FAFN - Revision 3

1. The following information is give at a manufacturers year end: Data: Purchases of raw materials Returns inwards Increase in stocks of raw materials Direct wages Carriage inwards Production overheads Decrease in work- in-progress a) 188550 b) 202950 114000 9000 2700 46500 3750 24000 12000 c) 197550 d) 173550

Using some or all of the above figures, the correct figure for the factor cost of goods completed is:

2. Danushka Alis company provides a number of staff with lap-top computers, as well as pocket calculators. It capitalises the cost of the computers and depreciates them over several years, but writes off the cost of the pocket calculators in full, against profits, in the e period in which they are purchased. The main justification for this difference in treatment is which one of the following? a) Computers last longer then pocket calculators b) The cost of pocket calculators is not material c) The company has always adopted this treatment, and therefore must be consistent with the treatment of previous periods. d) Pocket calculators do not decrease in value 3. Which of the following would be a good method of segregating duties of staff? a) Employing an experienced cashier to deal with all the bank transactions b) Employing separate persons to maintain the sales and purchases ledger c) Employing a wages specialist to calculate and deal with the payment of wages. d) Employing a separate person to maintain and reconcile control accounts. 4. Ragulans business which is not VAT registered, purchased stationary items on credit costing 2000 excluding VAT. The rate of VAT on the goods was 17.5% What are the correct ledger entries? Option: A B C D Debit Stationery expense Stationery expense VAT account Stationery expense Stationery expense VAT account Credit 2000.00 Creditors 2000.00 350.00 Creditors 2350.00 Creditors 1702.13 297.87 Creditors 2000.00 2350.00 2350.00 2000.00 c) Option C d) Option D

a) Option A

b) Option B

5. On 1 April 2004, a company owed a supplier 840. During the month of April the company purchased goods for 1400 and returned goods valued at 200. A payment of 200 was made towards the outstanding balance. The supplier offered a discount of 5% on purchases. The balance on he suppliers account at the end of the period is: a) 1780 credit b) 100 debit c) 1780 debit d) 100 credit

6. Lavanya Ltd purchased a machine at a cost of 34000, 600 carriage from the suppliers premises and 900 installation costs. After 6 months in operation, the machine broke down and it cost 1000 to repair. In the balance sheet, what would be the cost of the machine at the end of the year? 7. The accumulated fund is equal to: a) b) c) d) The book value of net assets in a not-for-profit organisation Retained profits in a limited company The excess of receipts over payments in a not-for-profit organisation The bank balances of a organisation

8. Where a transaction is credited to the correct ledger account but debited to the purchases account instead of the fixed asset account, the error is known as an error of: a) Omission b) Commission c) Principle d) Original entry

9. Where a transaction is entered into the correct ledger accounts, but the wrong amount is used, the error is known as an error of: a) Omission b) Commission c) Original Entry d) Principle

10. Mathinis firm owed VAT of 56750 at the beginning of the month. During the month, it sold standard-rated goods with a net value of 1500000. Its purchases and expenses during the same month amounted to 470000 including VAT. It paid VAT to the customs and Excise, of 83500. At the end of the month, the balance on the VAT account was: a) 320500 debit b) 165750 credit c) 320500 credit d) 165750 debit

11. Internal controls are used to prevent errors occurring, as well as to detect errors which may have already occurred. Which one of the following is an example of prevent control? a) b) c) d) Reconciling control accounts with the ledger accounts Preparing the trial balance Preparing a bank reconciliation Matching purchase invoices with Goods Received Notes

12. An invoice for electricity has been debited to the suppliers account and credited to the electricity account. This would result in: a) b) c) d) A overstatement of profit and an understatement of current liabilities An understatement of profit and an understatement of current liabilities An overstatement of profits and an overstatement of current liabilities An understatement of profit and an overstatement of current liabilities

13. Your organisation paid 420875 in net wages to its employees during the year. Employees tax and national insurance amounted to 7000 and employers national insurance was 38500. Employees had contributed 21875 to a supermarket scheme, What is the amount to be charged against profits for the year, in respect of wages? 14. In times of rising prices, the FIFO method of stock valuation, when compared to the Average Cost method of stock valuation, will usually produce. a) A higher profit and lower closing stock value b) A higher profit and a higher closing stock value

c) A lower profit and a higher closing stock value d) A lower profit and a lower closing stock value 15. The main aim of financial accounting is to: a) b) c) d) Provide financial information to satisfy the needs of users of accounts Record every financial transaction in the books of account Ensure that double-entry records are maintained Maintain ledger accounts for every asset and liability

16. Saranga Ltd owns freehold property costing 360000 (200000 for the land and 160000 for the building) The companys accounting policy is to depreciate buildings (but not freehold land) at the rate of 2% per annum on the straight line basis After five years, what is the net book value of the freehold land and the building in the financial accounts of Pasco Ltd?

a) 356800

b) 344000

c) 324000

d) 376000

17. The following is an extract from the trail balance of Sinthiya Ltd for its most recent year. Data: Ordinary share capital, shares of 25p Share premium General reserves Profit and loss account b/fwd Dividends paid Debit ( millions) Credit ( millions) 12 3 10 49 7

Net profit before tax has already been calculated as being 34m. Corporation tax of 5m is to be provided, and a final dividend of 35p per share is proposed. Using some or all of the figures above, what is the correct figure of retained profit for the year? 18. Cost of Goods Sold is calculated as: a) b) c) d) Closing stock purchases + opening stock Closing stock + purchases opening stock Opening stock + purchases + closing stock Opening stock + purchases closing stock

19. Which of the flowing reserves would be classified as a capital reserve? (i) (ii) (iii) (iv) Share premium account Revaluation reserve Profit and loss account Fixed asset replacement reserve

a) All of the above (i), (ii), (iii) and (iv) b) (iii) and (iv) only c) (i) and (ii) only d) (ii) and (iii) 20. At the beginning of the year, Kishalinis clubs Membership Subscriptions account showed a debit balance of 2750 and a credit balance of 1237.5. During the following year, subscriptions received amounted to 66000.

At the end if the year, subscriptions paid in advance amounted to 1100, and subscriptions in arrears, and expected to be collected, amounted to 825. You are required to calculate the amount to be transferred to the income and expenditure account for the year? 21. A business had a balance at the bank of 4000 at the start of the month. During the month, it paid for materials of 2000, less trade discount of 20% and cash discount of 10%. It received a cheque from a debtor in respect of an invoice for 600, subject to cash discount of 5%. Calculate the balance at the bank at the end of the month. 22. The profit earned by Shaniya in 2002 was 375000. He injected new capital of 90000 during the year and withdrew goods for his private use that cost 30000. If net assets at the beginning of 2002 were 75000, what were the closing net assets? 23. The following is an extract from the trial balance of a business for its most recent year. Data: Distribution expenses Administration expenses Provision for doubtful debts Fixed assets at cost Depreciation on fixed assets Bad debts written off Debtors Debit () 30000 42500 125000 25000 20000 225000 Credit () 15000

Gross profit has already been calculated as being 187500. Depreciation is to be provided at 2% on the reducing balance, and the provision for doubtful debts is to be amended to 4% of debtors. By using some or all of the figures, what is the correct net profit? 24. Rajkumars organisation restores its petty cash balance to 350 at the end of ach month. During December, the total expenditure column in the petty cash book was calculated as 310, and hence the imprest was restored by this amount. The analysis columns, which had been posted to the nominal ledger, totaled only 300. This error would result in: a) b) c) d) The trial balance being 10 higher on the credit side The petty cash balance being 10 lower than it should be He trial balance being 10 higher on the debit side No imbalance in the trial balance.

25. The prime costs of goods manufactured is the total of: a) b) c) d) All materials and labour Direct materials, labour and overheads All factory costs of goods completed All factory costs before adjusting for work in progress