirements for question two are on the next page November 2002 15 FAFN FOR FREE CIMA.000 Advertising 3. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 217.000 (S takes a cash discount of 10% on invoice amount on all payments to suppliers.000 The following amounts relate to cheques dated before 31 July 2002. 1.000 Vehicle expenses 9.000 General expenses 8. after excluding bad debts of $2.blogspot. 3.000.com .) Wages 15.000) Loan interest 500 ($500 was paid on 1 August 2002) Drawings 20.500 The following receipts appeared on the bank statement in the year ended 31 July 2002: $ Receipts from sales 215.000 10.

000 15. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.com .Question Two continued Do not write in these columns below Required: Marks available For use by the first marker For use by the second marker (a) Prepare the profit and loss account for the year ended 31 July 2002 and the balance sheet at that date by completing the shaded areas in the financial statements below and on the next page. S Profit and Loss account for the year ended 31 July 2002 $ Sales Opening stock Purchases Closing stock Cost of goods sold Gross profit Discount received Less: Expenses Wages Vehicle expenses General expenses Advertising Loan interest Depreciation Charge for doubtful debts Bad debt Loss on sale of vehicle Profit for the year Sub-total: 1 10 /2 1 $ 2 12.blogspot.000 2 10.000 1 1 1 1 /2 /2 /2 /2 1 /2 1 1 1 1 /2 /2 Space for workings to Question Two FAFN 16 November 2002 FOR FREE CIMA.

com . why the $2. Explain to S. 3 (Maximum of 30 words) Total Marks for Question Two = 20 Question Two Total = 20 Marks November 2002 17 FAFN FOR FREE CIMA.S Balance sheet at 31 July 2002 $ Fixed assets (net book value) Vehicles Machinery Current assets Stock Debtors Provision Prepayment Bank Current liabilities Trade creditors Accrual Net current assets Long-term liabilities Loan 10% Capital Capital at 1 August 2001 Profit for the year ended 31 July 2002 Drawings Capital at 31 July 2002 Sub-total: 61/2 $ $ Marks available For use by the first marker For use by the second marker 1 1 /2 10.000 21.blogspot. (in the shaded area below).000 does not appear in the financial statements.000) 82.000 1 1 (b) After S’s financial statements had been prepared. S attended a meeting with his accountant to discuss them.000 1 /2 (10.000 1 1 /2 1 18. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. S is surprised that the $2.000 he received when he sold his old vehicle does not appear in the financial statements.

as an independent accountant. Profit and loss account for the year ended 30 June 2002 $000 Turnover Cost of sales Gross profit Operating expenses Depreciation Loss on sale of fixed asset Operating profit Interest Dividends Retained profit for year Balance sheets at 30 June $000 Fixed assets (see note) Current assets Stock Debtors Bank and cash Current liabilities Trade creditors Fixed asset creditor Accrued interest Dividends Net current assets Long-term liability Loan (200) 885 Share capital Share premium account Profit and loss account 700 100 85 885 Note: M plc purchased fixed assets for $550. The draft financial statements for M plc are set out below.com .000 during the year ended 30 June 2002. to prepare a cash flow statement.670 (870) 800 (415) (250) (5) 130 (15) (70) 45 2002 $000 980 70 175 50 295 (100) (20) (5) (65) (190) 105 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. but do not understand why the cash balances have decreased. They are pleased that they have made a profit for the year ended 30 June 2002. FAFN 18 November 2002 1.085 190 890 (250) 640 600 0 40 640 $000 700 65 215 65 345 (85) 0 (10) (60) (155) 2001 $000 FOR FREE CIMA.Question Three The Directors of M plc employ a book-keeper who prepares draft accounts for them using accounting software.blogspot. They have asked you.

Please do not write in these columns below

Required:
Marks available

For use by the first marker

For use by the second marker

(a) Prepare a cash flow statement for M plc for the year ended 30 June
2002 by completing the shaded areas as necessary in the cash flow statement below. Cash flow statement M plc year ended 30 June 2002 Operating profit Adjustments for non-cash items
1 1

$000
1

/2 /2 /2

Adjustments for working capital
1 1 1

/2 /2 /2

Cash from operations Interest Purchase of fixed assets Sale of fixed assets Dividends Share capital Loan Movement in cash
Subtotal: 7
1

/2

1 1
1 1 1

/2 /2 /2

(b) What do you, as the independent accountant, consider is the main
reason for the decrease in the cash balance? (Maximum of 30 words)

3 Total Marks for Question Three = 10

Question Three Total = 10 Marks

November 2002

19

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Question Four
D has been an accountant for many years. He had always understood that the historical cost convention was important in the preparation of the financial statements. However, he has recently been attending a series of lectures on accounting and many of the speakers have referred to a move to current cost accounting. He is keen to update his knowledge and has asked you to explain some terms to him.

Please do not write in these columns below
For use by the first marker For use by the second marker

Required:
(Maximum of 30 words for each explanation)
Marks available

(i)

Define "historical cost accounting"

3

(ii)

Give an example to illustrate the use of historical cost accounting

2

(iii) Define "net realisable value"

2

(iv) Give an example to illustrate the use of net realisable value

2

(v)

Define "current cost accounting"

2

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20

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Question Four continued
Do not write in these columns below

Required:
(Maximum of 30 words for each explanation)
Marks available

For use by the first marker

For use by the second marker

(vi)

Define "economic value"

3

(vii)

Explain the effect on historical cost profit and asset values if current cost accounting is used rather than historical cost accounting, assuming rising prices.

3

(viii)

Define "capital maintenance"

Total Marks for Question Four =

3 20

Question Four Total = 20 Marks

End of Question Paper

November 2002

21

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Do NOT write your name or your student registration number anywhere on this booklet. All questions are compulsory. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.  The Chartered Institute of Management Accountants 2003 FOR FREE CIMA.blogspot. Do not exceed the stated number of words. and also for workings where questions require them. Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-12) Answer the THREE questions in section B (these are on pages 13-19) You are advised to spend 10 minutes reading through the paper before starting to answer the questions. You are NOT permitted to leave the examination hall with this booklet. you must write your answers in the shaded space provided. You should spend no more than 85 minutes in total answering the THREE questions in section B.com . which has 25 sub-questions. Please note that you will NOT receive marks for your workings. Hand this entire booklet to the invigilators at the end of the examination. For section B questions.Examination Question and Answer Book Write here your full examination number Centre Code: Hall Code: Desk Number: Foundation Level Financial Accounting Fundamentals 1 INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions FAFN 21 May 2003 Wednesday morning THIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET. You should spend no more than 85 minutes in total answering the ONE question in section A. Avoid the use of correction fluid. You are allowed three hours to answer this question paper. Sufficient space has been provided for you to write your answers. Do NOT remove any sheets from this booklet: cross through neatly any work that is not to be marked.

it was found that accrued expenses of $1.500 had been omitted and that closing stock had been overvalued by $500. The effect of these errors is an A B C D overstatement of net profit of $1. given below. Question One Do not write in these columns below 1. block out your first answer completely and then circle another letter. has only ONE correct answer.25 inclusive. C or D that gives the correct answer to each sub-question.000 overstatement of net profit of $2.000 For use by the first marker For use by the second marker FAFN 2 May 2003 FOR FREE CIMA.1 After the profit and loss account for Z Ltd had been prepared. If you wish to change your mind about an answer.000 understatement of net profit of $1.blogspot. You will NOT receive marks if more than one letter is circled.com . Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space has been provided for you to do your workings where these sub-questions require them.000 understatement of net profit of $2.SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. REQUIRED: Place a circle “O” around the letter A. B.

and this has not been recorded in the cash book 170 4. External auditors must follow the audit procedures prepared by the internal auditors. External auditors should prepare the accounts. but not credited by the bank A cheque from a customer which had previously been entered in the cash book when received.com .860 $16.350 For use by the first marker For use by the second marker The firm’s cash book shows a debit balance of The following information is available: Bank charges not entered in the cash book Unpresented cheques Direct debit payment on the bank statement not entered in the cash book Sales receipts banked.2 The cashier is reconciling his company’s cash book with the bank statement at 31 March 2003.060 $12. $ 12.600 230 9.400 110 What should be stated as the bank balance in the company’s balance sheet at 31 March 2003? A B C D $11.Do not write in these columns below 1.blogspot.3 A B C D Which ONE of the following is true? External auditors normally check all purchase invoices.640 For use by the first marker For use by the second marker 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. has been returned by the bank as “dishonoured”.840 $12. External auditors check the internal control system. May 2003 3 FAFN FOR FREE CIMA.

700 4.com . which is registered for VAT.100 Credit Gas expense Accruals Gas expense Accruals For use by the first marker For use by the second marker NIL $1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 4.5 The following information related to Q plc for the year ended 28 February 2003: For use by the first marker For use by the second marker Prime cost Factory overheads Opening work-in-progress at 1 March 2002 Factory cost of goods completed The closing work-in-progress at 28 February 2003 was A B C D $33.000 4.400 $1.400 $1.000 700 4.000 1.Do not write in these columns below 1. and the amount of the bill was $2.000 $40.4 D is preparing the accounts for A Ltd for the year ended 31 March 2003.6 N Ltd.000 40. received an invoice from an advertising agency for $4.000 $ 122.000 $47. The rate of VAT on the goods was 17⋅5%.400 $2.700 Credit Creditors Creditors Creditors VAT account Creditors VAT account 4 For use by the first marker For use by the second marker A B C $ 4.000 300. The most recent gas bill received by A Ltd was dated 6 February 2003 and related to the quarter 1 November 2002 to 31 January 2003.000 $54.000 185. Which ONE of the following ledger entries should be made in A Ltd’s books at 31 March 2003? Debit A B C D Accruals Gas expense Accruals Gas expense NIL $1.700 4.000 plus VAT.100 1.400 $2.100.700 700 May 2003 D Advertising expense 4.blogspot. The correct ledger entries are: Debit Advertising expense Advertising expense Advertising expense $ 4.000 FAFN FOR FREE CIMA.

900 1. 1 June.650 $1. Profit would be understated and fixed assets would be understated. Rates are charged for a tax year. May 2003 5 FAFN FOR FREE CIMA.blogspot. on 1 March. plus any arrears.800 for the year ended 31 March 2002 and $2. The effect of not correcting this error on the financial statements would be: A B C D Profit would be overstated and fixed assets would be understated. and were $1. For use by the first marker For use by the second marker 1. The company is now preparing its accounts for the accounting year ended 30 June 2002. 1 September and 1 December.8 H Ltd began trading on 1 July 2001. Profit would be understated and capital would be overstated.9 The return on capital employed for S plc is 24% and the net asset turnover ratio is 3 times. instead of the equipment account. Rates are payable quarterly in advance.7 E Ltd received an invoice for the purchase of fixed asset equipment which was credited to the correct supplier’s ledger account.850 $1. The charge to H Ltd’s profit and loss account for rates for the year ended 30 June 2002 is For use by the first marker For use by the second marker A B C D $1. Profit would be overstated and fixed assets would be overstated.com .000 for the year ended 31 March 2003.700 $1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Do not write in these columns below 1. but debited to the equipment repairs account. For use by the first marker For use by the second marker What is the net profit margin? A B C D 8% 28% 72% It cannot be calculated. which runs from 1 April to 31 March.

plus employer’s national insurance contributions. Internal auditors are employed by the shareholders. External auditors report to the directors. FAFN 6 May 2003 FOR FREE CIMA. The use of passwords.12 Which ONE of the following statements is TRUE? For use by the first marker For use by the second marker A B C D Internal auditors report to the directors.com . gross pay earned by employees. External auditors are employees of a company. For use by the first marker For use by the second marker A B C D 1. gross pay earned by employees. The use of batch processing.10 Which ONE of the following would NOT help detect errors in a computerised accounting system? The use of coding systems.11 The total cost of salaries charged to a limited company’s profit and loss account is cash paid to employees. For use by the first marker For use by the second marker A B C D 1. net pay earned by employees.1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The use of control accounts.blogspot.

(iv) R plc has fewer fixed assets.000 Over 3 months 6.14 The following information relates to companies Q plc and R plc. who are competitors selling widgets: Q plc 30% 4 R plc 25% 5 For use by the first marker For use by the second marker Gross profit percentage Fixed asset turnover ratio A director at Q plc believes that these ratios indicate that: (i) Q plc has a higher selling price.blogspot. (iii) R plc has lower sales volume.000 2-3 months 8.com .840 debit $2.840 credit Balance sheet $47. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (i). (ii) Q has lower purchasing costs. (ii).000 $47. The entry for doubtful debts in the profit and loss account for the year ended 30 April 2003 and the net debtors figure in the balance sheet at that date should be: Profit and loss account $40 credit $40 debit $2.000 The company provides for doubtful debts as follows: Provision 0% 1% 10% 30% The doubtful debt provision at 1 May 2002 brought forward was $2. (iii) and (iv).880. May 2003 7 FAFN FOR FREE CIMA.160 A B C D 1. Which of the above are possibly true based on the information provided? A B C D (i) only. (i).160 $50.1.160 $47.13 The following is the aged debtors analysis for J Ltd at 30 April 2003: For use by the first marker For use by the second marker Age of debt Amount ($) Less than 1 month 12. (ii) and (iii) only.000 1-2 months 24. (i) and (ii) only.

sent a cheque to the supplier for payment of the goods delivered in May.1.100 $1.16 On 1 May 2003. direct wages and direct expenses. it helps with credit control.17 The main advantage of using a sales ledger control account is that For use by the first marker For use by the second marker A B C D double entry book-keeping is not necessary. FAFN 8 May 2003 FOR FREE CIMA. returned goods valued at $100 which had been purchased in April 2003.com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. During the month of May. direct expenses and production overheads.185 $1. E Ltd: For use by the first marker For use by the second marker • • • purchased goods for $1. 1.blogspot.300 1. it helps in detecting errors. raw materials consumed and direct wages. The balance on the supplier’s account at the end of May 2003 is A B C D $1.15 The prime cost of goods manufactured is the total of For use by the first marker For use by the second marker A B C D raw materials consumed.700 and the supplier offered a 5% discount for payment within the month. it ensures that the trial balance will always balance.015 $1. direct wages. raw materials consumed. E Ltd owed a supplier $1.200. raw materials consumed.

000.blogspot. Directors’ remuneration. May 2003 9 FAFN FOR FREE CIMA.000.000. an increase in cash of $20.19 Which of the following is an “appropriation of profit” in a limited company? For use by the first marker For use by the second marker A B C D Interest paid.000. Retained profit.000 1.000 5. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Do not write in these columns below 1. an increase in cash of $22.com .000 6.18 The following information relates to J Ltd for the year ended 30 April 2003: For use by the first marker For use by the second marker Retained profit for the year Net cash inflow from operating activities Dividend paid Profit on sale of fixed assets Proceeds on sale of fixed assets Taxation paid Interest paid Payments for fixed assets Issue of debentures The cash flow statement will show A B C D a decrease in cash of $13.000 4. $000 28.000 1.000 26. an increase in cash of $14. Dividend paid.000 2.000 8.000 3.

blogspot. a list of all transactions checked by the internal auditor. The cashier received $20 from staff for the private use of the photocopier and $60 for a miscellaneous cash sale. On 1 February 2003.com . the cashier paid $20 for window cleaning. a history of all transactions on a ledger account. 1. What amount was drawn from the bank account for petty cash at the end of February 2003? For use by the first marker For use by the second marker A B C D $185 $260 $315 $375 1.22 The following are extracts from the financial statements for the year ended 31 January 2003 of M plc: $000 200 50 25 80 60 For use by the first marker For use by the second marker Issued Ordinary shares of $1 Share premium account Profit and loss account Debenture Profit before interest for the year ended 31 January 2003 What is the return on total capital employed? A B C D 17% 22% 24% 30% FAFN 10 May 2003 FOR FREE CIMA. the float was $300.1.20 N operates an imprest system for petty cash. It was decided that this should be increased to $375 at the end of February 2003. a list of all transactions automatically posted from day books to ledgers. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. $100 for stationery and $145 for coffee and biscuits. During February.21 An audit trail in a computerised accounting system is For use by the first marker For use by the second marker A B C D information regarding all transactions in a period.

000 inflow $25. the external auditor should ensure that the financial statements comply with company law.000 outflow $15.Do not write in these columns below 1.24 In order to confirm that financial statements show a true and fair view.com .000 inflow 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.23 The following information was extracted from the balance sheets of Z Ltd at 31 December 2002 and at 31 December 2001: 2002 $000 100 150 125 60 2001 $000 140 130 115 75 For use by the first marker For use by the second marker Stock Debtors Trade creditors Other creditors What figure should appear as part of the cash flow statement for the year ended 31 December 2002? A B C D $25. For use by the first marker For use by the second marker A B C D May 2003 11 FAFN FOR FREE CIMA.blogspot. generally accepted accounting principles. accounting standards.000 outflow $15. all of the above.

1. S Ltd depreciates its equipment on the reducing balance basis at 25% per annum. The net book value of the equipment at 31 December 2005 should be For use by the first marker For use by the second marker A B C D Nil $25. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. The company’s accounting year end is 31 December.531 $33.000 on 1 July 2002.25 S Ltd purchased equipment for $80.750 For Marking Purposes Only – Total Marks for Question One (Total = 50 Marks) End of Section A FAFN 12 May 2003 FOR FREE CIMA. It is S Ltd’s policy to charge a full year’s depreciation in the year of purchase.com .312 $29.blogspot.

the members agreed with this proposal.500 2. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. 13 FAFN $ 42.500 1. Some members have paid deposits for the holiday. The treasurer does not know how to prepare an income and expenditure account and has given you. which amount to $600.300 $ 38.000 7.000 1. Question Two The treasurer at the WV Golf Club has presented a receipts and payments account at the annual general meeting for many years.400 900 1. which is set out below. After a discussion. his most recent receipts and payments account.000 4.SECTION B – 50 MARKS ANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. The members whose subscriptions are owing have left the club and the treasurer has said that it is unlikely that these members will pay their subscriptions.400. (ii) The club has decided to organise its first golfing holiday in June 2003. at the annual general meeting this year a member proposed that an income and expenditure account be prepared in its place. unless more members agree to go.com .200 52. However.400 May 2003 FOR FREE CIMA. he will cancel the holiday and return the deposits.blogspot. WV Golf Club – Receipts and payments account year ended 31 March 2003 $ Receipts Annual subscriptions Shop sales Deposits for golfing holiday Payments Wages Shop supplies Ground maintenance Rent Lawnmower Repairs Receipts less payments Balance at bank 1 April 2002 Balance at bank 31 March 2003 The treasurer has provided you with the following additional information: (i) The subscriptions are as follows: Annual subscriptions received Joining fees Subscriptions received in advance for year ended 31 March 2004 Total Joining fees are to be apportioned over 5 years.500 6.000 1.000 600 53.400 42.400 10. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.000 35. but the treasurer has said that. Subscriptions owing for the year ended 31 March 2003 amount to $1.300 5. an accountant.

000 31 March 2003 $ 400 1.blogspot.000 300 1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 Employee’s tax owing Creditor for shop supplies Rent paid in advance Stock of shop supplies Equipment – at valuation Do not write in these columns below Required: (a) Prepare the shop trading account and the income and expenditure account for the year ended 31 March 2003 and the balance sheet (opposite) at that date by completing the blanks in the financial statements below. WV Golf Club Shop Trading Account year ended 31 March 2003 $ $ Marks available For use by the first marker For use by the second marker Shop gross profit WV Golf Club Income and expenditure account year ended 31 March 2003 $ Income Shop trading account – gross profit 2 $ 3 Expenditure 3 Surplus/Deficit for the year Sub-total: 8 FAFN 14 May 2003 FOR FREE CIMA.(iii) Other assets and liabilities of the club were estimated as follows: 31 March 2002 $ 500 750 200 1.com .500 8.800 9.

com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot. (Maximum of 30 words) (ii) Explain ONE advantage (in the shaded area below) of an income and expenditure account compared to a receipts and payments account.Question Two continued Do not write in these columns below WV Golf Club Balance Sheet year at 31 March 2003 Marks available For use by the first marker For use by the second marker $ Fixed assets Equipment Current assets $ 1 /2 Current liabilities 11/2 Net current assets 2 Accumulated funds Sub-total: 4 8 (b) (i) State TWO advantages (in the shaded area below) of a receipts and payments account. 2 (Maximum of 30 words) Sub-total: 2 4 Question Two Total Marks = May 2003 15 20 FAFN FOR FREE CIMA.

The book-keeper had recorded all the cash received during the year in the bank account and had recorded the issue of shares in a mispostings account.Question Three The book-keeper at D Ltd has prepared a trial balance at 31 December 2002. therefore. the accountant. The transactions are as follows: (i) The company bought a new delivery vehicle.000.600. which had a net book value of $2. However.000 11. but is unable to complete the accounts as there were certain transactions during the year which he did not know how to record and. At the previous year-end. (ii) In January 2002.000 ordinary $1 shares at an issue price of $1⋅40.000. The trial balance shows the cost of land and buildings at $100.000. the store keeper has told the book-keeper during this current year that this figure was not correct and it should have been $11. was considered to be a doubtful debtor. which he used for transactions for which he did not know the correct ledger accounts for the debit and credit entries.780 1. (iv) (v) FAFN 16 May 2003 FOR FREE CIMA. the book-keeper learnt that M is now bankrupt and cannot pay any of his debts. the company decided to issue $200.290 and the balance of the money was borrowed from a bank. payable in September 2002. The terms of the issue were: • • • 70 cents on application. as he counted one item twice. made a doubtful debt provision of $800. (iii) The stock at the previous year-end was valued at $13. for an agreed figure of $3. omitted from the books.500. to prepare the journal entries for these transactions. 20 cents on call.780 The company paid the invoice by trading in an old van. a customer who owed $1. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. therefore.com .blogspot.000 and the directors wish to record this revaluation in the balance sheet. He has asked you.000 and the accumulated depreciation at $15. During the current year. payable February 2002 (which included the premium). The land and buildings have been revalued at $150. The invoice details were as follows: Cost of delivery vehicle Annual road tax $ 10. payable March 2002. 50 cents on allotment. M. The book-keeper thought there was a fifty per cent chance he might pay and.

blogspot. Dr $ Journal (i) Cr $ Do not write in these columns below Marks available For use by the first marker For use by the second marker 2 Journal (ii) 2 Journal (iii) 2 Journal (iv) 2 Journal (v) Total: 2 10 Question Three Total = 10 Marks May 2003 17 FAFN FOR FREE CIMA. You are NOT required to write a narrative for each journal. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Required: Prepare the journal entries for the transactions opposite by completing the shaded areas of the schedule below.com .

Question Four You are the senior accountant in a company and in charge of the accounts department. Required: Marks available For use by the first marker For use by the second marker (a) State briefly (in the shaded area below) the purpose and contents of EITHER the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements” OR the Accounting Standards Board’s “Statement of Principles for Financial Reporting”. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot. She has asked you what she will learn apart from book-keeping. You have therefore agreed to pay for her tuition on a financial accounting course. 3 (c) Describe (in the shaded area below) the characteristics of useful information.com . Sub-total: 3 9 FAFN 18 May 2003 FOR FREE CIMA. One of your junior staff is very good at book-keeping and you have identified her as a person with potential for promotion. 3 (b) Explain (in the shaded area below) the objective of financial statements.

blogspot.com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Question Four continued Required: Marks available For use by the first marker For use by the second marker (d) Explain (in the shaded areas below) the following accounting (i) concepts: business entity 3 (ii) money measurement 3 (iii) cost 3 (iv) realisation 2 sub-total: Total: 11 20 Question Four Total = 20 Marks End of Question Paper May 2003 19 FAFN FOR FREE CIMA.

blogspot. All questions are compulsory. You should spend no more than 85 minutes in total answering the THREE questions in section B. you must write your answers in the shaded space provided. You are NOT permitted to leave the examination hall with this booklet. Answer the ONE question in section A (this has 25 sub-questions) Answer the THREE questions in section B You are advised to spend 10 minutes reading through the paper before starting to answer the questions. Avoid the use of correction fluid. Foundation Level Financial Accounting Fundamentals 1 INSTRUCTIONS TO CANDIDATES Read this page before you look at the questions FAFN 19 November 2003 Wednesday morning THIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET. which must be attached to this booklet here.  The Chartered Institute of Management Accountants 2003 FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. and also for workings where questions require them. which has 25 sub-questions. Hand this entire booklet to the invigilators at the end of the examination.Examination Question and Answer Book Write your full examination number. You should spend no more than 85 minutes in total answering the ONE question in section A. Do not exceed the stated number of words. Do NOT write your name or your contact ID anywhere on this booklet. For section B questions. Sufficient space has been provided for you to write your answers. Do NOT remove any sheets from this booklet: cross through neatly any work that is not to be marked. You are allowed three hours to answer this question paper. Please note that you will NOT receive marks for your workings.com . your contact ID and your name on a double-sided card.

If you wish to change your mind about an answer.1 A business is normally said to have earned revenue when For use by the first marker For use by the second marker A B C D cash has been received. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. block out your first answer completely and then circle another letter. B. an order has been placed. goods have been manufactured and placed in stock.1 to 1. REQUIRED: Place a circle "O" around the letter A. a customer is legally obliged to pay for goods delivered or services rendered. given below. C or D that gives the correct answer to each sub-question. You will NOT receive marks if more than one letter is circled. Please note that you will NOT receive marks for any workings to these sub-questions.blogspot.SECTION A — 50 MARKS ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1. has only ONE correct answer.com . Sufficient space has been provided for you to do your workings where these sub-questions require them. Question One Do not write in these columns below 1. FAFN 2 November 2003 FOR FREE CIMA.25 inclusive.

000 November 2003 3 FAFN FOR FREE CIMA. $000 160 200 360 80 30 450 75 55 For use by the first marker For use by the second marker Direct materials Direct labour Prime cost Carriage outwards Depreciation of delivery vehicles Factory indirect overheads Increase in work-in-progress stock Decrease in stock of finished goods What should be the factory cost of goods completed for the year ended 31 July 2003? A B C D $735.000 $1.095.400 1.000 $885.3 The following information relates to NBV Limited for the year ended 31 July 2003.600 500 What would be the balance shown on the bank statement at 30 June 2003? A B C D Overdraft $6.500 300 2.2 The following information relates to C Limited at 30 June 2003: For use by the first marker For use by the second marker Balance per cash book – credit balance Unpresented cheques Bank charges not entered in the cash book Receipts not yet credited by the bank Dishonoured cheques not yet recorded in the cash book $ 4.blogspot.com .000 Favourable $2.Do not write in these columns below 1.300 1.200 Overdraft $5.000 $845. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.100 Overdraft $4.

000 Add back $3.blogspot.000 FAFN 4 November 2003 FOR FREE CIMA. In relation to the items above. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 Add back $11. For use by the first marker For use by the second marker A B C D 1.Do not write in these columns below 1. what should be the net adjustment to operating profit in order to determine the net cash flow from operating activities? A B C D Deduct $11.5 The following information relates to CFS plc: For use by the first marker For use by the second marker Machinery Cost at 1 January 2002 Additions Disposal Cost at 31 December 2002 Provision for depreciation at 1 January 2002 Depreciation charge Disposal Provision for depreciation at 31 December 2002 The proceeds on disposal of the machine were $1. Checking a purchase invoice with the purchase day book. $000 80 20 (10) 90 15 8 (6) 17 CFS plc is preparing the cash flow statement for the year ended 31 December 2002.000.000 Add back $5. Inspecting physical existence of fixed assets.com .4 Which of the following tests carried out by an external auditor is a compliance test? Confirming authorisation of a reconciliation of the sales ledger control account. Checking unpresented cheques in a bank reconciliation.

rather than a fixed asset account.900 $2. materiality.700 $3. For use by the first marker For use by the second marker A B C D 1. November 2003 5 FAFN FOR FREE CIMA.000 are charged to an expense account.400 $2. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. In Quarter 3.500 1. the shareholders. a gas bill of $2. money measurement. The accountant has accrued $2. prudence. he had accrued $1.400 for gas in Quarter 3.6 The accountant at S Limited is preparing quarterly accounts for Quarter 3.Do not write in these columns below 1. the external auditors.700 was paid.com .7 D plc has a policy that all items of equipment which cost less than $1. the government.600 for gas and this balance was carried forward to Quarter 3. This is an example of the application of the concept of going concern.8 Internal auditors report to For use by the first marker For use by the second marker A B C D the management. For use by the first marker For use by the second marker What should be the charge for gas in the profit and loss account for Quarter 3? A B C D $1. In Quarter 2.blogspot.

For use by the first marker For use by the second marker Which of the following ledger entries should be made in A Limited’s accounts? A B C D Rent expense Rent expense Rent expense Rent expense $2.blogspot.000 $2.500 Profit $500 FAFN 6 November 2003 FOR FREE CIMA. 1 May.10 T Limited purchased a machine costing $14.Do not write in these columns below 1.000.500 Loss $9. The company uses the straight-line method of depreciation. 1 August and 1 November.100 Prepayment Prepayment Accrual Prepayment/accrual $400 $200 $200 Nil 1. The company estimated that the asset had a useful life of 4 years and an expected residual value of $2. Rent is payable quarterly in advance on 1 February.com .000 on 1 August 1999.800 and $2.400 for the years ended 31 January 2003 and 2004 respectively. It is the company’s policy to charge a full year’s depreciation in the year of purchase and none in the year of disposal. The annual charge for rent was $1.050 $2.500. For use by the first marker For use by the second marker What should be the profit or loss on disposal in the year ended 30 November 2002? A B C D Loss $500 Loss $3. On 1 November 2002. The company’s financial year end is 30 November. the asset was sold for $4.050 $2.9 A Limited is preparing financial statements for the year ended 30 June 2003. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.

000 1.000 Deduct $2.000 Add back $1. A credit note for $500 for goods returned by a customer had been recorded in the correct ledgers. A cash sale has been recorded as debit cash sales.11 The following information is an extract from the balance sheets of DCF plc: For use by the first marker For use by the second marker Stock Trade debtors Bank Trade creditors 31 August 2003 $000 20 16 12 48 (14) 34 31 August 2002 $000 14 18 10 42 (17) 25 DCF plc is preparing the cash flow statement for the year ended 31 August 2003. what should be the net adjustment to operating profit in order to determine the net cash flow from operating activities? A B C D Deduct $1.blogspot.000 Deduct $7.12 Which of the following entries would NOT affect the agreement of the totals in the trial balance? (i) (ii) (iii) (iv) An invoice for $300 for rent has been omitted from the ledgers. but as $5. In relation to the items above.com .000. credit cash. November 2003 7 FAFN FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Do not write in these columns below 1. An invoice for vehicle expenses has been charged to the vehicle fixed asset account. (ii) and (iii) only All of them. For use by the first marker For use by the second marker A B C D (i) only (i) and (ii) only (i).

E Ltd uses the straight-line method of depreciation.000 Credit $2.000 FAFN 8 November 2003 FOR FREE CIMA.000 and debtors of $6. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. For use by the first marker For use by the second marker What is the bank balance? A B C D Credit $4.13 Which ONE of the following is NOT an intangible fixed asset? For use by the first marker For use by the second marker A B C D Goodwill Trademark Investment Patent 1.15 A company has a quick (acid test) ratio of 2 : 1.14 E Ltd bought computer equipment on 1 January 2000 for $24. For use by the first marker For use by the second marker What should be the annual depreciation charge for the years ended 31 December 2002 and 2003? A B C D $4.Do not write in these columns below 1.800 $5.500 $6.000 Debit $4.000.600 $7. On 31 December 2001. it now considers that the remaining life is only two years and that the residual value will be nil.000. Current liabilities are $4.com .blogspot.000 Debit $2.000.000 and estimated that it would have a useful life of five years and a residual value of $2. Current assets include stock of $10.600 1.

There were no fees received in advance.500 $23.000 17.16 Which of the following does NOT prevent fraud and errors? For use by the first marker For use by the second marker A B C D Authorisation procedures Organisation of staff Suspense accounts Reconciliations 1.000 4. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. 2001 $ 8. at either year end.000 $11.17 The BMX cycling club started in January 2001. What should be the total amount of fees recognised in the income and expenditure account for the year ended 31 December 2002? A B C D $7. or fees in arrears.000 2002 $ 10.000 7.com .000 November 2003 9 FAFN FOR FREE CIMA.500 $12.Do not write in these columns below 1.blogspot.000 For use by the first marker For use by the second marker Joining fees Annual fees Life membership fees Joining fees are recognised over a period of 4 years and life membership fees are recognised over 10 years.000 23.000 6.000 5. The following fees were received in the years ended 31 December 2001 and 2002.

000 1.com .000 $45. staff are less likely to become bored.20 The job descriptions of staff in the credit control department are normally segregated because lower salaries can be paid. For use by the first marker For use by the second marker A B C D FAFN 10 November 2003 FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Do not write in these columns below 1. X2 and X3) in stock at the year end.18 ABC plc declared a final dividend of 5% for the year ended 28 February 2003.000 shares at a price of $4 in December 2002 and the shares were valued at a price of $3 on 28 February 2002. X bought 1. First In/ First Out $000 10 15 12 37 Net realisable value $000 20 11 14 45 Replacement cost $000 30 8 13 51 For use by the first marker For use by the second marker X1 X2 X3 At what value should the stock be stated in the statutory financial statements? A B C D $33. The warehouse manager has produced the following schedule for the values of the three items (X1.000 $37. For use by the first marker For use by the second marker What should be the final dividend received by X? A B C D $25 $50 $150 $200 1.blogspot. The nominal value of the shares is 50 cents. control is facilitated.19 The internal accounts of E Ltd value stock at replacement cost.000 $51. work is completed more efficiently.

A method of accounting which uses market values. For use by the first marker For use by the second marker A B C D 1.blogspot.000 11 November 2003 FAFN FOR FREE CIMA. A method of adjusting historical cost accounts for the effects of changing price levels by using indices specific to the enterprise.Do not write in these columns below 1.092.22 Which of the following is the best description of current purchasing power accounting? A method of accounting which considers the effects of changing price levels by reference to the retail price index.135.com . 1.21 The style of management accounts within an enterprise is determined by For use by the first marker For use by the second marker A B C D company law.000 $1.000 $1. the shareholders.000 $732. the directors. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.23 The following information relates to P Ltd at 30 September: 2003 $000 60 50 20 2002 $000 40 85 28 Stock of raw materials Work-in-progress stock Stock of finished goods For the year ended 30 September 2003: Purchases of raw materials Manufacturing wages Factory overheads $000 710 42 360 For use by the first marker For use by the second marker The prime cost of production in the manufacturing account for the year ended 30 September 2003 is A B C D $690. A method of accounting which uses economic values (value in use). company law and accounting standards.

300 £1.410 Net pay £2.590 £2. who received her net salary in cash for the month ended 31 March 2003: £ 3.100 A B C D 1.510 £3.000 £3.com .410 £700 £1.25 Which of the following are normally produced in the month-end routine of a computerised accounting system? For use by the first marker For use by the second marker (i) (ii) (iii) (iv) A B C D Balances on all ledger accounts at the end of the month Balances on the debtors’ and creditors’ personal ledgers and the debtors’ and creditors’ control accounts Balance on stock (inventory) The profit and loss account and balance sheet (i) only (i) and (ii) only (i). ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 £1.blogspot. the balance on the payroll control account and the net pay for J’s salary for March was Charge to profit and loss account £2.Do not write in these columns below 1.100 £2.100 £3. (Total = 50 Marks) End of Section A FAFN 12 November 2003 FOR FREE CIMA. (ii) and (iii) only All of them.000 450 300 250 210 180 20 For use by the first marker For use by the second marker Gross salary Tax deducted Employer’s national insurance Employee’s national insurance Employer’s contribution to pension fund Employee’s contribution to pension fund Voluntary deduction for payment to charity The charge to the profit and loss account.510 Balance on payroll control account £1.24 The following information was extracted from the pay slip of J.

He employs a book-keeper who uses an accounting software package to produce a trial balance.000 12.000 467.000 Cr $ 20.000 383.000 20.000.000 3.000 1.000 10.000 467.000 15. Dr $ 8.SECTION B – 50 MARKS ANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN.000 7.000 2. The prepayment for rent at 31 August 2003 is $2. (iv) (v) November 2003 13 FAFN FOR FREE CIMA.000 24.com . which VA accepted. The engineer repaired the computer in August.000 33.000.000 Advertising Bank Bank loan Bank interest Capital at 1 September 2002 Capital introduced Carriage outwards Computing expenses Creditors Debtors Discount received Drawings Fixtures at cost Power Provision for depreciation on fixtures at 1 September 2002 Provision for doubtful debts at 1 September 2002 Purchases Rent Salaries Sales Stock at 1 September 2002 The following additional information has been provided by the book-keeper to the accountant.000 5. An engineer gave an estimate of $500 to repair the computer. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (i) (ii) (iii) The stock at 31 August 2003 has been valued at $20.000 20. his accountant manually prepares journal entries and asks the book-keeper to enter these into the accounting software package.000 240. Question Two VA is a sole proprietor. The provision for doubtful debts is to be 5% of the debtors. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS. The computer crashed in August 2003.blogspot.000 60. At the year end.000 30. Depreciation on the fixtures is to be provided for the year ended 31 August 2003 on the reducing balance basis at 1/3 per annum. The trial balance of VA at 31 August 2003 is set out below.000 36.000 2.000 3. but has not yet submitted his invoice.

Dr Cr Ledger account $ $ (i) 1 (ii) 1 (iii) 1 (iv) 1 (v) sub-total: 1 5 FAFN 14 November 2003 FOR FREE CIMA. Use the journal schedule set out below and complete the name of the ledger account and the amount of the debit and credit in the shaded areas. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Do not write in these columns below Required: (a) Marks available For use by the first marker For use by the second marker (1) Prepare the journal entries for the information in items (i) to (v) on page 20.blogspot.com . You are NOT required to write a narrative for the journal entries.

Profit and Loss Account year ended 31 August 2003 $ $ Sales Gross profit 1 2 /2 Less: Expenses 1 1 /2 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 Net profit sub-total: 7 November 2003 15 FAFN FOR FREE CIMA.com . ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.Required: (a) Marks available For use by the first marker For use by the second marker (2) Prepare the accounts for VA for the year ended 31 August 2003 by completing the shaded areas in the accounts below.blogspot. VA Trading.

ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (maximum of 30 words) Sub-total: 2 Question Two Total = 20 Marks FAFN 16 November 2003 FOR FREE CIMA. His accountant explained that one of the differences is that the accounts of a limited liability company must show a true and fair view.blogspot. You are required to explain the meaning of a “true and fair view” in the shaded area below.Question Two continued Do not write in these columns below For use by the first marker For use by the second marker Marks available Fixed Asset VA Balance Sheet at 31 August 2003 $ $ Provision for Cost depreciation $ 1 Current Assets 1 /2 1 1 /2 /2 1 /2 1 /2 Current Liabilities 1 /2 Net Current Assets Long-term Liability 1 /2 Capital at 1 September 2002 1 1 /2 /2 1 /2 Capital at 31 August 2003 Sub-total: 6 (b) VA is considering converting his business into a limited liability company. He has asked his accountant about the differences between the accounts of a sole proprietor and those of a limited liability company.com .

300.500 Required: (a) Prepare the sales ledger control account by entering the description and the appropriate amount of the debit or credit in the schedule below. A discount allowed of $500 had been correctly entered in a debtor’s personal account in the sales ledger.000 600 24. but no other entries in the books had been made.com .000 4. and the sales ledger control account is part of the double entry in the nominal ledger.000 500 3. Sales ledger control account balance at 1 October 2003 Credit sales Cheques received from customers Discounts allowed Returns inwards Bad debts written off Interest charged on debtors’ accounts overdue Contra with the purchase ledger control account Cheque received relating to a debt which had previously been written off as bad Total of the balances on personal accounts in the sales ledger at 31 October 2003 $ 20. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.000 200.000 7.000 175. The following information relates to transactions with customers for the month ended 31 October 2003.000 5. (v) November 2003 17 FAFN FOR FREE CIMA. A contra of $1. Sales ledger control account Dr Cr Description $ $ Marks available For use by the first marker For use by the second marker 1 1 /2 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 Sub-total: 5 (b) (i) (ii) (iii) (iv) The following errors were subsequently discovered: The total of the sales day book had been over-cast by $1. A credit note of $800 for goods returned had been correctly entered in the sales ledger control account.Question Three All transactions with customers of PFI Limited are recorded in personal accounts in the sales ledger. NHS is both a customer of and supplier to PFI Limited.200 between NHS debtor’s account in the sales ledger and creditor’s account in the purchase ledger had been omitted from the books.blogspot. but had not been entered in the debtor’s personal account in the sales ledger.000. The schedule of the balances on the personal accounts in the sales ledger had been under-cast by $1.

Description Sales ledger control account Total of balances on personal accounts in the sales ledger $ 24.500 1 1 1 1 1 Revised balances at 31 October 2003 Sub-total: 5 For use by the first marker For use by the second marker Marks available $ Original balances at 31 October 2003 Question Three Total = 10 Marks FAFN 18 November 2003 FOR FREE CIMA.Do not write in these columns below Required: Prepare a statement reconciling the sales ledger control account and the total of the balances on the personal accounts in the sales ledger by entering a description and the appropriate amount in the shaded areas of the schedule below.blogspot. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.com .

(maximum of 30 words) 4 (ii) State the financial statement which provides information about the performance of an enterprise and describe its key components. (maximum of 30 words) 4 (b) (i) Give two examples of users of financial statements.com . Required: Marks available For use by the first marker For use by the second marker (a) (i) State the financial statement which provides information about the financial position of an enterprise and describe its key components. (maximum of 30 words) 4 (iii) State the key components of a cash flow statement.blogspot.Question Four The objective of the financial statements of an enterprise is to provide information about the financial position. State why this information may be useful to users. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (maximum of 30 words) Sub-total: 2 14 November 2003 19 FAFN FOR FREE CIMA. State why this information may be useful to users. State why this information may be useful to users. performance and financial adaptability of that enterprise which is useful to a wide range of users for assessing the stewardship of management and for making economic decisions.

blogspot.com . (maximum of 30 words) Sub-total: 3 6 Question Four Total = 20 Marks End of Question Paper FAFN 20 November 2003 FOR FREE CIMA. ACCA & CAT RESOURCES VISIT: http://kaka-pakistani. (maximum of 30 words) 3 (c) Explain the meaning of the term “stewardship”.Question Four continued Required: Marks available For use by the first marker For use by the second marker (ii) Give one example of an economic decision based on accounting information that may be made by each of two different categories of users of financial statements.

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