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financial reporting
ACCA Financial Reporting: Practice And Revision Kit 1st Edition BPP Learning Media - Solutions
24.18 Which one of the following statements is correct?A If a business makes a profit, it has positive cash flow.B If a business makes a loss, it has negative cash flow.C A business may make a profit but have negative cash flow.D A business that breaks even has cash inflows equal to cash used.(2
24.17 Big Time Co had the following transactions during the year.Purchases from suppliers were $18,500, of which $2,550 was unpaid at the year end. Brought forward payables were $1,000.Wages and salaries amounted to $9,500, of which $750 was unpaid at the year end. The financial statements for the
24.16 A company sold warehouse premises at a loss during a financial period. How would this transaction be included in a statement of cash flows for the period that complies with IAS 7 Statement of Cash Flows and that uses the indirect method to present cash flows from operating activities?Loss on
24.15 The following information is available about the plant, property and equipment of Lok Co, for the year to 31 December 20X3.$'000 Carrying amount of assets at beginning of the year 462 Carrying amount of assets at end of the year 633 Increase in revaluation surplus during the year 50 Disposals
24.14 Which one of the following statements is correct, with regard to the preparation of a statement of cash flows that complies with IAS 7 Statement of Cash Flows? A A statement of cash flows prepared using the direct method produces the same figure for net cash from operating activities as a
24.13 Which, if any, of the following items could be included in 'cash flows from financing activities' in a statement of cash flows that complies with IAS 7 Statement of Cash Flows?1 Interest received 2Taxation paid 3Proceeds from sale of property A1 only B2 only C3 only DNone of them(2 marks)
24.12 The following extract is taken from a draft version of company's statement of cash flows, prepared by a trainee accountant.$'000 Net cash flow from operating activities Profit before tax 484 Depreciation charges 327 Profit on sale of property, plant and equipment 35 Increase in
24.11 A draft statement of cash flows contains the following calculation of cash flows from operating activities: Profit before tax Depreciation Decrease in inventories Decrease in trade and other receivables Decrease in trade payables Net cash inflow from operating activities Which of the
24.10 The following extract is from the financial statements of Pompeii, a limited liability company at 31 October: Equity and liabilities Share capital Share premium Retained earnings Non-current liabilities Bank loan 20X9 $'000 20X8 $'000 120 80 60 40 85 68 265 188 100 365 150 338 What is the
24.9 IAS 7 requires the statement of cash flows to open with the calculation of net cash from operating activities, arrived at by adjusting net profit before taxation. Which one of the following lists consists only of items which could appear in such a calculation? A B C D Depreciation, increase in
24.8 Which of the following items could appear in a company's statement of cash flows?1 Proposed dividends 2Rights issue of shares 3Bonus issue of shares 4Repayment of loan A1 and 3 B2 and 4 C1 and 4 D2 and 3(2 marks)
24.7 An extract from a statement of cash flows prepared by a trainee accountant is shown below.Cash flows from operating activities$m Net profit before taxation 28 Adjustments for: Depreciation(9)Operating profit before working capital changes 19 Decrease in inventories 13 Increase in
24.6 Which of the following assertions about statements of cash flows is/are correct?1 A statement of cash flows prepared using the direct method produces a different figure for operating cash flow from that produced if the indirect method is used.2 Rights issues of shares do not feature in
24.5 In preparing a company's statement of cash flows complying with IAS 7 Statements of Cash Flows, which, if any, of the following items could form part of the calculation of cash flow from financing activities?1 Proceeds of sale of premises 2Dividends received 3Bonus issue of shares A1 only B2
24.4 Part of a company's draft statement of cash flows is shown below: Net profit before tax Depreciation charges Proceeds of sale of non-current assets $'000 8,640 (2,160) 360 Increase in inventory Increase in accounts payable The following criticisms of the above extract have been made: 123 +
24.3 In the course of preparing a company's statement of cash flows, the following figures are to be included in the calculation of net cash from operating activities. Depreciation charges Profit on sale of non-current assets Increase in inventories Decrease in receivables Increase in payables What
24.2 Part of the process of preparing a company's statement of cash flows is the calculation of cash inflow from operating activities.Which of the following statements about that calculation (using the indirect method) are correct?1 Loss on sale of operating non-current assets should be deducted
24.1 Which of the following items appear in a company's statement of cash flows?1 Surplus on revaluation of non-current assets 2Proceeds of issue of shares 3Proposed dividend 4Irrecoverable debts written off 5Dividends received A1, 2 and 5 only B2, 3, 4, 5 only C2 and 5 only D3 and 4 only(2 marks)
23.9 If a material event occurs after the reporting date but before the financial statements are authorised for issue outside the organisation, and this event does NOT require adjustment, what information should be disclosed in the financial statements?A The nature of the event and an estimate of
23.8 Which of the following is the correct definition of an adjusting event after the reporting period?A An event that occurs between the reporting date and the date on which the financial statements are authorised for issue that provides further evidence of conditions that existed at the reporting
23.7 Which of the following events between the reporting date and the date the financial statements are authorised for issue must be adjusted in the financial statements?1 Declaration of equity dividends 2Decline in market value of investments 3The announcement of changes in tax rates 4The
23.6 The financial statements of Overexposure Co for the year ended 31 December 20X1 are to be approved on 31 March 20X2. Before they are approved, the following events take place.1 On 14 February 20X2 the directors took the strategic decision to sell their investment in Quebec Co despite the fact
23.5 Which of the following events occurring after the reporting period are classified as adjusting, if material?1 The sale of inventories valued at cost at the end of the reporting period for a figure in excess of cost 2A valuation of land and buildings providing evidence of an impairment in value
23.4 IAS 10 Events after the reporting period regulates the extent to which events after the reporting period should be reflected in financial statements.Which one of the following lists of such events consists only of items that, according to IAS 10, should normally be classified as
23.3 In finalising the financial statements of a company for the year ended 30 June 20X4, which of the following material matters should be adjusted for?1 A customer who owed $180,000 at the end of the reporting period went bankrupt in July 20X4.2 The sale in August 20X4 for $400,000 of some
23.2 The draft financial statements of a limited liability company are under consideration. The accounting treatment of the following material events which occurred after the end of the reporting period needs to be determined.According to IAS 10 Events after the reporting period, which TWO of the
23.1 Which of the following material events after the reporting period and before the financial statements are approved by the directors should be adjusted for in those financial statements? 1 A valuation of property providing evidence of impairment in value at the reporting period 2 Sale of
22.9 Which one of the following is a disclosure about non-adjusting events required by IAS 10 Events after the reporting period? A Dividends declared before the end of the reporting period and paid after the end of the reporting period The nature of both material and non-material non-adjusting
22.8 Which of the following are required as disclosures by IAS 2 Inventories?1 The amount of write-downs of inventories in the period that have been recognised as an expense 2The original cost of inventories that are carried at net realisable value 3The carrying amount of inventories classified by
22.7 Which of the following should be disclosed in the note to the financial statements for tangible non-current assets?1 The market value of all assets classified as tangible non-current assets, whether they have been revalued or not 2A reconciliation of the carrying amount of non-current assets
22.6 A certain IFRS requires that the following disclosure is made in a note to the financial statements:(i)A brief description of its nature(ii)Where practicable an estimate of the financial effect(iii)An indication of the uncertainties relating to the amount or timing of any outflow(iv)The
22.5 Which of the following statements is/are correct?1 IAS 37 requires disclosure in the notes to the financial statements of the uncertainties affecting the outcome of a provision 2IAS 10 requires disclosure of the nature and financial effect of a non-adjusting event after the reporting period in
22.4 Which of the following should be disclosed in the note to the financial statements for intangible assets?1 The method of amortisation used 2A reconciliation of the carrying amount at the beginning and end of the period 3The useful life of the assets 4The net realisable value of any deferred
22.3 Which of the following should be disclosed in the note to the financial statements for inventories?1 The date the inventories were purchased or manufactured and/or how long they have been held as inventories 2The amount of inventories carried at net realisable value 3The accounting policies
22.2 For which class or classes of assets should a company disclose in the notes to the financial statements a reconciliation of the opening carrying amount to the closing carrying amount, showing the movements in the period?1 Cash 2Intangible assets 3Tangible non-current assets 4Trade receivables
22.1 Which of the following best describes the purpose of disclosure notes in the financial statements?A To provide more detail for the users of financial statements about the information in the statement of financial position and statement of profit or loss and other comprehensive income.B To
21.10 Fruitz Co has a tax liability relating to 20X1 brought forward in 20X2 of $16,000. This liability is finally agreed at $18,500, which is paid in 20X2.Fruitz's accountant estimates their tax liability for profits earned in 20X2 will be $20,000.What will be the charge for taxation in Fruitz's
21.9 Which of the following statements about limited liability companies' accounting is/are correct?1 A revaluation surplus arises when a non-current asset is sold at a profit.2 The authorised share capital of a company is the maximum nominal value of shares and loan notes the company may issue.3
21.8 The correct ledger entries needed to record the issue of 200,000 $1 shares at a premium of 30c, and paid for in full, would be ADr Ordinary share capital$200,000 Cr Share premium account$60,000 Cr Cash$140,000 BDr Cash$260,000 Cr Ordinary share capital$200,000 Cr Share premium account$60,000
21.7 Which one of the following items does NOT appear under the heading 'equity and reserves' on a company statement of financial position?A Share premium account BRetained earnings CRevaluation surplus DLoan stock(2 marks)
21.6 Which TWO of the following could appear as separate items in the statement of changes in equity required by IAS 1 Presentation of Financial Statements as part of a company's financial statements?A Dividends on equity shares paid during the period BLoss on sale of investments CProceeds of an
21.5 Identify, by indicating the relevant box in the table below, whether each of the following statements about the financial statements of a limited company is true or false, according to International Financial Reporting Standards.In preparing a statement of cash True False flows, either the
21.4 Which of the following items are required to be disclosed by a limited liability company, either on the face of their main financial statements or in the notes, according to International Financial Reporting Standards?1 Share capital 2Dividends proposed 3Depreciation and amortisation A1 and 2
21.3 At 31 December 20X2 the following matters require inclusion in a company's financial statements:1 On 1 January 20X2 the company made a loan of $12,000 to an employee, repayable on 30 April 20X3, charging interest at 2 per cent per year. On the due date she repaid the loan and paid the whole of
21.2 Which TWO of the following might appear as an item in a company's statement of changes in equity?A Profit on disposal of properties BSurplus on revaluation of properties CEquity dividends proposed after the reporting date DIssue of share capital(2 marks)
21.1 Which of the following items may appear as current liabilities in a company's statement of financial position?1 Revaluation surplus 2Loan due for repayment within one year 3Taxation 4Preference dividend payable on redeemable preference shares A1, 2 and 3 B1,2 and 4 C1,3 and 4 D2, 3 and 4(2
20.16 Wanda keeps no accounting records. The following information is available about her position and transactions for the year ended 31 December 20X4:$Net assets at 1 January 20X4 210,000 Drawings during 20X4 48,000 Capital introduced during 20X4 100,000 Net assets at 31 December 20X4 400,000
20.15 The following information is available for the year ended 31 December 20X4 for a trader who does not keep proper accounting records:$Inventories at 1 January 20X4 38,000 Inventories at 31 December 20X4 45,000 Purchases 637,000 Gross profit percentage on sales = 30%Based on this information,
20.14 On 31 December 20X0 the inventory of V was completely destroyed by fire. The following information is available:1 Inventory at 1 December 20X0 at cost $28,400 2Purchases for December 20X0 $49,600 3Sales for December 20X0 $64,800 4Standard gross profit percentage on sales revenue 30%Based on
20.13 A sole trader who does not keep full accounting records wishes to calculate her sales revenue for the year.The information available is:1 Opening inventory$17,000 2Closing inventory$24,000 3Purchases$91,000 4Standard gross profit percentage on sales revenue 40%Which of the following is the
20.12 Alpha is a sole trader who does not keep proper accounting records.Alpha's first year of trading was 20X4. From reviewing Alpha's bank statements and the incomplete records relating to cash maintained, the following summary has been compiled.Bank and cash summary, Alpha, 20X4$Cash received
20.11 Aluki fixes prices to make a standard gross profit percentage on sales of 20%.The following information for the year ended 31 January 20X3 is available to compute her sales total for the year.$Inventory: 1 February 20X2 243,000 31 January 20X3 261,700 Purchases 595,400 Purchases returns
20.10 Senji does not keep proper accounting records, and it is necessary to calculate her total purchases for the year ended 31 January 20X3 from the following information:$Trade payables: 31 January 20X2 130,400 31 January 20X3 171,250 Payment to suppliers 888,400 Cost of goods taken from
20.9 A sole trader's business made a profit of $32,500 during the year ended 31 March 20X8. This figure was after deducting $100 per week wages for himself. In addition, he put his home telephone bill through the business books, amounting to $400 plus sales tax at 17.5%. He is registered for sales
20.8 A business's bank balance increased by $750,000 during its last financial year. During the same period it issued shares of $1 million and repaid a loan note of $750,000. It purchased non-current assets for$200,000 and charged depreciation of $100,000. Working capital (other than the bank
20.7 A fire on 30 September 20X2 destroyed some of a company's inventory and its inventory records.The following information is available:$Inventory 1 September 20X2 318,000 Sales for September 20X2 612,000 Purchases for September 20X2 412,000 Inventory in good condition at 30 September 20X2
20.6 A sole trader fixes her prices by adding 50 per cent to the cost of all goods purchased. On 31 October 20X3 a fire destroyed a considerable part of the inventory and all inventory records. Her trading account for the year ended 31 October 20X3 included the following figures: Sales Opening
20.5 Based on the above information, what figure should appear in A's statement of profit or loss for the year ended 30 November 20X3 for purchases? A $283,760 B $325,840 C $329,760 D $331,760 (2 marks)A is a sole trader who does not keep full accounting records. The following details relate to her
20.4 Based on the above information, what should be the figure for sales revenue in A's statement of profit or loss for the year ended 30 November 20X3?$A is a sole trader who does not keep full accounting records. The following details relate to her transactions with credit customers and suppliers
20.3 A sole trader fixes his prices to achieve a gross profit percentage on sales revenue of 40%. All his sales are for cash. He suspects that one of his sales assistants is stealing cash from sales revenue. His trading account for the month of June 20X3 is as follows: Recorded sales revenue Cost
20.2 Which of the following calculations could produce an acceptable figure for a trader's net profit for a period if no accounting records had been kept?A Closing net assets plus drawings minus capital introduced minus opening net assets BClosing net assets minus drawings plus capital introduced
20.1 A business has compiled the following information for the year ended 31 October 20X2:$Opening inventory 386,200 Purchases 989,000 Closing inventory 422,700 The gross profit as a percentage of sales is always 40%Based on these figures, what is the sales revenue for the year?A$952,500
18.11 A company has a suspense account balance in its trial balance of $560 credit.It was discovered that discounts allowed of $700 have been debited to, instead of credited to, the receivables control account.What is the remaining balance on the suspense account after this error has been adjusted
18.10 A suspense account shows a credit balance of $130. Which of the following could be due to?A Omitting a sale of $130 from the sales ledger BRecording a purchase of $130 twice in the purchases account CFailing to write off a bad debt of $130 DRecording an electricity bill paid of $65 by
18.9 The suspense account shows a debit balance of $100. What could this balance be due to?A Entering $50 received from A Turner on the debit side of A Turner's account BEntering $50 received from A Turner on the credit side of A Turner's account CUndercasting the sales day book by $100
18.8 The trial balance of C, a limited liability company, did not agree, and a suspense account was opened for the difference. Checking in the bookkeeping system revealed a number of errors.Which TWO of the following errors would require an entry to the suspense account as part of the process of
18.7 The trial balance of Z failed to agree, the totals being: DEBIT$836,200 CREDIT$819,700 A suspense account was opened for the amount of the difference and the following errors were found and corrected:1 The total of the cash discount received column in the cash book had not been posted to the
18.6 A company's trial balance failed to agree, the out of balance difference of $25,000 being posted to a suspense account.Subsequent investigation revealed the difference was due to one side of an entry to record the purchase of machinery for $25,000, by cheque, failing to post to the plant and
18.5 A suspense account was opened when a trial balance failed to agree. The following errors were later discovered..A gas bill of $420 had been recorded in the gas account as $240.A sales invoice to a customer for $50 had been credited to accounts receivable..Interest received of $70 had been
18.4 A trial balance extracted from a sole trader's records failed to agree, and a suspense account was opened for the difference.Which of the following errors would require an entry in the suspense account in correcting them?1 Sales returns were mistakenly debited to the purchases returns
18.3 A company's trial balance totals were:Debit$387,642 Credit$379,511 A suspense account was opened for the difference.Which one of the following errors would have the effect of reducing the difference when corrected?A The petty cash balance of $500 has been omitted from the trial balance.B$4,000
18.2 What will the balance on the suspense account be after making the necessary entries to correct the errors affecting the suspense account?A$2,440 Debit B$15,560 Credit C$13,640 Debit D$3,440 Debit(2 marks)
18.1 Which of these errors will require an entry to the suspense account to correct them?A All five items B3 and 5 only C2, 4 and 5 only D1, 2, 3 and 4 only(2 marks)
17.18 Paula Co is reconciling its receivables control account and has discovered the following items:(1)An invoice for $110 had been recorded in the receivables ledger as $1,100(2)A cash sale of $100 to a customer had been posted to the receivables ledger Where should each of the corrections be
17.17 The electricity account for Jingles Co for the year ended 30 June 20X1 was as follows.$Opening balance for electricity accrued at 1 July 20X0 300 Payments made during the year 1 August 20X0 for three months to 31 July 20X0 600 1 November 20X0 for three months to 31 October 20X0 720 1 February
17.16 Beta Co has total assets of $650,000 and profit for the year of $150,000 recorded in the financial statements for the year ended 31 December 20X3. Inventory costing $50,000, with a resale value of$75,000, was received into the warehouse on 2 January 20X4 and included in the inventory value
17.15 The following balances have been extracted from the nominal ledger accounts of Tanya, but the figure for bank loan is unknown. There are no other accounts in the main ledger.$Payables 27,000 Capital 66,000 Purchases 160,000 Sales 300,000 Other expenses 110,000 Receivables 33,000 Purchase
17.14 The following are balances on the accounts of Luigi, a sole trader, as at the end of the current financial year and after all entries have been processed and the profit for the year has been calculated. $ Non-current assets 85,000 Receivables 7,000 Trade payables 3,000 Bank loan 15,000
17.13 Two types of common errors in bookkeeping are errors of principle and errors of transposition.Which of the following correctly states whether or not these errors will be revealed by extracting a trial balance?Errors of principle Errors of transposition AWill be revealed Will not be revealed
17.12 A purchase return of $48 has been wrongly posted to the debit of the sales returns account, but has been correctly entered in the supplier's account.Which of the following statements about the trial balance would be correct?A The credit side to be $48 more than the debit side BThe debit side
17.11 The accountant at Investotech discovered the following errors after calculating the company's profit for 20X3:(a)A non-current asset costing $50,000 has been included in the purchases account(b)Stationery costing $10,000 has been included as closing inventory of raw materials, instead of
17.10 Net profit was calculated as being $10,200. It was later discovered that capital expenditure of $3,000 had been treated as revenue expenditure, and revenue receipts of $1,400 had been treated as capital receipts.What is the net profit after correcting this error?A$5,800 B$8,600 C$11,800
17.9 An organisation restores its petty cash balance to $250 at the end of each month. During October, the total expenditure column in the petty cash book was calculated as being $210, and the imprest was restored by this amount. The analysis columns posted to the nominal ledger totalled only
17.8 A company's statement of profit or loss and other comprehensive income for the year ended 31 December 20X4 showed a net profit of $83,600. It was later found that $18,000 paid for the purchase of a motor van had been debited to motor expenses account. It is the company's policy to depreciate
17.7 Where a transaction is entered into the correct ledger accounts, but the wrong amount is used, what is the error known as?A An error of omission BAn error of original entry CAn error of commission DAn error of principle(2 marks)
17.6 What is an error of commission?A An error where a transaction has not been recorded BAn error where one side of a transaction has been recorded in the wrong account, and that account is of a different class to the correct account CAn error where one side of a transaction has been recorded in
17.5 Which one of the following is an error of principle?A Plant and machinery purchased was credited to a non-current assets account.B Plant and machinery purchased was debited to the purchases account.C Plant and machinery purchased was debited to the equipment account.D Plant and machinery
17.4 The debit side of a trial balance totals $50 more than the credit side. Which one of the following could this be due to?A A purchase of goods for $50 being omitted from the payables control account BA sale of goods for $50 being omitted from the receivables control account CAn invoice of $25
17.3 A company's trial balance failed to agree, the totals being:Debit$815,602 Credit$808,420 Which one of the following errors could fully account for the difference?A The omission from the trial balance of the balance on the insurance expense account $7,182 debit BSettlement discounts received
17.2 The bookkeeper of Peri made the following mistakes:Sales returns of $384 were credited to the purchases returns account.Purchases returns of $296 were debited to the sales returns account.Which one of the following journal entries will correct the errors?Dr Cr$$A Sales returns 768 Purchases
17.1 The debit side of a trial balance totals $800 more than the credit side.Which one of the following errors would fully account for the difference?A$400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset account.B Credit note issued to a
16.15 Listed below are five potential causes of difference between a company's cash book balance and its bank statement balance as at 30 November 20X3: 1 2 Cheques recorded and sent to suppliers before 30 November 20X3 but not yet presented for payment An error by the bank in crediting to another
16.14 The following bank reconciliation statement has been prepared for a company: Overdraft per bank statement Add: Deposits credited after date Less: Unpresented cheques presented after date Overdraft per cash book $ 39,800 64,100 103,900 44,200 59,700 Assuming the amount of the overdraft per the
16.13 After checking a business cash book against the bank statement, which of the following items could require an entry in the cash book?1 Bank charges 2A cheque from a customer which was dishonoured 3Cheque not presented 4Deposits not credited 5Credit transfer entered in bank statement 6Standing
16.12 The following attempt at a bank reconciliation statement has been prepared by Q Co:$Overdraft per bank statement 38,600 Add: deposits not credited 41,200 79,800 Less: unpresented cheques 3,300 Overdraft per cash book 76,500 Assuming the bank statement balance of $38,600 to be correct, what
16.11 The following information relates to a bank reconciliation.(i)The bank balance in the cashbook before taking the items below into account was$8,970 overdrawn.(ii)Bank charges of $550 on the bank statement have not been entered in the cashbook.(iii)The bank has credited the account in error
16.10 Which of the following statements about bank reconciliations are correct?1 A difference between the cash book and the bank statement must be corrected by means of a journal entry.2 In preparing a bank reconciliation, lodgements recorded before date in the cash book but credited by the bank
16.9 The following bank reconciliation statement has been prepared by a trainee accountant:$Overdraft per bank statement 3,860 Less: unpresented cheques 9,160 5,300 Add: deposits credited after date 16,690 Cash at bank as calculated above 21,990 What should be the correct balance per the cash
16.8 In preparing a company's bank reconciliation statement at March 20X3, the following items are causing the difference between the cash book balance and the bank statement balance:1 Bank charges $380 2Error by bank $1,000 (cheque incorrectly debited to the account)3 Lodgements not credited
16.7 Listed below are some possible causes of difference between the cash book balance and the bank statement balance when preparing a bank reconciliation.Which TWO of these items require an entry in the cash book?A Cheque paid in, subsequently dishonoured BError by bank CBank charges DLodgements
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