RFH SCHOOL OF ACCOUNTANCY

Question:1

Which of the following statements are true regarding disclosure of events after the reporting period?

(1) Non-adjusting events are disclosed if non- disclosure would affect the ability of users to make
proper evaluations and decisions
(2) Any new information received between the end of the reporting period and the date the
financial statements are authorized for issue, relating to conditions existing before the end of
the reporting period, does not need to be discloser or adjusted

 Neither statement is true

 1 only
 1 and 2
 2 only

Question:2

Which TWO of the following should be recorded on the credit side of the accounts receivable control
account? DLCA
 Contras against accounts payable
 Irrecoverable debts written off
1.B/D 1.cash received
 Dishonored cheques 2.sale 2.reurn 0utward
 Credit sales 3.interest 3.bad debts
Question:3
4.dish0n0ur 4. c0ntra entry
cheque 5.C/D
Samantha is a shareholder of Gold Co

Gold Co has had a difficult trading year and as a result Samantha is worried about the liquidity of the
company

Which of the following ratios would Samantha be MOST interested in?

 Asset turnover PR0FITABILITY

 Interest cover PBIT/FINANCE C0ST
 Return on capital employed PR0FITABILITY
 Quick ratio LIQUIDITY

Question:4

In respect of directors’ responsibilities, which of the following statements are true or false?
True False
It is the direct’ responsibility to prepare the financial statements
FALSE
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and select appropriate accounting

It is the directors’ responsibility to design internal controls which TRUE
aid the prevention and detection of fraud

Question:5

When a machine is purchased, it is capitalized as a non-current asset and depreciated over its useful life,
rather than writing the cost off in full in the statement of profit or loss.

Which accounting concept is being applied here?

 Materiality
 Accruals concept
 Substance over form
 Business entity concept

Question:6

Romeo Chocolate, a limited liability company, has several projects in progress.

Which of the following could be capitalized according to IAS 38 Intangible Assets?

 Expenditure in developing a new white chocolate bar due to start commercial production next
year
 A new machine to be used in the development laboratory producing a new chocolate bar
 Investigation into a new recipe of chocolate icing
 Applied research on a project into non-melting chocolate

Question:7

Semple uses FIFO for inventory valuation. Transactions during July 20X6 were as follows:

Received (units) unit price ($) sold (units)

3 July 300 50 100*50=500

10 July 170 55
170*55=9350
16 July 200

21 July 120 52

26 July 590 160

Semple had no inventory at the beginning of July.

360

What value should be recorded for the inventory at 31 July?

120*52=6240
590-360=230 110*55=6050
 RFH SCHOOL OF ACCOUNTANCY 6240+6050
=12290
12290
$________________

Question:8

In according with IAS 37 provisions, Contingent Liabilities and Contingent assets which TWO of the
following would be treated as provisions?

 The cost of repairing environmental damage after leakage of factory chemicals into a river
 The expected cost of repair of goods sold under warranty
 The amount that will probably be recovered in a legal case
 Electricity cost, calculated according to a bill received after the year end

Question:9

Which of the following statement is correct?

 Non-current assets should always be revalued annually so that values in the statement of
financial position are kept up-to-date
 Self-constructed assets should be depreciated from the date construction starts
 The useful life of a tangible non-current asset cannot be more than 20 years
 At the end of each accounting period the residual value and useful life of a non-current asset
should be reviewed

Question:10
add
A company made a profit for the year of $18,750, after accounting for depreciation of $1,250. During
less for $8,000, receivables increased by $1,000. Inventories
the year, non-current assets were purchased
add decreased by $1,800 and payables increased by $350. add less
According to IAS 7 statements of Cash Flows, what should be the increase in cash and cash equivalents
during the year? =18750+1250-8000-1000+1800+350
13150
$ _________________ =13150
Question:11

Ahmed had the following transactions in October 20X8

Sales during October 20X8 $

Cash 3,800 (including sales tax of $570)

Credit 7,250 (including sales tax of $1,088)

Cash received for credit sales made 5,215 (including sales tax of $783)

In September 20X8

SALE=3800+7250+1200
SALE=12250
 RFH SCHOOL OF ACCOUNTANCY

Interest income 1,200 revenue

What revenue should Ahmed report for October 20X8?

 $9,392
 $12,250
 $13,824
 $15,024

Question:12

Which Two of the following are true?

 Sales are included in receivables net of sales tax charged

 Sales tax can be repaid to a business by the tax authorities
 Sales are included in the statement of profit or loss gross of the sales tax charged
 Sales tax is collected on behalf of the tax authorities

Question:13

On 1 January 20X6, Clarence receives a loan from his bank of $11,500.

The loan is repayable in five equal annual installments starting on 1 January 20X7

How much of the loan capital is shown as a non-current liability in Clarence statements of financial
position at 31 December 20X6?
11500/5=2300
9200
$ ______________ =11500-2300
Question:14 =9200
Which TWO of the following errors would lead to the creation of a suspense account?

 An invoice for rent debited to the heat and light account n0

 An overdraft debited to the trail balance
 Vehicle repairs invoice debited to the non-current assets account N0
 Cash sales recorded in the cash book and nowhere else

Question:15

Rehnie uses the average cost (AVCO) method for inventory valuation. Transactions during October 20X6
were as follows:

Date Received (units) unit price ($)

sale
issued to production

1 Oct opening balance 200 3.50 700 (units)

0pening invent0ry

AVC0=t0tal c0st/t0tal unit*REMAINING ST0CK

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purchases
14 Oct purchases 800 3.75 3000
25 Oct issues 1000 400

What amount should be included in cost of sales for October?

 $1,450 AVC0= t0tal c0st / t0tal unit * s0ld unit

 $2,250
=3700 / 1000 * 400
 $1,480
 $2,220 =1480
Question:16

Which TWO of the following material events after the reporting period are adjusting events according to
IAS 10 Events after the reporting period?

 A legal claim, against which a provision of $50,000 had been made was settled for $40,000
 A 15% shareholding was acquired in STU for $10m N0
 An accident occurred in the company’s factory injuring five employees n0
 Inventories which were included in the statement of financial position at cost of $10,000 were
sold for $7,000

Question:17

Which of the following would be recognized as a provision in the financial statement in accordance with
IAS 37 provisions, contingent Liabilities and Contingent Assets?

 A possible obligation depending on the occurrence of a future uncertain event

 A probable obligation which cannot be reliably measured at present 1.present 0bligati0n
 A possible obligation as a result of a past event 2.reliable measured
 A present obligation as a result of a past event 3.pr0bable
Question:18

Which TWO of the following are expenses?

 Irrecoverable debt written off

 Decrease in allowance for receivables inc0me
 Increase in warranty provision
 Increase in owner’s drawings drawing

Question:19

A trial balance has been extracted but does not be responsible for the difference?

Which of the following errors could be responsible for the difference?

wr0ng questi0n
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 The trade receivables account balance is understated by $400

 Carriage inwards of $200 has been credited to the carriage inwards account
 Rent paid of $400 has not been entered in the rent account
 Cash sales of $200 have been debited to the sales account

Question:20

Smith receives a bank statement which shows an overdrawn balance of $3,500. Whilst carrying out a
reconciliation of the cash book to the bank statement balance, the following points came to light:

(1) Cheques sent to suppliers for $4,019 have not been presented to the bank at the date of the
bank statement
(2) A payment of $75 has been paid out of the bank account due to a bank error

After correction of the above points, what amount should be shown in the statement of financial
position for the bank overdraft?

7519 3500
$ __________
4019
Question:21 7519
Magic Co had the following share capital in issue for the year ended 31 December 20X4:

7% $1 Irredeemable preference shares $30,000 2100

5% $1 Redeemable preference shares $60,000

$1 Ordinary shares $100,000 100000*0.05=5000

Magic Co paid all the preference dividends owed and also paid an interim ordinary dividend of $0.05 per
share during the year.

What should be shown as dividends paid in the statement of changes in equity?

 $7,100 5000+2100
 $10,100 =7100
 $5,000
 $8,000

Question:22

BF Co has 120 units in inventory at 31 March 20X8. Each unit had cost $450 when they were purchased.
The normal sales price of each unit is $500. During March 20X8 20 of the units were damaged and will
require repair costs of $12.50. the selling price after repairs have been carried out will be $430 per unit.

What is the closing inventory figure at 31 March 20X8?

purchase=54000
RFH SCHOOL OF ACCOUNTANCY

 $50,100
51350
 $53,600
 $54,000
 $53,350

Question:23

Rajesh runs a business selling computers to individuals. His terms of sale are primarily cash on delivery
with large customers allowed 14 days credit.

Which of the following transactions should be recognized as revenue in Rajesh’s financial statements?

 Rajesh has sold one of his delivery vans to his brother and has received payment in cash
 Rajesh has received payment from his largest customer for a delivery of 20 computers that took
place two weeks ago
 A customer has promised to place an order next week for a new computer and has paid a
refundable deposit of $100
 A competitor who has run out of a particular item has asked Rajesh to fulfill a sale to a customer
and Rajesh delivered the goods

Question:24

Which of the following statements is correct?

 At the end of each accounting period the residual value and result value and useful life of a non-
current asset should be reviewed
 Self-constructed assets should be depreciated from the date construction starts
 The useful life of a tangible non-current asset cannot be more than 20 years
 Non-current assets should always be revalued annually so that values in the statement of
financial position are kept up-to date

Question: 25

Which of the following would help a company with high gearing to reduce its gearing ratio?

 Making a right issue of equity shares

 Taking out a loan with a bank
 Issuing further long-term loan stock
 Paying dividends on its equity shares

Question:26

The interpretation of ratios allows investors to:

(1) From an expectation of the company’s future performance

(2) Compare two companies as possible future investments
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(3) Gain assurance that the financial statements are correct

(4) Calculate their future dividend to be received from the company

Which of the above statement are correct?

 3 and 4 only
 1, 2 and 4 only
 1, 2, 3 and 4
 1 and 2 only

Question:27

A business sold goods with a list price of $24,000 to a credit customer. The customer is entitled to a
trade discount of 5% and also to a further 2.5% discount if payment is made within ten days of the
invoice date which he is expected to do at the point when the sale is made.
0nly SALE am0unt
What amount should be credited to the revenue in the statement of profit or loss?

 $22,800
=24000*5%
 $22,230 =22800*2.5%
 $24,000 =22230
 $23,400

Question:28

A company’s statement of profit or loss for the year ended 31 March 20X0. Showed the following:

$’000

Profit from operations 1,200

Financial cost 200

_____

Profit before tax 1,000 PBIT

Income tax expense 400

_____

Profit after tax 600

______

Extracts from its statement of financial position at 31 March 20X0 showed the following:

$’000
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Share capital 8,000

Retained earnings 1,200

_____

Equity 9,200

_____

Non-current liabilities capital empl0yed=n0n current liability+equity

10% Loan notes 2,000

What is the return on capital employed for the year ended 31 March 20X0?

 5.6%
 6.5%
 10.7%
 8.9%

Question:29

When performing his year end inventory count Mahmood accidentally counted goods that were in the
dispatch area waiting to be delivered to customers. The goods had a cost of $50,000 and were
dispatched prior to the year end.

What impact does this uncorrected error have on profit and assets at the year end?

Overstated understated

Profits 50000
Assets 50000
Question:30

Which of the following objectives will be achieved by the preparation of the trial balance?

 To ensure that all debit and credit entries are entered in the correct ledger accounts
 To ensure that all accounting entries have accurately recorded the correct amount of a
transaction
 To check that all balances have been correctly extracted from the ledger accounts
 To check for the omission of accounting entries in the accounting records
 RFH SCHOOL OF ACCOUNTANCY

Question:31

The inventory records of Fragment Co as at 31 December 20X9 have been destroyed. The following
information has been obtained for the year ended 31 December 20X9:

$ S=C+P
Sales 915,800
125=100+25
Purchases 688,800 100/125*915800
CGS=732640
Opening inventory 156,800
CL. ST0CK=156800+688800-732640
Fragment Co applies a 25% mark-up on all sales. CL.ST0CK=112960

What is the value of closing inventory at 31 December 20X9?

$ 112960
__________

Question:32

Corey had an interest accrual of $45,450 on 1 January 20X6 and a closing interest accrual of $48,750 in
the financial statements for the year ended 31 December 20X6. The finance cost in the statement of
profit or loss was $256,000.

What figure should appear for interest paid in the statement of cash flows for the year ended 31
December 20X6?
45450 b/d
252700
$ ___________ 252700
256000 I/S
Question:33 c/d 48750
A company purchased a non-current asset on 1 January 20X6 for $90,000. The company depreciates
non-current assets on a straight-line basis over five years. On 1 January 20X7 a modification costing capital
$10,000 was made to the non-current asset to extend its useful life by one year and routine
revenue maintenance costing $5,000 was also carried out. c0st=90000
useful life=5 years
Which amount should be charged for depreciation for the year to 31 December 20X7?
=90000/5
 $17,400 dep.=18000
 $21,000 nbv=72000+10000
 $16,667
=82000/5
 $16,400
=16400
Question:34

Which of the following statements are true regarding disclosure of events after the reporting period?
RFH SCHOOL OF ACCOUNTANCY

(1) Non-adjusting events are disclosed if non-disclosure would affect the ability of users to make
proper evaluations and decisions
(2) Any new information received between the reporting period and the date the financial
statements are authorized for issue, relating to conditions existing before the end of the
reporting period, does not need to be disclosed or adjusted.

 1 only
 2 only
 Neither statement is true
 1 and 2

Question:35

Amir receives $980 from a credit customer. This was net of an early settlement discount of $20 which
the customer was expected to take advantage of at the time the invoice was issued:

What expected to take advantage of at the time the invoice was issued

What is the correct double entry to record the receipt?

 Dr payables $1000 Cr discounts received $20 Cr cash $980

 Dr cash $980 Cr receivables $980
 Dr receivables $980 Cr cash $980
 Dr discounts received $20 Dr cash $980 Cr payables $1000

Question:36

Which of the following costs could be capitalized as an intangible asset in accordance with IAS 38
intangible Assets?

 Advertising the launch of a new product

 Computers used for administration purposes in the research and development department
 Market research into a new geographical market
 Testing a new process which will create efficiency savings of 10% once implemented

Question:37

Gamma Co’s receivables control account at 30 June 20X9 is as follows:

Receivables control account

$ $

Balance brought forward 39,900 Cash receipts 61,600

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Credit sales 55,500 Balance carried forward 33,800

_______ ______

95,400 95,400

_______ ______

What is the balance for receivables in the trial balance at 30 June 20X9?

 $39,900 Dr
 $39,900 Cr
 $33,800 Dr
 $33,800 Cr

Question:38

Which TWO of the following are expenses?

 Irrecoverable debit written off

 Decrease in allowance for receivables
 Increase in warranty provision
 Increase in owner’s drawing

Question:39

DTT sells a large quantity of inventory on 22 December 20X4 and recognizes this sale in the year ended 3
December 20X4, even though the cash will not be received until February 20X5.

Which accounting concept is being applied?

 Going Concern
 Materiality
 Business entity (reporting entity) concept
 Accruals basis

Question:40

In accordance with IAS 37 provisions Contingent Liabilities and Contingent Assets which TWO of the
following statements are correct?

 A contingent asset should be recognized if it is possible an inflow of economic benefit will be

received
 No disclosure is required for a contingent liability where an outflow of economic benefit is
possible
 A probable liability of uncertain timing and amount should be provided for
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 A contingent asset should be disclosed where an inflow of economic benefit is probable

Question:41

Francois incorrectly posted his discounts received of $400 by only making an entry in the discounts
received ladger account DR. CLCA
(W.S.H)
Which journal entry should be used to correct this error?
CR.D.R
DR. SUSPENSE (W.H)
 Dr payables Cr suspense
CR. D.R
 Dr payables Cr discounts received
 Dr discounts received Cr suspense
 Dr suspense Cr payable DR. CLCA (C.0.E)
CR. SUSPENSE
Question:42

The following receivables control account has been prepared incorrectly:

Receivables control account

$ $

Opening balance dr 32,876 Cash received from credit customers cr 45,852

Contra with payables cr 300 Irrecoverable debt cr 5,500

Credit note issued cr 3,287 Dishonored cheque dr 150

Credit sales dr 55,168 Closing balance 40,129

______ _______

91,631 91,631

_______ ________

After correcting the errors made in preparing the account, what should the closing balance be?

 $39,139 32876 45852

 $33,165 55168 5500
 $33,255
150 300
 $32,265
3287
Question:43
88194 33255
Information should only be disclosed if it capable of influencing the economic decisions of users:

Which qualitative characteristic of financial information is being applied here?

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 Faithful representation
 Relevance
 Timeliness
 Understandability

Question:44

The accountant of ABC Co extracted a balance of $85,105 from the trade payables control account.
Whilst carrying out a reconciliation of the balances on the accounts payables control account with the
list of balances on the payables ledger, the following errors were identified:

(1) A payment to a credit supplier for $55 had been made from petty cash but had not been
recorded in the payables control account
(2) Discounts received of $32 had been recorded as discounts allowed
(3) Goods costing $140 had been returned to the supplier but this transaction had been recorded
(4) The purchase day book was overcast by $900 n0t

What is the balance on the accounts payables ledger control account after adjusting for these errors?

 $85,778 85105 b/d

payment 55
 $83,978
 $84,088 disc0unt 64
 $83,946 purchase 900
Question:45 return 140
What transaction is represented by the following entries?
83946 85105
Dr Allowance for receivables Cr Receivables expense (decrease in all0wance)
 An increase in the allowance for receivables
 The recovery of an irrecoverable debt
 The writing off of an irrecoverable debt
 A decrease in the allowance for receivable

Question:46

A company has a financial year end of 30 September 20X7. On 1 October 20X7 there was:

(1) A fall in the value of several foreign currencies, which significantly reduced the value of the
company’s overseas assets n0n adjusting events
(2) A serious fault discovered in some year end inventories, which made them worthless adjusting event
According to IAS 10 Events After the Reporting Period, which of the above should be regarded as
adjusting events for the year to 30 September 20X7?
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 Neither 1 nor 2
 2 only
 1 only
 1 and 2

Question:47

When using the indirect method of reporting cash flows from operating activities, which TWO of the
following would create an INCREASE in the cash generated from operations in a statement of cash
flows?

 Increasing in payables add

 Increase in receivables less
 Loss on sale of non-current asset add
 Increase in inventories less

Question:48

A business recently purchased a new motor van for use by the sales department. Details of the
purchase, as it appeared on the invoice from the motor dealer are as follows:

Motor van c0st 38,000 add

Trade discount disc0unt 3,000 less
______

35,000

Additional items

Alloy wheels capital 2,200 add

Petrol revenue 100 n0
Insurance revenue 600 n0
Sign writing of business name 1,200 add
On side of van capital
_________

39,100

38000-3000 35000+2200+1200
=35000 =38400
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_________

What is the purchase cost of the motor van to be recorded on the statement of financial position?

38400
________________

Question:49

This is an extract from Kamal’s trial balance for the year end 30 June 20X8.

$
CGS=19500+325000+8250+15700-22250
Opening inventory add 19,500 CGS=368450-22250
CGS=346200
Closing inventory less 22,250

Purchases add 325,000

Carriage inwards add 8,250

Distribution costs no 28,125

Administration salaries no 96,750

31400/2 Depreciation add 31,400
=15700
Depreciation expense is split equality between cost of sales and distribution expenses.

What should be the cost of sales figure shown in Kamal’s statement of profit or loss for year ended 30
June 20X8?

346200
$ ___________

Question:50

Which of the following statements is correct?

 The accounts receivable control account contains details of individual customer accounts
 The sales day book is part of the double entry system
 A book of prime entry is one with an initial record of transaction is made
 The account receivable control account always agree to the accounts receivable ledger