OSHWAL COLLEGE

ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

(ACCA)
Foundation Level
FA2
Maintaining financial records

TEST 1 – APRIL 2020

Time Allowed: 2 Hours

Attempt all questions

ALL 50 questions are compulsory and MUST be attempted. Tick the correct answer. Each question is worth 2 marks
1. Which one of the following is not an enhancing qualitative characteristic of useful financial information?
A. Verifiability
B. Faithful representation
C. Understandability
D. Comparability
2. A business had the following assets and liabilities: receivables of $4,000, inventory of $550, motor
vehicles of $12,500, payables of $7,050 and a bank loan of $2,500. What was the capital balance of the
business?
A. $26,600
B. $7,500
C. $21,600
D. $17,050
3. Anil purchases goods for resale. The invoice relating to the purchase shows the cost of goods as $805,
inclusive of 15% sales tax. Anil is registered for sales tax. What entry should be made in the purchases
account?
A. A debit of $805
B. A credit of $805
C. A debit of $700
D. A credit of $700
4. At 1 April 20X0 the balance on Shandre’s capital account is $71, 534. In the next year she invests an
additional $20,000 of personal funding and negotiates a $30,000 loan for the business. The profit for the
year ended 31 March 20X1 was $21,345 and Shandre’s drawings for the year came to $14,754. What is
Shandre’s closing capital at 31 March 20X1?
A. $128,125
B. $78,125
C. $127, 633
D. $98,125
5. Shahid returns goods purchased on credit for $1,500. What double entry should Shahid make to record
this in his accounting records?
A. Dr Purchase returns $1,500 Cr Payables $1,500
B. Dr Bank $1,500 Cr Payables $1,500
 C. Dr Payables $1,500 Cr Bank $1,500
D. Dr Payables $1,500 Cr Purchase returns $1,500
6. At the beginning of the year, the balance on Inoka’s capital account was $53,691. During the year Inoka
made drawings of $19,500 and the net loss for the year was $22,222. What was the balance on Inoka’s
capital account at the end of the year?
A. $11,969
B. $95,413
C. $50,969
D. $56,413
7. Which of the following correctly calculates cost of sales?
A. Purchases + Opening inventory + Closing inventory
B. Purchases – Opening inventory + Closing inventory
C. Purchases – Opening inventory – Closing inventory
D. Purchases + Opening inventory – Closing inventory
8. Tillakaratne purchases goods for resale on credit. He is registered to account for sales tax. Which one of
the following double entries should be used to post the purchases made on credit to the general ledger?
A. Dr Payables, Dr Sales tax, Cr Purchases
B. Dr Payables, Cr Purchases, Cr Sales tax
C. Dr Purchases, Cr Payables, Cr Sales tax
D. Dr Purchases, Dr Sales tax, Cr Payables
9. Which accounting convention is being applied if an allowance for receivables account is created?
A. Going concern
B. Prudence
C. Historic cost
D. Single entity
10. At the year-end Misbah has an overdrawn bank account. He also has a five year bank loan. How should
these balances be reported in his statement of financial position?
Overdraft Loan
A. Non-current liability Non-current liability
B. Current liability Current liability
C. Current liability Non-current liability
D. Non-current liability Current liability
11. Mike draws up his accounts on the assumption he will continue in business for the foreseeable future.
Which accounting principle or concept is being applied?
 A. Consistency
B. Prudence
C. Going concern
D. Accruals
12. Which of the following changes could not occur as a result of an entry in the bookkeeping records?
A. Increase asset and increase liability
B. Increase asset and increase capital
C. Increase capital and increase liability
D. Increase capital and decrease liability
13. A business sells goods to Harper, who is registered for sales tax, for $1,800 inclusive of sales tax at 20%.
What entry should Harper make in his sales tax account?
A. $360 credit
B. $360 debit
C. $300 credit
D. $300 debit
14. How is the closing balance on the wages account entered in the statement of profit or loss?
A. By a debit to wages and a credit to the statement of profit or loss
B. By a debit to the statement of profit or loss and a credit to wages
C. By a debit to the statement of profit or loss
D. By writing the total in the profit statement, the balance on wages remaining unaffected
15. Which one of the following accounting concepts requires adjustments to account for accrued expenses
when preparing annual accounts?
A. Historical cost
B. Going concern
C. Consistency
D. Matching
16. The payment of cash to a supplier will:
A. Increase receivables and reduce cash balance
B. Reduce cash balance and reduce current liabilities
C. Reduce accounts payable and increase purchases
D. Increase payables and reduce cash balance
17. Which one of the following statements correctly describes the difference between current liabilities and
non-current liabilities?
 A. Current liabilities are amounts which it is currently known must be paid, while noncurrent liabilities
are amounts which might need to be paid in the long term
B. Current liabilities are amounts which must be paid within the next year, while noncurrent liabilities
are amounts which must be paid in more than one year
C. Current liabilities are amounts under a certain value, while non-current liabilities are amounts greater
than that value
D. Current liabilities are amounts for which there is currently a known value, while the value of non-
current liabilities requires confirmation.
18. Which of the following changes could not occur as a result of an entry in the bookkeeping records?
A. Increase asset and increase liability
B. Increase asset and increase capital
C. Increase capital and increase liability
D. Increase capital and decrease liability
19. How will the payment to a supplier affect the financial statements?
A. Increase receivables and reduce cash balance
B. Reduce cash balance and reduce current liabilities
C. Reduce accounts payable and increase purchases
D. Increase payables and reduce cash balance
20. The profit of a business may be calculated by using which one of the following formulae?
A. Opening capital – Drawings + Capital introduced – Closing capital
B. Closing capital + Drawings – Capital introduced – Opening capital
C. Opening capital + Drawings – Capital introduced – Opening capital
D. Closing capital – Drawings + Capital introduced – Opening capital
21. At 1 April 20X6, Georgina had net assets of $50,000. At 31 March 20X7, she had net assets of $75,000.
During the year ended 31 March 20X7, Georgina withdrew $5,000 cash from the business and took $250
of goods for her personal use. What profit was made by Georgina’s business in the year ended 31 March
20X7?
A. A $19,750
B. B $20,000
C. C $30,000
D. D $30,250
22. Which one of the following statements best defines an asset?
A. An item owned by an entity that will lead to future economic benefits
B. A physical item that can be sold
 C. An item controlled by an entity that will lead to future economic benefits
D. An item that can be converted into cash
23. The capital of a business would change as a result of:
A. a supplier being paid by cheque
B. raw materials being purchased on credit
C. non‐current assets being purchased on credit
D. wages being paid in cash
24. In the quarter ended 31 March 20X2, Chas had taxable sales, net of sales tax, of $90,000 and taxable
purchases, net of sales tax, of $72,000. If the rate of sales tax is 10%, how much sales tax is due?
A. $1,800 receivable
B. $2,000 receivable
C. $1,800 payable
D. $2,000 payable
25. Kieron is an antiques dealer. His inventory includes a clock which cost $15,800. Kieron expects to spend
$700 on repairing the clock which will mean that he will be able to sell for $26,000. At what value
should the clock be included in Kieron’s inventory?
A. $15,100
B. $15,800
C. $25,300
D. $26,000