C02-Fundamentals of Financial Accounting

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1 1. Answer B Principle difference between Income Statement and Income & Expenditure Account. 2. Answer D Principle knowledge about the usage and preparation of Financial Accounts and Management Accounts. 3. Answer D Option A, B & C are the examples of revenue expenditure. Capital expenditure is the funds used to acquire or upgrade the physical assets. 4. Answer B Principle knowledge of Accruals concept. 5. Answer A Principle knowledge of historical cost convention. 6. Answer C Principle knowledge of stewardship function. 7. Answer $16,500 Assets = Capital + Liabilities Assets = Capital + Liabilities 14,000 7,500 6,500 6,000 (6,000) 9,000 9,000 (7,500) (7,500) 15,500 16,500 (1,000) 8. Answer False Non current assets are the assets acquired with a going concern view. 9. Answer False The users of financial statements are external stake holders who do not

2 necessarily advise the management on the decision making and to address the operational issues of the company. 10. Answer A Principle knowledge of accounting. 11. Answer A 1 st July Float = $150 Cash from staff =$25 Cheque for employee = ($90) Cheques drawn for petty cash = $500 Amount paid in to petty cash X = ($385) 1 st August Balance maintained = Answer B Over drawn (825) Un presented cheques (475) Incorrect direct debit 160 Deposits not credited 600 Over drawn in SOFP $ Answer C Principle knowledge of petty cash Imprest system. One of the advantages of having imprest system in place. 14. Answer B Sales Ledger Control Account Sales 250,000 Bank 225,000 Dis Hon Chq 3,500 RI 2,500 Bad debts 3,000 Contra 4,000 C/F 19,000 B/F 19, Answer C Total cash during the year

3 Banked $50,000 Paid wages $12,000 With drew cash $24,000 Difference between Opening and closing $100 Total cash = $86,100 Less cash deposited from car sale $5000 Sales $ 81, Answer B O/B $300 Window cleaning $(20) Stationery $(100) Coffee and biscuits $(145) Photocopy revenue $20 Miscellaneous received $60 Bank Amount $260 C/B $ Answer B owing money $1200 Good received $1700 Good returned $(100) Cheques Presented $(1615) Discount $(85) Net balance $ Answer D Expenses are recorded excluding the VAT there fore we will have expenses as per the gross amount $4000 and sales VAT separately however the total payables will be $ Answer D Principle knowledge of coding accounting systems. 20. Answer B Principle knowledge of coding accounting systems. 21. Answer $1050 Rent Per month $1,800/12 = $150

4 No of months May to Nov = 7 Charge to IS = 7x$150 = $ Answer $200 Car Value $12,000 End year 1 Value $12, = $9600 End year 2 Value $9, = $ 7200 End year 3 Value $ = $4800 Year 4 carrying Value $4,800 Less sale price $5000 profit = $ Answer $170,000 Prime cost = DM+ DL Material O/B $45,000 Material Purchase $ 150,000 Material C/B %75,000 Total Material Consumer = 45, ,000-75,000 = 120,000 Direct Manufacturing wages = $50,000 Prime cost = 120,000+50,000 = 170, Answer D Machine Value = 52,000 Residual Value =4000 Estimated life = 8 years straight line depreciation each year over a 8 year life = $6,000 Machine sold in year 6 for $35,000 Book Value year 6 = 52, = Profit = Sale Book Value 35,000-22,000 $13, Answer C Total value of asset is $15,000+$1500+$750 = $17,250 10% deprecation for the year $1725 Book value at the end of year = $15,525 Repairing cost of $400 does not adds up to the value of asset. 26. Answer A Bank is debited with the actual amount received Share capital and Share premium are credited individually.

5 27. Answer B ($11,000) 1. Additional machinery purchased on cash cash outflow $15, NBV of the asset disposed $2, Profit on Asset disposed $2,000 Total cash from sales $4,000 Net cash flow = -$15,000 + $4,000 ($11,000) 28. Answer B Principle knowledge of prime cost. 29. Answer C Machine cost $40,000 Estimated life = 6 years Residual Value = $10,000 Depreciation straight line Year 4 selling price =$15,000 NBV year 4 = $40,000-$15,000 = $25,000 Profit/loss = Loss $10, ,000 of depreciation as per internal policy 30. Answer C O/B $240,000 Prime cost $ 720,000 Over heads $72,000 C/B $ 350,000 Total cost of finished goods = O/B + Prime cost + over heads C/B = 240, ,000+72, ,000= $682, Answer C VAT received by customer is $30,000 VAT paid by the company $21,000 Purchase made 161,000 inclusive of VAT gross purchase 161,000/1.15 give 15% rate of Vat. 32. Answer B Reducing balance method Year1 end value 8,000x75% = 60,000 year 2 end value 60,000x75%= 45,500 Year 3 end value 45,000x75%= 33,750 year 4 end value 33,750x75%=25312

6 33. Answer C $1,800x9/12 + $2,000x3/12 = $1, Answer $47,000 Goods complete cost = O/B + Prime cost + Overheads closing balance. 300,000= 40, , ,000 C/B 300, ,000= -C/B -47,000= -C/B 47,000= C/B 35. Answer B Principle knowledge of Accounting equation. 36. Answer C $2,400/12X7 charge to IS $2,400/12x5 SOFP as prepayment 37. Answer B The subscription charged for year 2. $6000+$750 = $6750. Ignoring the paid dates and recognizing on the issuing date. 38. Answer C charge to income statement is balance brought forward + 5/12 of 36,000 prepayments = 7/12 of 36, Answer D 40. Answer C 41. Answer A Increase in inventory = increase in working capital decrease in Bank = decrease in working capital Increase in payables = decrease in working capital Total decrease of $1500 in working capital. 42. Answer Debit $1800 TR= 4,000,000 % of receivables 7.5%

7 Amount for receivables = $300,000 Provision for bad debts = 3% of receivables $9,000 Increase in provision is 25% more than previous year Previous provision 9,000/1.25 = $7,200 $9000-$7200 = $1800 Debit income statement. 43. Answer B $15,000 outflow Cash flow from working capital activities. Increase in Trade creditors + Increase in other creditors Less Increase in stock + Increase in debtors. (20+20) - (20+35) (15) 44. Answer D Principle knowledge of an external audit. 45. Answer A The true and fair presentation is an opinion and can vary within certain parameters so there can be more than a single true and fair presentation of a company s financial statements. 46. Answer A Principle knowledge of external audit. 47. Answer A Principle knowledge of internal audit. 48. Answer C One of the primary functions of an internal auditor is to report on the current accounting systems, evaluate the reliability of the system and identify the loop holes in the current accounting system. 49. Answer A All the mentioned above accounting error result in an equal trail balance as they effect the different accounting heads but not the sides of each entry. What usually causes the trail balance to be unequal are arithmetic errors that is when you sum up each side or the wrong amounts for one but not both entries in the trial balance.

8 50. Answer False An error of commission occurs where a correct amount is entered, but in the wrong person`s account.

CBA Model Question Paper CO2. The difference between an income statement and an income and expenditure account is that

CBA Model Question Paper CO2. The difference between an income statement and an income and expenditure account is that CBA Model Question Paper CO2 Question 1 The difference between an income statement and an income and expenditure account is that A an income and expenditure account is an international term for a Income