British Management College- Mock Exam

PAPER: Financial Accounting (FA)

Full Marks 25×2=50

Time allowed: 1 Hour

STUDENTS NAME:……………………………..
DATE:…………………………………………………
Marks obtained:………………………………………………
1. Which of the following correctly describes a credit note?
a) A note raised by the purchaser of goods recording the receipt of goods into the warehouse.
b) A note raised by the purchaser of goods formally requesting that the amount recorded as owed by them be
reduced.
c) A note provided by the supplier of goods settling out what is included in a consignment.
d) A note which records goods returned by a customer or the reduction of money owed by a customer.
Answer:……………………….
2. Which of the following is /are TRUE in respect of limited liability company?
a) When a business is incorporated, certain legal requirement must be complied with
b) The owners of a company have joint and personal liability for all company debts
c) A company has less rigid reporting obligations compared to a sole trader
d) The company is a separate legal entity which exists independently at its owners
Answer:……………………….
3. Busy Co. has decided to change its method of inventory valuation from FIFO to average cost. At 31 st December
20X7, the inventory valuation using average cost is much lower than its FIFO valuation. When considering the
effect of the inventory valuation, which of the accounting concept should the users of Busy Co’s financial
statements consider?
a) Accruals concept
b) Going concern
c) Substance over form
d) Consistency
Answer:……………………….
4. Which of the following is a book of prime entry?
a) Sales Invoice
b) Purchase day book
c) Sales day book
d) Journal
Answer:……………………….
5. Which TWO of the following be included in a statement of profit or loss?
a) Income for the year
b) Non-current liabilities
c) Drawings taken from the business
d) Current assets
e) Expenses for the year
f) Capital introduced
Answer:……………………….
6. A business maintains a three column cash book. The credit side of the cash book shows a total in the early
settlement discount column. Which is the correct total posting for this total?
a) Dr. Revenue
b) Dr. Discount received
c) Cr. Discounts received
d) Cr. Revenue
Answer:……………………….
7. According to IASB’s conceptual framework for financial reporting, which of the following elements are directly
related to the statements of financial position?
a) Income
b) Liabilities
c) Assets
d) Expenses
e) Equity
Answer:……………………….
8. Which TWO of the following statements about debit note are correct?
a) It is an agreement to sell goods or services
b) It is raised by the seller of goods
c) It is a formal request for a credit note to be issued
d) It is raised by the purchaser of goods
Answer:……………………….
9. Which of the following statements regarding the qualitative characteristics of financial information is FALSE?
a) Understandability means that points are too complex for non-expert users should be excluded
b) Information is verifiable if different, knowledgeable and independent observers could reach consensus that a
particular depiction is a faithful representation
c) Information will be only useful if it is relevant and faithfully represented
d) Information is timely then its usefulness is enhanced
Answer:……………………….
10. Wing started a business with $5,000 of capital. In his first month of trading he made a profit of $1,600. At the end
of the month Wing was owed $1,500 from his customers and had $5,400 in the bank. He also owed $1,000 to his
suppliers.

What are Wing’s drawings for the first month?

a) $900
b) $500
c) $1,700
d) $700
Answer:……………………….

11. Which of the following are the characteristics of a limited liability company?
a) There are two or more owners who work in the business and share the profits between them by
agreement
b) The owner or owners hold shares in the business which entitle them to vote at general meetings
c) The business is recognized in law as a separate legal entity to its owners
Answer:……………………….
12. Which TWO of the following will a journal be used for?
a) To check that the trial balance is in balance
b) To record the depreciation charge for the year
c) To record non-routine transactions
d) To record goods purchased
Answer:……………………….
13. Which TWO of the following statements are true of the duality concept?
a) Each transaction must have only two entries
b) Each transaction has both debit and credit entries
c) The value of debit and credit entries must be equal
d) The number of debit and credit entries must be equal
Answer:……………………….
14. A keeps a$200 petty cash float which she manages using an imprest system. Why it is important that A keeps a
record of the detailed petty cash transactions?
a) To ensure that business expenses are recorded correctly
b) To ensure that there is a check on the security of the petty cash
c) To ensure that the correct cash at bank balance is recorded in the general ledger
Answer:
a) 2 and 3 only
b) 1 only
c) 1 and 2 only
d) 1, 2, 3
15. Alastair has purchased goods with a list price of $12,000 from McDougal on credit. McDougal has offered a
discount of 2% if Alastair pays cash within 14 days of purchase. Alastair has taken advantage of the discount and
needs to record the cash payments.
What is the correct journal entry to record the cash paid ?
1. Dr. Purchases $12,000 Cr. Discount Received $240 Cr. Cash $ 11,760
2. Dr. Payables $ 11,760 Cr. Cash $ 11760
3. Dr. Cash $ 11,760 Cr. Payables $ 11,760
4. Dr. Payables $ 12,000 Cr. Discount Received $ 240 Cr. Cash $ 11,760
Answer:
16. Which of the following statements is/are TRUE?
a) A debit records an increase in assets and a decrease in prepayment expenses
b) A debit records an increase in assets and decrease in liability
c) A credit records an increase in drawing and decrease in liability
d) A credit records a decrease in assets, an increase in prepayment expenses and decrease in drawing
Answer :…………………

17. Jack, a sole trader, had the following assets and liabilities at the beginning and at the end of his financial year:
Particular Beginning of the Year ($) End of the Year ($)
Motor vehicle 12,000 10,000
Cash at bank 250 -
Bank overdraft - 4,250
Inventory 5,250 6,750
Receivables - 2,350
No drawings were or capital introduced during the year.
What was Jack's profit or loss for the year?
1) $ 2650 Loss 2) $ 5850 Profit 3) $ 5850 Loss 4) $ 2650 Profit
18. A Co’s receivables cost account at 31 March 20X7 is as follows:
Particular $ Particular $
Balance brought forward 100,300 Cash received from customer 56,600
Credit sales 80,600 Balance carried forward 124,300
180,900 180,900
What amount should be included for receivables in the trial balance at 1 April 20X7?
a) $180,900 Cr.
b) $124,300 Cr.
c) $124,300 Dr.
d) $180,900 Dr.
Answer:……………………….
19. Jay sells fruit and sales are for cash. The takings are banked at the end of each week and a cash float of $50 is
maintained. During the week commencing 25 March, the following payments were made from cash:
 Payment to suppliers $ 340
 Wages $ 150
 Rent $ 70
Jay banked $ 600 at the end of the week.
What were the cash takings for the week commencing 25 March?
1) $ 1,110 (2) $ 1,160 (3) $ 600 (4) $ 560
Answer:……………………….
20. Which of the following is a source document for petty cash?
a) Purchase invoices b) Quotation C) Sales invoice d) Receipt and claim form

21. On 28 December 20X4 Ming purchased 6,000 units of component x with a retail price of $12 per unit. The supplier
gave Ming a $2 per unit trade discount and a further discount of $0.50 per unit if she paid within the two months.
Although Ming had not paid for the goods before her year end of 31 December 20X4. She plans to pay for the
goods on 28 January 20X5. What is the correct journal entry to record the purchase of component x on 28
December 20X4?
A) Dr. purchases $72,000 Cr. Discount received $12,000 Cr. Payables $60,000
B) Dr. purchases $72,000 Cr. Payables $72,000
C) Dr. purchases $57,000 Cr. Cash $57,000
D) Dr. purchases $60,000 Cr. Payables $60,000

22. Hiroto regularly buys from a supplier who offers trade discount of 10% to all customers who buy more than 1000
units of their product in a single order. They also offer a further settlement discount of 5% if the payment is made
within seven days of delivery. Hiroto orders 800 units costing $5 each and pays when the goods are delivered. How
much will Hiroto record as discount received on this transaction?
1. $200 2. $580 3. $180 4. $400
23. Transaction need to be accounted for and presented in accordance with their substance and economic reality
even if their legal form is different is known as ……………………..
a) Materiality
b) Substance over form
c) Faithful representation
d) Accruals
24. When preparing financial statements it is important that they are complete, neutral and errors free. Which of the
following qualitative characteristics does the above statement support?
a) Timeliness
b) Comparability
c) Understandability
d) Faithful representation
Answer:……………………….

25. Bobbin introduced $13000 into his business. Bobbin then purchases goods for $5000 on credit. He made sales of
20% of goods purchased for $1500 on cash. He then sold 10% of goods purchased on credit for $700. Find total
Assets and Capital using accounting equation?
Assets = $…………………
Capital =$…………………