ACCA

Paper F3 Financial Accounting

Mock Exam
Prepared by: Mr Yeo Hong Ann

Time allowed : 2 hours

ALL FIFTY questions are

compulsory and MUST be attempted

Paper F3 Mock Exam Questions Page 1 of 23

Q1

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?

A The Standards Advisory Council

B The International Financial Reporting Interpretations Committee

Q2

One of the following statements about sole trader businesses is incorrect?

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Q6

International Financial Reporting Standards are set by which body?

A. IASB
B. IASCF

Q7

Which of the following is not an example of the accounting concept of accruals?

A. Depreciation
B. Writing inventory down from cost to NRV
C. Prepayments

Q8

In order for the information in financial statements to be reliable it should possess

the following characteristics:

A. Neutrality
B. Consistency
C. Both of the above

Q9

The following occurrence might explain the existence of a credit balance on an

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Q11

Susan has extracted a trial balance and created a suspense account with a credit
balance of $759 to make it balance.

Susan found the following:

1. A sales invoice for $4,569 has not been entered in the accounting records
2. A payment of $1,512 has been posted correctly to the payables control
account but no other entry has been made.
3. A credit sale of $131 has only been credited to the sales account.

What is the remaining balance on the suspense account after these errors
have been corrected?

A $3,810 debit
B $2,140 credit
C $890 credit
D $622 debit

Q12

Peter and John are in partnership sharing profits in the ratio 3:2. During the
financial year the partnership earned $28,650 profit. Peter is paid a salary of
$5,000 and partners were charged interest on drawings amounting to $200 for
Peter and $350 for John. Peter’s current account had a credit balance of $15,614
at the beginning of the year.

What is the net increase in Peter’s current account during the year?

A $19,320
B $34,934
C $19,720
D $14,480

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Q13

Andrew entered into the following transactions:

1. He sold goods on credit to Cindy with a list price of $3,200. He allows a 10%
trade discount and a further 2% discount for payment within seven days.
Cindy paid within two days.
2. He made a credit sale to Esther allowing a 5% trade discount on the list price
of $640.
3. He purchased goods for $600 and paid $590, receiving a discount for
immediate cash payment.

How much discount should be recorded in the Discount Allowed account

as a result of the above transactions?

A $57.60
B $10.00
C $352.00
D $409.60

Q14

Which of the following errors should be identified by performing a

receivables control account reconciliation?

A A sales invoice of $500 has been omitted from the sales daybook
B A sales return of $45 was entered as $54 in the sales returns daybook
C Purchases of $72 were entered as sales returns in the sales returns daybook
and the individual account
D The total of the sales daybook was miscast by $200

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Q15

Mark use the imprest method of accounting for petty cash.

The petty cash was counted and there was $57.22 in hand. The following petty
cash slips were found for the following:
$
Stamps 16.35
Sale of goods to staff 12.00
Coffee and tea purchase 18.23
Birthday cards for staff 20.20

What is Mark’s imprest amount?

A $124
B $100
C $112
D $80

Q16

Clinton had receivables of $598,600 at 30 November 2008. His allowance for

receivables at 1 December 2007 was $12,460 and he wishes to change that to
2% of receivables at 30 November 2008. On 29 November 2008 he received
$635 in full settlement of a debt that he had written off in the year ended 30
November 2007.

What total amount should be recognised for receivables in the income

statement for the year ended 30 November 2008?

A $488 credit
B $11,972 debit
C $1,123 credit
D $147 debit

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Q17

Julie has prepared her draft accounts for the year ended 30 April 2008, and
needs to adjust them for the following items:

1. Rent of $10,500 was paid and recorded on 2 January 2007 for the period 1
January to 31 December 2007. The landlord has advised that the annual rent
for 2008 will be $12,000 although it has not been invoiced or paid yet.
2. Property and contents insurance is paid annually on 1 March. Joanna paid
and recorded $6,000 on 1 March 2008 for the year from 1 March 2008 to 28
February 2009.

What should the net effect on profit be in the draft accounts for the year
ended 30 April 2008 of adjusting for the above items?

A $1,000 decrease
B $1,500 increase
C $1,000 increase
D $1,500 decrease

Q18

ABC Co, a limited liability company, has non-current assets with a carrying value
of $2,500,000 on 1 December 2007.

During the year ended 30 November 2008, the following occurred:

Depreciation of $75,000 was charged to the income statement

Land and buildings with a carrying value of $1,200,000 were revalued to
$1,700,000
An asset with a carrying value of $120,000 was disposed of for $150,000

The carrying value of non-current assets at 30 November 2008 was $4,200,000.

What amount should be shown for the purchase of non-current assets in

the statement of cash flows for the year ended 30 November 2008?

A $1,395,000
B $1,895,000
C $1,425,000
D $195,000

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Q19

Luke’s receivables ledger control account does not agree with the total of the
receivables ledger. He discovered the following errors:

(1) A sales invoice has been entered into the sales day book as $895 rather than
$859
(2) The receivables column of the cash received day book has been undercast
by $600
(3) A contra of $400 against the purchase ledger has only been entered in the
control account

Which of the above errors would cause a difference between the

receivables control account and the total of the receivables ledger?

A 2 and 3 only
B 1 and 3 only
C 1 and 2 only
D 1, 2 and 3

Q20

Daniel’s trial balance did not balance so he opened a suspense account with a
balance of $2,770 credit. When investigating the difference, he discovered the
following errors:

1. The sales day book was undercast by $950

2. A loss on disposal of a non-current asset of $5,600 has been recorded in the
sundry expense account as $6,500
3. One page of transactions from the purchases day book with a total of $1,150
has been posted to the payables control account, but no other entry has been
made

What is the balance on the suspense account after Daniel has corrected the
above errors?

A $2,070
B $3,020
C $2,520
D $2,770

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Q21

John sold goods to Ruth in May 2009 with a list price of $98,000. John allowed a
trade discount of 10%. Ruth returned goods with a list price of $3,000 on 31 May
and returned a further $5,000 of goods at list price on 6 June as they were found
to be unsuitable.

How much should John record in the sales returns account at 31 May?

A $2,700
B $3,000
C $8,000
D $7,200

Q22

Esther made a profit for the year of $345,687 and has closing net assets of
$435,195. During the financial year, capital of $60,000 was introduced which
consisted of $40,000 in cash and $20,000 in non-current assets. Drawings of
$6,000 were taken out of the business each month.

What was the opening balance of net assets?

A $35,508
B $121,508
C $768,882
D $101,508

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Q23

Samuel’s trial balance did not balance so he opened a suspense account with a
debit balance of $346. Control accounts are maintained for receivables and
payables.

Samuel discovered the following:

1. The sales day book was undercast by $400

2. Purchases of $520 from the purchases day book have only been recorded in
the payables ledger control account
3. Profit on sale of non-current assets of $670 had been recorded in the sundry
income account as $760

What is the remaining balance on Samuel’s suspense account after these

errors have been corrected?

A $264 credit
B $136 debit
C $956 debit
D $1,266 debit

Q24

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Q25

Which one of the following would cause a company’s gross profit

percentage on sales to fall?

A A reduction in the total value of goods returned to suppliers.

B An increase in the costs of delivery of goods to customers.
C A decline in average inventory levels.
D An increase in theft of inventory by customers and staff.

Q26

On 1 September 2006, a business had inventory of $380,000. During the month,

sales totalled $650,000 and purchases $480,000. On 30 September 2006 a fire
destroyed some of the inventory. The undamaged goods in inventory were
valued at $220,000. The business operates with a standard gross profit margin of
30%.

Based on this information, what is the cost of the inventory destroyed in

the fire?

A $185,000
B $140,000
C $405,000
D $360,000

Q27

Where, in a company’s financial statements complying with Singapore

accounting standards, should you find dividends paid?

1 Income statement
2 Balance sheet
3 Cash flow statement
4 Statement of changes in equity.

A 1 and 3
B 2 and 3
C 1 and 4
D 3 and 4

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Q28

The following information is available about a company’s dividends:

$
2005
Sept. Final dividend for the year ended
30 June 2005 paid (declared August 2005) 100,000

2006
March Interim dividend for the year ended
30 June 2006 paid 40,000

Sept. Final dividend for the year ended

30 June 2006 paid (declared August 2006) 120,000

What figures, if any, should be disclosed in the company’s income

statement for the year ended 30 June 2006 and its balance sheet as at that
date?
Income statement Balance sheet
for the period liability
A $160,000 deduction $120,000
B $140,000 deduction nil
C nil $120,000
D nil nil

Q29

A property company received cash for rent totalling $838,600 in the year ended
31 December 2006.

Figures for rent in advance and in arrears at the beginning and end of the year
were:

31 December 2005 31 December 2006

$ $
Rent received in advance 102,600 88,700
Rent in arrears (all subsequently received) 42,300 48,400

What amount should appear in the company’s income statement for the
year ended 31 December 2006 for rental income?

A $818,600
B $738,000
C $939,200
D $858,600

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Q30

A and B are in partnership, sharing profits in the ratio 3:2 and preparing their
accounts to 30 June each year. On 1 January 2006, C joined the partnership and
the profit sharing ratio became A 40%, B 30%, and C 30%.

Profits for the year ended 30 June 2006 were:

$
6 months ended 31 December 2005 300,000
6 months ended 30 June 2006 450,000

A bad debt of $50,000 was written off in the six months to 30 June in computing
the $450,000 profit. It was agreed that this expense should be borne by A and B
only, in their original profit-sharing ratios.

What is A’s total profit share for the year ended 30 June 2006?
$
A 330,000
B 310,000
C 340,000
D 350,000

Q31

At 1 July 2005 a company’s allowance for receivables was $48,000.

At 30 June 2006, trade receivables amounted to $838,000. It was decided to

write off $72,000 of these debts and adjust the allowance for receivables to
$60,000.

What are the final amounts for inclusion in the company’s balance sheet at
30 June 2006?

Trade Allowance for Net

receivables receivables balance
$ $ $
A 838,000 60,000 778,000
B 766,000 60,000 706,000
C 766,000 108,000 658,000
D 838,000 108,000 730,000

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Q32

Which one of the following journal entries is correct according to its

narrative?
Debit Credit
$ $
A Mr Smith personal account 100,000
Directors’ remuneration 100,000
Bonus allocated to account of managing director (Mr Smith)

B Purchases 14,000
Wages 24,000
Repairs to buildings 38,000
Transferring cost of repairs to buildings carried out by
company’s own employees, using materials from inventory

C Discounts allowed 2,800

Discounts received 2,800
Correction of error: discounts allowed total incorrectly debited
to discounts received Account

D Suspense account 20,000

Rent receivable 10,000
Rent payable 10,000
Correction of error: rent received credited in error to
rent payable account.

Q33

A company’s gross profit as a percentage of sales increased from 28% in the

year ended 31 December 2005 to 33% in the year ended 31 December 2006.

Which one of the following could have caused the increase?

A An increase in sales volume.

B Understatement of closing inventory at 31 December 2005.
C Overstatement of closing inventory at 31 December 2005.
D Goods received in December 2005 and included in inventory at 31 December
2005 were not recorded in purchases until January 2006.

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Q34

Which of the following statements about inventory valuation for balance

sheet purposes are correct?

1 According to FRS 2 Inventories, average cost and FIFO (first in and first out)
are both acceptable methods of arriving at the cost of inventories.
2 Inventories of finished goods may be valued at labour and materials cost only,
without including overheads.
3 Inventories should be valued at the lowest of cost, net realisable value and
replacement cost.
4 It may be acceptable for inventories to be valued at selling price less
estimated profit margin.

A 1 and 3
B 2 and 3
C 1 and 4
D 2 and 4

Q35

Which of the following items could appear as items in a company’s cash

flow statement?

1 A bonus issue of shares

2 A rights issue of shares
3 Revaluation of non-current assets
4 Dividends paid

A All four items

B 1, 3 and 4 only
C 2 and 4 only
D 2 and 3 only

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Q36

Which of the following statements are correct?

1 A company’s issued share capital must be included in its published balance

sheet as part of shareholders’ funds.
2 If a company pays a cash dividend on ordinary shares, the total shareholders’
interest (share capital plus reserves) remains unchanged.
3 A company’s statement of changes in equity must include the proceeds of
any share issue during the period.
4 A company must disclose its significant accounting policies by note to its
financial statements.

A 1 and 2 only
B 1 and 3 only
C 3 and 4 only
D 1, 3 and 4

Q37

A company has occupied rented premises for some years, paying an annual rent
of $120,000. From 1 April 2006 the rent was increased to $144,000 per year.
Rent is paid quarterly in advance on 1 January, 1 April, 1 July and 1 October
each year.

What figures should appear for rent in the company’s financial statements
for the year ended 30 November 2006?

Income statement Balance sheet

$ $
A 136,000 Prepayment 12,000
B 136,000 Prepayment 24,000
C 138,000 Nil
D 136,000 Accrual 12,000

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Q38

A business received a delivery of goods on 29 June 2006, which was included in

inventory at 30 June 2006. The invoice for the goods was recorded in July 2006.

What effect will this have on the business?

1 Profit for the year ended 30 June 2006 will be overstated.

2 Inventory at 30 June 2006 will be understated.
3 Profit for the year ending 30 June 2007 will be overstated.
4 Inventory at 30 June 2006 will be overstated.

A 1 and 2
B 2 and 3
C 1 only
D 1 and 4

Q39

Which, if any, of the following statements about intangible assets are

correct?

1 Goodwill arising on the acquisition of a subsidiary will appear as an intangible

asset in the balance sheet of the acquiring company and in the consolidated
balance sheet.
2 Deferred development expenditure must be amortised over a period not
exceeding five years.
3 If the conditions specified in FRS 38 Intangible assets are met, development
expenditure may be capitalised, if the directors decide to do so.
4 Trade investments must appear in a company’s balance sheet under the
heading of intangible assets.

A 1 and 3
B 1 and 4
C 2 and 4
D None of the statements is correct

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Q40

The company’s policy is to charge depreciation on the straight line basis at 20%
per year, with proportionate depreciation in the years of purchase and sale.

What should be the charge for depreciation in the company’s income

statement for the year ended 31 December 2006?

A $184,800
B $192,600
C $191,400
D $184,200

Q41

Which of the following characteristics of financial information contribute to

reliability, according to the r
F amework for ht e r
P epar ation and Presentation
of Financial Statements ?

1 Completeness
2 Prudence
3 Neutrality
4 Faithful representation

A All four items

B 1, 2 and 3 only
C 1, 2 and 4 only
D 2, 3 and 4 only

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Q42

Which of the following statements about the requirements of FRS 37

Provisions, contingent liab l
i eit s and contn
i gent assets are correct?

1 A contingent asset should be disclosed by note if an inflow of economic

benefits is probable.
2 No disclosure of a contingent liability is required if the possibility of a transfer
of economic benefits arising is remote.
3 Contingent assets must not be recognised in financial statements unless an
inflow of economic benefits is virtually certain to arise.

A All three statements are correct

B 1 and 2 only
C 1 and 3 only
D 2 and 3 only

Q43

Which of the following statements about bank reconciliations are correct?

1 In preparing a bank reconciliation, unpresented cheques must be deducted

from a balance of cash at bank shown in the bank statement.
2 A cheque from a customer paid into the bank but dishonoured must be
corrected by making a debit entry in the cash book.
3 An error by the bank must be corrected by an entry in the cash book.
4 An overdraft is a debit balance in the bank statement.

A 1 and 3
B 2 and 3
C 1 and 4
D 2 and 4

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Q44

Which of the following statements are correct, according to FRS 10 Events

after the balance sheet date ?

1 Details of all adjusting events must be disclosed by note to the financial

statements.
2 A material loss arising from the sale, after the balance sheet date, of
inventory valued at cost at the balance sheet date must be reflected in the
financial statements.
3 If the market value of investments falls materially after the balance sheet
date, the details must be disclosed by note.
4 Events after the balance sheet date are those that occur between the balance
sheet date and the date when the financial statements are authorised for
issue.

A 1 and 2 only
B 1, 3 and 4
C 2 and 3 only
D 2, 3 and 4

Q45

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Q46

Which one of the following statements is correct?

A The prudence concept requires assets to be understated and liabilities to be

overstated.
B To comply with the law, the legal form of a transaction must always be
reflected in financial statements.
C If a non-current asset initially recognised at cost is revalued, the surplus must
be credited in the income statement.
D In times of rising prices, the use of historical cost accounting tends to
understate assets and overstate profits.

Q47

All the sales made by a retailer are for cash, and her sale prices are fixed by
doubling cost. Details recorded of her transactions for September 2006 are as
follows:

$
1 Sept. Inventories 40,000
30 Sept. Purchases for month 60,000
Cash banked for sales for month 95,000
Inventories 50,000

Which two of the following conclusions could separately be drawn from

this information?

1 $5,000 cash has been stolen from the sales revenue prior to banking
2 Goods costing $5,000 have been stolen
3 Goods costing $2,500 have been stolen
4 Some goods costing $2,500 had been sold at cost price

A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4

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Q48

A draft cash flow statement contains the following:

$m
Profit before tax 22
Depreciation 8
Increase in inventories (4)
Decrease in receivables (3)
Increase in payables (2)
–––
Net cash inflow from operating activities 21

Which of the following corrections need to be made to the calculation?

1 Depreciation should be deducted, not added

2 Increase in inventories should be added, not deducted
3 Decrease in receivables should be added, not deducted
4 Increase in payables should be added, not deducted

A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4

Q49

What should the closing balance be when all the errors are corrected?

A $128,200
B $509,000
C $224,200
D $144,600

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Q50

Bush Co received a statement from one of its suppliers, XYZ Co, showing a
balance due of $3,980. The amount due according to the payables ledger
account of XYZ Co in Bush Co’s records was only $230.

Comparison of the statement and the ledger account revealed the following
differences:

1 A cheque sent by Bush Co for $270 has not been allowed for in XYZ Co’s
statement.
2 XYZ Co has not allowed for goods returned by Bush Co $180.
3 Bush Co made a contra entry, reducing the amount due to XYZ Co by $3,200,
for a balance due from XYZ Co in Bush Co’s receivables ledger. No such
entry has been made in XYZ Co’s records.

What difference remains between the two companies’ records after

adjusting for these items?

A $460
B $640
C $6,500
D $100

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