ACCA F3 FA Exam kit PDF

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Question Bank ACCA Financial Accounting (FA) Exams from September 2020

ii In tr o d u c tio n

No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of First Intuition Ltd. Any unauthorised reproduction or distribution in any form is strictly prohibited as breach of copyright and may be punishable by law. We are grateful to the Association of Chartered Certified Accountants and the Chartered Institute of Management Accountants for permission to reproduce past examination questions and model answers. Additional comments and guidance have been prepared by First Intuition Ltd. © First Intuition Ltd, 2020 MAY 2020 RELEASE

A C CA F A Q ues t i on Ba n k

A CC A F A Q u es t i o n Ba n k

In tr o d u c tio n

How to use this Question Bank

1 QUESTION PRACTICE IS KEY TO SUCCESS This Question Bank has been written to help you pass Paper FA Financial Accounting.

Targeted question practice In the first section there are banks of questions based around each chapter of the Course Notes. The number of questions reflects the weighting of the topic to the syllabus. You should attempt the Test Your Learning Questions where indicated to test your knowledge so far and the practice assessment (which covers the full syllabus) immediately prior to taking the mock exam. You should also attempt the ACCA specimen.

Do the practice assessments The importance of question practice cannot be underestimated and you should attempt both the mock exam and the ACCA specimen under assessment conditions. For this paper you have two hours to answer 35 questions in Section A and 2 questions in Section B. It is vital you stick to the time allocation and answer every question. The types of question that may be included are as follows: OT

MTQ

Multiple Choice

You are required to choose one answer from a list of options by clicking on the appropriate radio button

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Multiple Response

You are required to select more than one response from the options provided by clicking the appropriate tick boxes

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Multiple Response Matching

You are required to select a response to a number of related statements by clicking on the radio button which corresponds to the appropriate response for each statement

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Number Entry

You are required to key in a numerical response to the question

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Each of the above types of question are included in this Question Bank.

iii

iv In tr o d u c tio n

A C CA F A Q ues t i on Ba n k

Contents Page ref Topic

Number of questions

Q

A

1 Introduction to accounting

12

1

111

2 Principles and concepts

18

3

113

3 Accounting systems

13

7

116

4 Double entry bookkeeping

16

10

118

5 The trial balance

15

13

120

6 Sales, purchases and taxes

19

16

123

7 Control accounts

23

23

128

8 Accruals and prepayments

19

29

134

9 Receivables and irrecoverable debts

15

34

139

10 Inventories

19

38

143

11 Non-current assets and depreciation

30

44

147

12 Bank reconciliations

20

51

153

13 Accounting errors

21

56

157

14 Incomplete records

16

61

161

15 Company accounts

21

65

165

16 Statements of cash flows

16

76

171

17 Interpretation of Financial Statements

19

83

175

18 Provisions and contingencies

8

88

179

19 Events after the reporting period

6

91

180

20 Group accounts

30

93

171

Chapter questions and answers

Mock Exams Full exams to practise are provided. Question practice, under assessment conditions, is vital to passing this exam.

ACCA Specimen paper It is vital that you try the computer based specimen exam on the ACCA website. The specimen uses the software that you will meet in your real exam and you must be familiar with it. You will find it on the ACCA website: www.accaglobal.com

A CC A F A Q ues t i on Ba nk

1: I n tr o d u c tio n to ac co u n t in g

Chapter questions 1: Introduction to accounting

OBJECTIVE TEST QUESTIONS 1

Which of the following provides advice to the International Accounting Standards Board (IASB) as well as informing the IASB of the implications of proposed standards for users and preparers of financial statements?   

The IFRS Advisory Council The IFRS Interpretations Committee The IFRS Foundation

2

A number of different groups of people make use of the information in published financial statements. These groups include: owners/investors, analysts and advisers, employees, business contacts, government and the public. What is the missing group?

3

“The supplier of goods on credit needs an indication of future trading, i.e. an indication of future progress. However, the shareholder needs a statement of financial position, i.e. an indication of the current state of affairs.”  

4

True False

The main aim of accounting is:    

To maintain ledger accounts for every asset and liability To produce a trial balance To provide financial information to users of such information To record every financial transaction individually

5

There are three main pieces of information comprising a set of financial statements. Two of these are the Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position. What is the correct name of the missing one?

6

For which purpose would a lender be most likely to use the information in published financial statements?    

Measuring performance, risk and return Taking buy/sell decisions Assessment of ability to repay debts Taking decisions regarding holding investments

1

2 1: I n tr o d u c tio n to ac co u n t in g 7

Who sets International Financial Reporting Standards?    

8

9

10

True

False

Sole traders have limited liability





A partnership has to produce financial statements in accordance with accounting standards issued by the IASB





Which of the following are advantages of trading as an unincorporated business? 1 2

Legal separation of ownership Unlimited liability

   

1 only 2 only Both 1 and 2 Neither 1 nor 2

Preparation of financial statements is the responsibility of: Shareholders Directors External auditors Internal auditors

Which ONE of the following sentences does NOT explain the distinction between financial accounts and management accounts?    

12

The IFRS Interpretations Committee The International Accounting Standards Board The IFRS Foundation The IFRS Advisory Council

Determine whether the following statements are TRUE or FALSE.

    11

A CC A F A Q ues t i on Ba nk

Financial accounts are primarily for external users and management accounts are primarily for internal users Financial accounts are normally produced annually and management accounts are normally produced monthly Financial accounts are more accurate than management accounts Financial accounts are audited by management whereas management accounts are audited by external auditors

The objective of financial statements is to enable users to assess the performance of management and to aid in decision making.  

True False

A CC A F A Q ues t i on Ba nk

2: P r i n cip le s an d co n c e p t s

2: Principles and concepts

OBJECTIVE TEST QUESTIONS 1

Assets are usually valued under which basis?    

2

What are the TWO fundamental qualitative characteristics of useful financial information?    

3

Relevance and reliability Relevance and faithful representation Truth and fairness Reliability and faithful representation

Income and expenses should be recognised in the period in which they have been earned or incurred, rather than when cash changes hands. Which accounting concept does this illustrate?    

4

Historic cost Net realisable value Current cost Fair value

Substance over form concept Consistency concept Separate entity concept Accruals concept

In the time of rising prices, what effect does use of the historic cost concept have on asset values and profits?

Asset values Profits

5

Overstated 

Understated 





If the owner of a business takes goods from inventory for his own personal use, the accounting concept to be considered is:    

Consistency Accruals Separate entity Going concern

3

4 2: P r in c ip le s an d co n c e p t s 6

A CC A F A Q ues t i on Ba nk

Which of the following statements about accounting concepts are correct? 1 2 3

4    

The accruals concept is that income should only be recognised when cash is received. The historic cost concept is that assets are initially recorded at their cost. The substance over form convention is that, whenever legally possible, the economic substance of a transaction should be reflected in the financial statements, rather than simply its legal form. The going concern concept is the assumption that the entity will continue in operation for the foreseeable future. 1, 2 and 3 1, 2 and 4 1, 3 and 4 2, 3 and 4

7

Which accounting concept means that similar items should receive the same accounting treatment?

8

Which of the following best explains what is meant by “capital expenditure”?    

9

10

A business has incurred the following expenditure. Identify whether each item should be treated as capital or revenue expenditure. Capital expenditure

Revenue expenditure

Redecoration of office premises





Upgrade of factory equipment





Cleaning of factory





Purchase of delivery van





Capital put into a business by its owner must always be in the form of cash.  

11

Expenditure on maintaining or repairing non-current assets Expenditure on expensive assets Expenditure relating to the issue of share capital Expenditure on the acquisition or improvement of non-current assets

True False

Which ONE of the following should be accounted for as capital expenditure?    

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

A CC A F A Q ues t i on Ba nk

12

A company includes in inventory goods received before the year end, but for which invoices are not received until after the year end. This is in accordance with:    

13

investors lenders suppliers taxation authorities

Which THREE of the following elements are included in the statement of financial position?     

17

Ensuring high profits Managing cash Ensuring the recording, controlling and safeguarding of assets Ensuring high dividends to shareholders

The objective of financial statements is to provide useful information to their most important users. These are (tick all that apply):    

16

Overstating profits and understating statement of financial position values Understating profits and overstating statement of financial position values Understating cash flow and overstating cash in the statement of financial position Overstating cash flow and understating cash in the statement of financial position

Which ONE of the following best describes the stewardship function?    

15

The historical cost convention The accruals concept The consistency concept The materiality concept

When there is inflation, the historical cost concept has the effect of:    

14

2: P r i n cip le s an d co n c e p t s

Assets Equity Expenses Income Liabilities

An asset is a present economic resource owned by a business as a result of past events.  

True False

5

6 2: P r in c ip le s an d co n c e p t s 18

A CC A F A Q ues t i on Ba nk

Which of the following will be classified as non-current assets for a dealer in computer equipment? (1) (2) (3) (4)

Computers for resale Vehicles for delivering computers Business capital Office furniture

   

(1) and (2) (2) and (3) (2) and (4) (3) and (4)

A CC A F A Q ues t i on Ba nk

3: A cco u n t in g sy st e m s

3: Accounting systems

OBJECTIVE TEST QUESTIONS 1

Which ONE of the following attributes is most important for any code to possess in order to be of use in an accounting system?    

2

Which of the following are used in a coding system for accounting transactions?    

3

Despatch notes Sales invoices Credit notes received Trade discounts

Which of the following is NOT a book of prime entry?    

5

Product code Nominal ledger code Department code All of the above

Which of the following would be recorded in the sales day book?    

4

Easy to change the code number Each code is unique A combination of letters and digits to ensure input accuracy Linked to assets, liabilities, income, expenditure and capital

Cash payments book Sales returns day book Receivables ledger Journal

Which of the following would NOT be recorded in the cash payments book?    

Payment to a supplier Staff wages paid Return of goods by a customer Refund given to a customer

7

8 3: A cco u n t in g syst e m s 6

A CC A F A Q ues t i on Ba nk

A business maintains a petty cash imprest system. The following amounts are paid out of petty cash during the month of April: $ Stationery

14.30

Travel expenses

25.50

Office refreshments

12.90

Sundry payables

24.00

What amount is required to restore the imprest balance to $100 at the end of April? $

7

The petty cash tin contains $200 cash at the beginning of September. The following amounts have been recorded in the petty cash book for the month: $ Taxi fares

65.00

Stamps

9.70

Milk and biscuits for office staff

24.35

Contribution to cover the cost of stamps taken for personal use

2.40

How much petty cash is left in the till at the end of September? $

8

Which of the following documents might be used to record an entry in the cash receipts book?    

9

An imprest system is:    

10

Credit sales invoice Sales credit note Remittance advice Goods received note

Accounting computer software An audit process Automatic agreement of the cash book and bank statement balances A method of controlling petty cash

B operates the imprest system for petty cash. At 1 July there was a float of $150 but it was decided to increase this to $200 from 1 August onwards. During July, the petty cashier received $25 from staff for using the photocopier and a cheque for $90 was cashed for an employee. In July, cheques were drawn for $500 for petty cash. What was the total expense paid from petty cash in July?    

$385 $435 $515 $615

A CC A F A Q ues t i on Ba nk

11

What is the purpose of an imprest system?    

12

It records the use of a company’s seal It helps to reconcile the cash book with the bank statement It helps to control petty cash It is part of computerised accounting

N operates an imprest system for petty cash. On 1 February, the float was $300. It was decided that this should be increased to $375 at the end of February. During February, the cashier paid $20 for window cleaning, $100 for stationery and $145 for coffee and biscuits. The cashier received $20 from staff for the private use of the photocopier and $60 for a miscellaneous cash sale. What amount was drawn from the bank account for petty cash at the end of February?    

13

3: A cco u n t in g sy st e m s

$185 $260 $315 $375

Which of the following are used in a coding system for accounting transactions?    

Department code Nominal ledger code Product code All of the above

9

10 4: Do u b le e n t r y b o o kke e p i n g

A CC A F A Q ues t i on Ba nk

4: Double entry bookkeeping

OBJECTIVE TEST QUESTIONS 1

Which TWO of the following statements are true?    

2

Which of the following would all result in a debit entry being made in the nominal ledger?    

3

4

5

A debit records an increase in liabilities A debit records a decrease in assets A credit records an increase in liabilities A credit records a decrease in expenses

Expense, increase in asset, increase in liability Expense, decrease in asset, increase in liability Income, decrease in liability, decrease in asset Expense, decrease in liability, increase in asset

What is the double entry to record the purchase of goods on credit? Debit

Credit

Payables





Receivables





Purchases





Sales





The double entry system of bookkeeping normally results in which of the following balances on the ledger accounts? Debit

Credit

Expenses





Capital





Liabilities





Drawings





Complete th...