INSTITUTE OF CHARTERED SECRETARIES

AND ADMINISTRATORS IN ZIMBABWE

EXAMINATION QUESTION PAPER

SUBJECT: FINANCIAL ACCOUNTING AND REPORTING

PART: B
DATE: JUNE 2020 TIME: 08:45 – 12:00 HOURS
DURATION: 3 hours and 15 minutes reading time

INSTRUCTIONS TO CANDIDATES

1. Answer ALL FIVE questions.

2. You are required to answer all questions in terms of the Zimbabwean Companies Act
(Chapter 24:03), 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 - 25 marks
Question 3 - 25 marks
Question 4 - 17 marks
Question 5 - 13 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 one of the following statements is true?

A. The trial balance is a book of prime entry.
B. Drawings appear on the credit side of the trial balance.
C. A suspense account must always have a debit balance on the trial balance.
D. Deferred tax can be a debit balance on the trial balance.

ii) Which two of the following statements are required to be disclosed as a note to the
financial statements for intangible assets?
1. The useful lives of intangible assets capitalised in the financial statements.
2. A description of the development projects that have been undertaken during the
period.
3. A list of all intangible assets purchased or developed in the period.
4. Impairment losses written off intangible assets during the period.

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

iii) What is the purpose of charging depreciation in the accounts?

A. To allocate the cost of a non-current asset over the accounting periods expected to
benefit from its use.
B. To ensure that funds are available for the eventual replacement of the asset.
C. To reduce the cost of the asset in the statement of financial position to its estimated
market value.
D. To comply with the prudence concept.

iv) IAS 1(revised) Presentation of Financial Statements requires some of the items to be
disclosed on the face of financial statements and others to be disclosed in the notes:
1. Depreciation
2. Revenue
3. Closing inventory
4. Finance cost

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

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Financial Accounting and Reporting: June 2020 Page 2 of 7
v) X Co has made an under provision of $4 300 on its tax liability account at 31 December
2019 before accounting for that year’s tax charge.

It estimates tax on profits for the year to be $69 780.

What amounts should be shown in X Co’s financial statements for the year ended 31
December 2019 in respect of tax?
Statement of profit or loss Statement of financial position
A. $69 780 tax charge $74 080 tax payable
B. $69 780 tax charge $64 480 tax payable
C. $74 080 tax charge $69 780 tax payable
D. $64 480 tax charge $69 780 tax payable

vi) At 30 June 2018 Runde Co’s capital structure was as follows:

Ordinary share capital
500,000 shares of 25c each $125 000
Share premium account $100 000

In the year ended 30 June 2019 Runde Co made a rights issue of 1 share for every 2 held
at $1 per share and this was taken up in full. Later in the year the company made a
bonus issue of 1 share for every 5 held, using the share premium account for the
purpose.

What was Runde Co’s capital structure at 30 June 2019?

Ordinary share capital Share premium account

A. $450 000 $25 000
B. $225 000 $250 000
C. $225 000 $325 000
D. $212 500 $262 500

vii) In relation to statements of cash flows, which, if any of the following statements are
correct?
1. The direct method of calculating net cash flow from operating activities leads to a
different figure from that produced by the indirect method, but it is balanced
elsewhere in the cash flow statement.
2. An entity making high profits must necessarily have a net cash inflow from operating
activities.
3. Profits and losses on disposals of non-current assets appear as items under cash
flows from investing activities in the cash flow statement or a note to it.

A. Statement 1 only
B. Statement 2 only
C. Statement 3 only
D. None of the statements
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viii) In consolidated financial statements, a group consists of:
A. A parent and its associates.
B. A parent and its joint ventures.
C. A parent and its branches.
D. A parent and all its subsidiaries.

ix) In partnership accounting, the loss on realisation is recorded as:

A. Dr Realisation Account Cr Partners’ Capital Accounts
B. Dr Partners Capital Accounts Cr Realisation Accounts
C. Dr Bank Account Cr Realisation Account
D. Dr Realisation account Cr Bank Account

x) Which of the following partners is paid a salary for taking part in the day to day
management of the partnership?
A. Nominal partner
B. Active partner
C. Sleeping partner
D. None of the above
(20 marks)

QUESTION 2

Doro Ltd Co compiles its financial statements at 31 December. At 31 December 2019, the
Company's trial balance was as follows:
Dr Cr
$ $
Sales revenue 14 800
Purchases 8 280
Inventory at 1 January 2019 1 390
Distribution costs 1 080
Administration expenses 1 460
Land at valuation 10 500
Building at cost 8 000
Accumulated depreciation at 1 January 2019 2 130
Plant & Equipment at cost 12 800
Accumulated depreciation at 1 January 2019 2 480
Trade receivables and payables 4 120 2 240
Cash at bank 160
Ordinary shares of 50c at 1 January 2019 10 000
Shares issued during the year 4 000
Share premium 4 000
Revaluation reserve 3 000
Retained earnings 3 140
10% Loan: repayable on 31 December 2025 2 000
47 790 47 790
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Financial Accounting and Reporting: June 2020 Page 4 of 7
 The following matters remain to be adjusted for the preparation of the Financial Statements
for the year ended 31 December 2019.
i) Inventory at 31 December 2019 amounted to $1 560.
ii) Depreciation is to be provided as follows:
 Buildings - 2% on cost.
 Plant & machinery - 20% per year on cost.
iii) Land is to be revalued to $12 000 and no change was required to the value of the
building.
iv) Accruals and prepayments were:
Accruals Prepayments
Distribution costs 190 120
Administrative costs 70 60

v) A final dividend of 2,5c per share is to be taken into account. All shares in issue at 31
December 2019 qualify for this dividend.

REQUIRED:
a) Prepare the company's Statement of Profit or Loss and Other
Comprehensive Income for the year ended 31 December 2019. (9 marks)
b) Prepare a Statement of Changes in Equity for the year ended 31
December 2019. (4 marks)
c) Prepare a Statement of Financial Position as at 31 December 2019. (12 marks)
[Total: 25 marks]

QUESTION 3

E, T & V are in a partnership sharing profits and losses in the ration 2:2:1. On 30 September
2019 they decided to dissolve the partnership at which date their Trial Balance was:

Trial balance as at 30 September 2019

Dr Cr
$ $
Capital Accounts:
E 39 000
T 13 000
V 2 000
Current Accounts
E 700
T 300
V 200
Trade payables 3 000
Loan from T 2 000
Freehold Property 30 000
Equipment 15 000
Inventory 8 000
Trade receivables 4 500
Cash at Bank 2 100
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Financial Accounting and Reporting: June 2020 Page 5 of 7
 59 900 59 900

The partners were unable to sell the business as a going concern and disposed off the assets
separately for the following amounts:
$
Freehold property 31 000
Equipment 4 800
Stock 2 900

Debtors were paid in full and creditors gave discounts totalling $100. Dissolution expenses
totalled $800.

REQUIRED:
Prepare all accounts of the partnership dissolution. (25 marks)

QUESTION 4

Visions Pvt Ltd manufactures a product whose details are as follows:

$
Selling price 15.00
Direct material (4.50)
Direct labour (2.00)
Direct production overheads (3.00)
Variable selling overheads (2.00)
Contribution 3.50

Additional information:
i) Sales in units are 500 in January, 400 in February, 200 in March, 300 in April and 450 in
May.
ii) Credit sales are 60% of total sales with the account customers paying in the month
following the sale and enjoying a 2% discount.
iii) Inventory levels are such that production in one month meets the next month’s sales
demand.
iv) The purchases of direct materials for one month meets the next month’s production
requirements. On the other hand, suppliers of direct raw materials are paid one month
following the purchase.
v) Save for labour costs paid in the month of occurrence, the rest of the expenses are paid
one month following that of occurrence.
vi) Fixed overheads are $1 000 per month including $250 for depreciation.
vii) At 1 February 2019, the bank had a positive balance of $1 950.

REQUIRED:
Prepare a cash budget for Vision Pvt Ltd for three months from February to
April 2019. (17 marks)

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Financial Accounting and Reporting: June 2020 Page 6 of 7
QUESTION 5

a)
Abridged Statement of Profit or Loss for the year ended 31 December 2019
First Last
$ $
Revenue 145 869 437 607
Cost of sales 65 642 166 291
Gross Profit 80 227 271 316
Operating expenses 21 880 131 282
Profit before tax 58 347 140 034
Corporate tax 15 025 36 059
Profit for the year 43 322 103 975

Additional information
Ordinary share dividend 34 658 83 200
Market Price per share at 31 December 2019 1.20 1.5
Capital employed 283 144 918 875
Ordinary share capital (shares of $1 each) 231 000 694 000

REQUIRED:
Calculate the following ratios for the two companies
i) Gross profit margin (1 mark)
ii) Mark-up percentage (2 marks)
iii) Earnings per share (2 marks)
iv) Return on Capital employed (2 marks)

b) Mubata Pvt Ltd has annual sales of $960 000 and a current ratio of 3.2:1.
All its sales are for cash and are priced at a mark-up on cost of 50%. The
average cash balance is $40 000 and the inventory turnover period is 90
days.

Assuming 360 days in a year, find the following:

i) Cost of Sales (1 mark)
ii) The Inventor value (1 mark)
iii) The Current Liabilities (2 marks)
iv) The Acid Test ratio (2 marks)
[Total: 13 marks]

“End of Examination Question Paper”

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