INSTITUTE OF CHARTERED SECRETARIES

AND ADMINISTRATORS IN ZIMBABWE

EXAMINATION QUESTION PAPER

SUBJECT: FINANCIAL ACCOUNTING AND REPORTING

PART: B
DATE: MAY 2021 TIME: 09:00 – 12:00 HOURS
DURATION: 3 hours; plus 15 minutes reading time

INSTRUCTIONS TO CANDIDATES

1. Answer ALL FIVE questions.

2. You are required to answer all questions in terms of the Zimbabwe Companies and Other
Business Entities Act (Chapter 24:31), Income Tax Act (Chapter 23:06) and International
Financial Reporting Standards.
3. Unless otherwise stated, calculations must be made to the nearest dollar. All workings must
be submitted. Credit will be given for NEAT and ORDERLY presentation.

Students may use silent non-programmable calculators.

MARK ALLOCATION
Question 1 - 20 marks
Question 2 - 30 marks
Question 3 - 20 marks
Question 4 - 20 marks
Question 5 - 10 marks
Total marks: 100 marks

Your examination script is the property of ICSAZ and is not to be removed from the examination
venue.
QUESTION 1

Select the letter that represents the most correct answer.

i) Which of the following statements are true?

1. The statement of cash flows is a record of past events.
2. Non cash transactions (e.g. bonus issues) are highlighted on the face of statement of
cash flows.
3. Statement of cash flows help users to assess the liquidity of a business.

A. 2 and 3
B. 1 and 2
C. 1 and 3
D. All of them

ii) Which of the following results in a difference between profit and cash flow?
1. Profit on disposal of a non-current asset.
2. Goods sold but not yet paid for.
3. The adjustment to cost of sales for opening and closing inventory.

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. All of them

iii) Which of the following would be classified as cash and cash equivalents in accordance
with IAS 7 Statement of cash flows?
1. Petty cash.
2. Bonds redeemable in 3 weeks’ time.
3. Current account balance at the bank.
4. Ordinary shares held in another company.

A. 1 and 3
B. 1, 2 and 3
C. 2 and 4
D. 1, 3 and 4

iv) Which of the following are assumptions under which financial statements are produced?
1. Going concern
2. Faithfull presentation
3. Accruals
4. consistency

A. 1 and 2
B. 1 and 3
C. 2 and 4
D. 3 and 4
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Financial Accounting and Reporting: May 2021 Page 2 of 6
v) The following body develops new IFRSs and improves existing IFRSs.
A. IFRS Foundation.
B. IASB.
C. IFRS Interpretations Committee.
D. IFRS Advisory Council.

vi) Which of the following items does not appear under the heading equity and reserves on
a statement of financial position?
A. Share premium
B. Retained earnings
C. Revaluation surplus
D. Loan stock

vii) Capital reserves are not available for distribution. Which of the following is not a capital
reserve?
A. Retained earnings
B. Share premium
C. Revaluation surplus
D. Statutory reserve

viii) In consolidated financial statements, if an investor as significant influence over an

investee, the investee is classified as:
A. Associate.
B. Joint venture.
C. A subsidiary.
D. None of the above.

ix) Free shares given to existing shareholders in proportion to their shareholding are known
as:
A. Bonus issue
B. Rights issue
C. Initial Public Offer
D. Preference shares

x) IAS 1 requires some or all of the following to shown on the face of the statement of
comprehensive income, which ones are these?
A. Revenue
B. Finance costs
C. Tax expense
D. All of the above.

(20 marks)

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Financial Accounting and Reporting: May 2021 Page 3 of 6
QUESTION 2

The following are the trial balances of H Ltd and its subsidiary S Ltd as at 31 December 2020
H Ltd S Ltd
Credits $ $
Ordinary share capital - Ordinary of $1 each 100 000 50 000
Retained earnings 250 000 130 000
Gross profit 440 000 360 000
Trade and other payables 80 000 60 000
Accumulated depreciation 31 December 2020 50 000 30 000
Bank overdraft _30 000 ______-
950 000 630 000
Debits
Property, plant & equipment at cost 152 000 100 000
investment is S Ltd-50,000 shares at fair value 150 000 -
Inventories 180 000 160 000
Trade and other receivables 190 000 80 000
Bank - 68 000
Auditors remuneration 15 000 12 000
Staff cost 100 000 80 000
Depreciation 15 000 10 000
Taxation for the year 108 000 90 000
Dividends paid _40 000 _30 000
950 000 630 000

H Ltd acquired its interest in S Ltd on 2 January 2017 at which date the retained earnings was
$80 000. At the date of acquisition consider the carrying amount of assets and liabilities of
S Ltd to be equal to the fair value thereof. Assume that the cost price or carrying amount
equals the current fair value.

REQUIRED:
a) Analysis of Changes in equity. (7 marks)
b) Draft the Consolidated Statement of Comprehensive Income for the year
ended 31-Dec-20. (8 marks)
c) Consolidated Statement of Changes in Equity for the year ended 31
December 2020. (5 marks)
d) Consolidated Statement of Financial Position as at 31 December 2020. (10 marks)
[Total: 30 marks]

QUESTION 3

Kuku (Pvt) Ltd owns a machine that is depreciated at 25% per annum on the straight-line
basis. For tax purposes, a 40/20/20/20 allowance is applied. The reporting date of the
company is 31 December. The tax rate is 28%. The profits before tax for each of the past four
years, after taking into account depreciation, were as follows:

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Financial Accounting and Reporting: May 2021 Page 4 of 6
 2017 $160 000
2018 $200 000
2019 $220 000
2020 $260 000

Accounting Tax

$ $
1 January 2017 Cost 20 000 20 000
31 December 2017 Depreciation/tax allowance (5 000) (8 000)
15 000 12 000
31 December 2018 Depreciation/tax allowance (5 000) (4 000)
10 000 8 000
31 December 2019 Depreciation/tax allowance (5 000) (4 000)
5 000 4 000
31 December 2020 Depreciation/tax allowance (5 000) (4 000)
- -

REQUIRED:
a) Calculate the current income tax for each of the years 2017, 2018, 2019 and
2020. (6 marks)
b) Calculate the deferred tax for each of the years 2017, 2018, 2019 and 2020. (8 marks)
c) Prepare the Statement of Profit or Loss extracts for the years ending 31
December 2017, 2018, 2019 and 2020. (6 marks)
[Total: 20 marks]

QUESTION 4

The following is information on the Head Office and branch of Taku Ltd a company
incorporated in Zimbabwe:

Transactions during the year ended 31 December 2020

$
Inventory sent to branch 9 600
Inventory returned to head office by the branch 160
Sales by branch for the year: Cash 4 000
Credit 6 580
Cash received from branch trade receivables and paid into H/O bank account 5 780
Sundry expenses paid by H/O 1 200

Additional information:
a) Trade at the branch began on 2 January 2020 and inventory is invoiced to the branch at
cost price.
b) Irrecoverable debts amounting to $100 should be written off.
c) Discount allowed on cash sales amounted to $60.

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Financial Accounting and Reporting: May 2021 Page 5 of 6
 N.B. Therefore, the cash sales of $4 000 on the transactions list need not be adjusted
downwards. Prompt payments are done the $60 already having been deducted.
d) Closing inventory amounted to $960.

REQUIRED:
a) Branch Inventory Account (6 marks)
b) Goods Sent to Branch Account (3 marks)
c) Branch Trade Receivables Control Account (4 marks)
d) Branch Expenses Account (4 marks)
e) Bank Account (3 marks)
[Total: 20 marks]

QUESTION 5

With the aid of examples and formulae, briefly explain the following ratios:
a) Asset turnover (2 marks)
b) Return on capital employed (2 marks)
c) Acid test ratio (2 marks)
d) Receivables collection period (2 marks)
e) Interest cover (2 marks)
[Total: 10 marks]

“End of Examination Question Paper”

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