Omair Masood: AS Level MCQs Madness

NCQ NABNESS ASLEvEL
F0R CLASS 0F 2u14

2uu BIFFIC0LT NCQ'S C0NPILEB
FR0N (}une 2uu2- Nov 2u1S
Specimen Papei)

0NAIR NAS00B

N0TE:
Theie will be Foui NCQ NABNESS 2 houi classes fiom
1
st
Nay -4
th
Nay.
You aie iequiieu to attempt these questions befoie
classes ( Su foi each class)
Betaileu answeis will be uiscusseu in class.

Q1.
2
UCLES 2013 9706/11/O/N/13
1 A non-current asset costs $250000 and has a useful economic life of 25 years. The estimated
residual value is $10000.

Depreciation is provided on a straight line basis.

After 10 years the asset is sold for $120000. Disposal costs of $20000 are incurred.

What is the loss on disposal?
A $30000 B $34000 C $50000 D $54000

2 Goods that had previously been purchased on credit have been returned to the supplier.

How should this be recorded in the purchasers books of account?

account to be debited account to be credited
A bank purchases returns
B trade payable bank
C creditor purchases returns
D purchases returns trade payable

3 On 1 January 2012 a business had prepaid rent of $50. During 2012, it made three rent
payments of $250 each. On 31 December 2012, the business owed $200 rent for 2012.

The business owner only charged the rent payments made during 2012 in the income statement.

What is the effect on profit for the year?
A $200 overstated
B $200 understated
C $250 overstated
D $250 understated

4 A computer used for demonstration to customers was treated as capital expenditure.

The following year a customer purchased the computer in the ordinary course of business.

Which entries are needed to adjust the cost of sales?

A inventory computers
B purchases computers
C sales inventory
D selling expenses sales

Q2.
2
UCLES 2013 9706/11/O/N/13
1 A non-current asset costs $250000 and has a useful economic life of 25 years. The estimated
residual value is $10000.

Depreciation is provided on a straight line basis.

After 10 years the asset is sold for $120000. Disposal costs of $20000 are incurred.

What is the loss on disposal?
A $30000 B $34000 C $50000 D $54000

2 Goods that had previously been purchased on credit have been returned to the supplier.

How should this be recorded in the purchasers books of account?

A bank purchases returns
B trade payable bank
C creditor purchases returns
D purchases returns trade payable

3 On 1 January 2012 a business had prepaid rent of $50. During 2012, it made three rent
payments of $250 each. On 31 December 2012, the business owed $200 rent for 2012.

The business owner only charged the rent payments made during 2012 in the income statement.

What is the effect on profit for the year?
A $200 overstated
B $200 understated
C $250 overstated
D $250 understated

4 A computer used for demonstration to customers was treated as capital expenditure.

The following year a customer purchased the computer in the ordinary course of business.

Which entries are needed to adjust the cost of sales?

A inventory computers
B purchases computers
C sales inventory
D selling expenses sales

Q3.
3
UCLES 2013 9706/11/O/N/13 [Turn over
5 The table shows information about a business.

$
provision for doubtful debts at 1 January 2012 700
trade receivables at 31 December 2012 (after writing off a bad
debt of $30)
15000

charge to income statement for bad and doubtful debts for year
ended 31 December 2012 (including the bad debt written off)
200

What is the total percentage provision that has been made for doubtful debts at
31 December 2012?
A 3.5% B 4.7% C 5.8% D 6.0%

6 The following information is extracted from the statement of financial position of a business.

$
bank loan (repayable 2019) 16200
bank loan interest owing 1 880
bank overdraft 11600
capital 20710
drawings 19100
inventory 14610
prepayments 1420
trade payables 14110
trade receivables 9050

What is the value of the net current liabilities?
A $1590 B $2510 C $18710 D $20320

7 A business sells computers. When they value their inventory they exclude the value of the
inventory that is over one year old, as they may be obsolete.

Which accounting principle does this demonstrate?
A going concern
B historical cost
C prudence
D realisation

MCQ MADNESS AS LEVEL - OMAIR MASOOD
Q4.
5
11 A trader provides the following financial information for the year.

$
direct costs 210000
indirect costs 55000
increase in work in progress 7000
raw materials taken for own use 2000

Which figures should appear in the manufacturing account?

prime cost
$
overheads
$
transfer to trading account
of income statement
$
A 208000 55000 256000
B 208000 55000 270000
C 210000 53000 256000
D 210000 53000 270000

12 Which item appears in a companys income statement?
A dividends
B inventory
C trade payables
D transfer to reserves

13 The table shows the following balances for a business.

start
of year
$
end
of year
$
inventory 6000 9000
trade payables 8000 10000

Total payments to trade payables were $20000.

What is the cost of sales for the year?
A $15000 B $19000 C $21000 D $25000

Q5.
8
UCLES 2013 9706/11/O/N/13
19 The following information has been taken from the books of accounts of a limited company for the
year ended 31 December 2012.

$
bank loan interest for the year 1650
bank overdraft interest for the year 2150
ordinary dividends paid during the year 900
8% debenture taken out on 1 October 2012 30000

What are the total finance costs in the income statement for the year ended 31 December 2012?
A $4400 B $4700 C $5300 D $6200

20 A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of
$300000.

Profit from operations for the year was $465000.

The directors paid an 8% ordinary dividend during the year.

What is the retained profit for the year?
A $250 000 B $370000 C $385000 D $400000

21 The following information was extracted from the books of a trader.

$
revenue for the year 126000
purchases for the year 87000
opening inventory 9000
closing inventory 12000

What is the rate of inventory turnover?
A 4 times B 6 times C 8 times D 12 times

22 A company wishes to improve its current ratio and its liquid (acid test) ratio.

How can this be done?
A increasing discounts to trade receivables
B increasing the provision for doubtful debts
C purchasing additional inventory on credit
D selling non-current assets

Q6.
6
UCLES 2013 9706/11/O/N/13
14 X and Y are in partnership sharing residual profits and losses in the ratio 7: 3.

Their fixed capital accounts have balances of X $40000; Y $60000. Interest is allowed on these
at the rate of 10% per year.

X is paid a salary of $40000 per year. Profit for the year was $200000.

What was the division of profits between the partners?

X
$
Y
$
A 137000 63000
B 140000 60000
C 149000 51000
D 152000 48000

15 X, Y and Z are in partnership, sharing profits, X 40%, Y 20% and Z 40%. Existing goodwill is
shown in the ledger as $10000.

The partners agree that the goodwill is now worth $40000 and they agree to share future profits
equally. They also agree that, in future, goodwill is not to appear in the ledger.

Which journal entry will record this change?

debit
$
credit
$
A X
Y
Z
goodwill
1334
7 333
1 333

10000
B X
Y
Z
goodwill
10000
10000
10000

30000
C X
Y
Z
goodwill
12000
6 000
12000

30000
D X
Y
Z
goodwill
13334
13333
13333

40000

Q7.
8
UCLES 2013 9706/11/O/N/13
19 The following information has been taken from the books of accounts of a limited company for the
year ended 31 December 2012.

$
bank loan interest for the year 1650
bank overdraft interest for the year 2150
ordinary dividends paid during the year 900
8% debenture taken out on 1 October 2012 30000

What are the total finance costs in the income statement for the year ended 31 December 2012?
A $4400 B $4700 C $5300 D $6200

20 A company has 1 000 000 ordinary shares of $1 issued at $2.50. It also has a 5% debenture of
$300000.

Profit from operations for the year was $465000.

The directors paid an 8% ordinary dividend during the year.

What is the retained profit for the year?
A $250 000 B $370000 C $385000 D $400000

21 The following information was extracted from the books of a trader.

$
revenue for the year 126000
purchases for the year 87000
opening inventory 9000
closing inventory 12000

What is the rate of inventory turnover?
A 4 times B 6 times C 8 times D 12 times

22 A company wishes to improve its current ratio and its liquid (acid test) ratio.

A increasing discounts to trade receivables
C purchasing additional inventory on credit
D selling non-current assets

Q8.
10
UCLES 2013 9706/11/O/N/13
27 Which statements about absorption costing are correct?

1 It apportions overheads between production and service departments.
2 It enables a company to know its break-even level of production.
3 It leads to higher inventory valuations than marginal costing.
4 It is used by management for make or buy decisions.

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

28 An accountant prepared the following break-even chart.

10
8
6
4
2
0
0 1 2 3 4 5
sales volume (millions of units)
costs
and
revenues
($m)
sales revenue
total costs
fixed costs
budget

The budgeted sales volume is 4.5 million units.

Which profit can be anticipated at this level?
A $2.5 million B $4.5 million C $7 million D $9 million

29 Which statement best describes job costing?
A a costing method that calculates the cost of meeting a specific customer order
B a costing method that calculates the cost of producing a number of identical units for a
customer
C a costing method that enables overheads to be absorbed into the cost of the product
D a costing method that separates fixed costs from variable costs

30 Which item would appear in a cash budget?
A bad debts
B cash discounts
C depreciation
D loan repayments
Q9.
2
UCLES 2013 9706/12/O/N/13
1 The following information is taken from a traders statement of financial position.

$
non-current assets 80000
capital at start of year 75000
drawings 16000
profit for the year 13000
non-current liability 6000
current assets 12700

What is the amount of trade payables?
A $8700 B $11700 C $14700 D $26700

2 A business wishes to create a new provision for doubtful debts.

Which effect will this have in the financial statements of the business?

in the income
statement
in the statement of
financial position
A increase profit increase current assets
B increase profit reduce current liabilities
C reduce profit increase current liabilities
D reduce profit reduce current assets

3 Anna owns a plumbing business. Costs for the year were $49 500 for wages and $95000 for
materials. These included $2200 labour and $540 materials used by Anna in the extension of the
business premises. Additional planning and legal costs of the extension were $450.

What was Annas total revenue expenditure for the year?
A $141310 B $141760 C $142300 D $144500

4 A building cost $340 000. The accumulated depreciation on the building was $47600. It was
decided to revalue the building to its market value of $560000.

What is the balance on the revaluation reserve?
A $172400 B $220000 C $267600 D $512400

Q10.
4
UCLES 2013 9706/12/O/N/13
8 A trader buys inventory costing $6000.

He is entitled to trade discount at 10% and cash discount of 5%.

On the same day he discovers that he can only sell the inventory for $5000.

Which amount should he record as the purchase price of the inventory?
A $5000 B $5130 C $5400 D $6000

9 A business is preparing a bank reconciliation and finds the following.

$
unpresented cheques 3190
uncredited bankings 1949

The cash book has a debit balance of $5000.

Which adjustments should be made to the cash book balance to reconcile it to the bank
statement?
A minus $3190, minus $1949
B minus $3190, plus $1949
C plus $3190, minus $1949
D plus $3190, plus $1949

10 A companys trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.

What is the double entry required to clear the suspense account balance?

account
debit
$
credit
$
A

discounts allowed
discounts received
suspense
312
240
72
B

discounts allowed
discounts received
suspense
624
480
144
C

discounts received
suspense
discounts allowed
240
72

312
D

discounts received
suspense
discounts allowed
480
144

624

Q11.
6
UCLES 2013 9706/12/O/N/13
14 The following departmental accounts have been prepared for a limited company for the year
ended 30 September 2013.

department X
$
department Y
$
revenue 810000 515000
cost of sales 470000 265 000
gross profit 340000 250000
overheads 210000 295 000
profit / (loss) for the year 130000 (45000)

The following errors have been found.

1 Department X overheads include $10 000 for the purchase of goods for resale of
department X.
2 Revenue of $40 000 has been credited to department X when it should have been
credited to department Y.

What is the corrected profit for the year for department X?
A $80000 B $90000 C $100000 D $170000

15 A company has the following expenses for the year.

$
directors salaries 140000
depreciation of delivery vehicles 87000
office salaries 90000
loan interest 33000
discounts allowed 12000

What is the total of the administration overheads?
A $242000 B $263000 C $329000 D $362000

16 Which items appear in the manufacturing account of a business?

1 closing inventory of finished goods
2 closing inventory of work in progress
3 carriage inwards
4 carriage outwards

A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4
Q12.
8
UCLES 2013 9706/12/O/N/13
20 A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided on it.

Which entry is needed to close the disposal account?

debit $ credit $
A disposal account 500 income statement 500
B disposal account 3500 income statement 3500
C income statement 500 disposal account 500
D income statement 3500 disposal account 3500

21 A business is reviewing credit limits for its customers.

What would result in a customers credit limit being reduced?
A Cash discounts are always taken by the customer.
B Sales have increased to that customer.
C The customer always pays their debt on time.
D The customer has lost a major contract.

22 The table shows extracts from the trial balance of a business at 31 December 2012.

$
ordinary share capital 20000
share premium 40000
long-term loan (repayable 2022) 30000
4% non-redeemable preference share capital 50000
7% debentures 2017 70000

What is the total of non-current liabilities in the statement of financial position?
A $100000 B $150000 C $160000 D $210000

Q13.
8
UCLES 2013 9706/12/O/N/13
20 A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided on it.

Which entry is needed to close the disposal account?

debit $ credit $
A disposal account 500 income statement 500
B disposal account 3500 income statement 3500
C income statement 500 disposal account 500
D income statement 3500 disposal account 3500

21 A business is reviewing credit limits for its customers.

What would result in a customers credit limit being reduced?
A Cash discounts are always taken by the customer.
B Sales have increased to that customer.
C The customer always pays their debt on time.
D The customer has lost a major contract.

22 The table shows extracts from the trial balance of a business at 31 December 2012.

$
share premium 40000
long-term loan (repayable 2022) 30000
4% non-redeemable preference share capital 50000
7% debentures 2017 70000

What is the total of non-current liabilities in the statement of financial position?
A $100000 B $150000 C $160000 D $210000

Q14.
4
UCLES 2013 9706/12/O/N/13
8 A trader buys inventory costing $6000.

He is entitled to trade discount at 10% and cash discount of 5%.

On the same day he discovers that he can only sell the inventory for $5000.

Which amount should he record as the purchase price of the inventory?
A $5000 B $5130 C $5400 D $6000

9 A business is preparing a bank reconciliation and finds the following.

$
uncredited bankings 1949

The cash book has a debit balance of $5000.

Which adjustments should be made to the cash book balance to reconcile it to the bank
statement?
A minus $3190, minus $1949
B minus $3190, plus $1949
C plus $3190, minus $1949
D plus $3190, plus $1949

10 A companys trial balance includes a suspense account. It was found that the only errors were

What is the double entry required to clear the suspense account balance?

account
debit
$
credit
$
A

discounts allowed
discounts received
suspense
312
240
72
B

discounts allowed
discounts received
suspense
624
480
144
C

discounts received
suspense
discounts allowed
240
72

312
D

discounts received
suspense
discounts allowed
480
144

624

Q15.
3
5 At the beginning of the year a company has a provision for doubtful debts of $1000. At the end of
the year the required provision is $2500. During the year debts of $1500 are written off and $100
is received in respect of a debt written off many years ago.

What is the net amount charged to the income statement for bad and doubtful debts?
A $1500 B $2500 C $2900 D $3000

6 What would be treated as part of the capital cost of the purchase of a building?

1 legal costs of the purchase
2 redecoration of the building
3 installation of air conditioning needed for the machinery in the building

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

7 Ryan purchased a van for $16000 on 31 December 2010. It is his policy to apply 25% per annum
reducing balance depreciation for each part of the year the asset is held. Ryan traded the vehicle
in on 1 July 2013 for a $6150 reduction on the cost of a new vehicle.

What was the profit or loss made on the disposal of the van?
A $600 loss B $1725 loss C $150 profit D $2150 profit

8 On 30 September 2012 a manufacturers current assets totalled $28 000. The next day, only two
transactions took place.

1 Inventory was bought for cash. The price of $2000 was subject to a trade discount of
20% and a cash discount of 5%. Payment was made immediately.
2 A bad debt of $400 was written off.

What was the total of current assets on 2 October 2012?
A $27 680 B $28 080 C $29 520 D $29 600

9 The table shows information from the books of a business at 30 April 2013.

details $
credit sales invoiced during financial year 79000
goods sent to customers on 28 April 2013 and invoiced 4 May 2013 6100
goods sent to customers during April 2013 on sale or return basis but
not sold by 30 April 2013
8 300

What is the value of sales for the year ended 30 April 2013?
A $76 800 B $85 100 C $87 300 D $93 400

Q16.
3
5 At the beginning of the year a company has a provision for doubtful debts of $1000. At the end of
the year the required provision is $2500. During the year debts of $1500 are written off and $100
is received in respect of a debt written off many years ago.

What is the net amount charged to the income statement for bad and doubtful debts?
A $1500 B $2500 C $2900 D $3000

6 What would be treated as part of the capital cost of the purchase of a building?

1 legal costs of the purchase
2 redecoration of the building
3 installation of air conditioning needed for the machinery in the building

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

7 Ryan purchased a van for $16000 on 31 December 2010. It is his policy to apply 25% per annum
reducing balance depreciation for each part of the year the asset is held. Ryan traded the vehicle
in on 1 July 2013 for a $6150 reduction on the cost of a new vehicle.

What was the profit or loss made on the disposal of the van?
A $600 loss B $1725 loss C $150 profit D $2150 profit

8 On 30 September 2012 a manufacturers current assets totalled $28 000. The next day, only two

1 Inventory was bought for cash. The price of $2000 was subject to a trade discount of
20% and a cash discount of 5%. Payment was made immediately.

A $27680 B $28080 C $29520 D $29600


details $
credit sales invoiced during financial year 79000
goods sent to customers on 28 April 2013 and invoiced 4 May 2013 6100
8 300

What is the value of sales for the year ended 30 April 2013?
A $76800 B $85100 C $87300 D $93400

Q17.
5
13 In reconciling the sales ledger control account with the balances in the sales ledger, it was
noticed that there was an error in the sales journal. This had been overcast by $740. In addition,
the total receipts from customers of $940 were recorded in the control account as $490.

Which correcting entry must be made?

control account list of balances
A $290 credit increase by $290
B $290 debit no effect
C $1190 credit decrease by $1190
D $1190 credit no effect

14 Which error would give rise to a difference in a trial balance?
A bringing forward an opening balance of $9590 instead of $9950
B debiting interest paid in the cash book and crediting it to interest received account
C debiting repair to motor vehicles account with $11250 for a new motor vehicle
D entering the sale of an item for $300 in the books as $3000

15 Which group of items are included in the prime cost?
A inventories of finished goods, purchases of raw materials, direct wages
B inventories of raw materials, purchases of raw materials, direct wages
C inventories of raw materials, purchases of raw materials, indirect wages
D inventories of work in progress, purchases of raw materials, indirect wages

16 A business provides the following information for the year.

$
prime cost 165000
factory overheads 43000
opening work in progress 6000
closing work in progress 15000

What is the cost of goods transferred to the trading account of the income statement?
A $113000 B $199000 C $208000 D $217000

Q18.
6
UCLES 2013 9706/13/O/N/13
17 Which statement about goodwill is correct?
A Internally generated goodwill should be omitted from the statement of financial position.
B Purchased goodwill should be classed as a tangible non-current asset.
C Purchased goodwill should be omitted from the statement of financial position.
D The value of goodwill should never be included in the statement of financial position.

18 W, X, Y and Z are in partnership.

What would be shown in the partnership appropriation account?
A drawings made by W
B goods taken for the personal use of Y
C interest on a loan made by Z
D interest on drawings made by X

19 A trader uses the revaluation method of depreciation for loose tools.

On 1 January loose tools were valued at $4620 and on 31 December at $5740. During the year
$2010 was spent on purchasing new loose tools.

Which amount was charged to the income statement?
A $890 B $1120 C $2010 D $3130

20 What is the reason for providing depreciation on non-current assets?
A to provide sufficient funds to replace the non-current assets
B to show the assets at replacement cost on the statement of financial position
C to show the fall in value of the assets in the income statement
D to spread the cost of the assets over their estimated useful lives

21 When is a share premium account opened?
A when shares are issued at a price above nominal value
B when shares are issued at a price below nominal value
C when shares are sold by a shareholder at a price above their nominal value
D when shares are sold by a shareholder at a price below their nominal value

Q19.
9
UCLES 2013 9706/13/O/N/13
29 A company manufactures four products.

Gamma Rho Theta Zeta
contribution per unit ($) 10 12 14 16
material required (litres) 5 4 6 7

If there is only enough material to make three of the products, which product should be
discontinued?

A Gamma
B Rho
C Theta
D Zeta

30 Sales for January 2014 are expected to be $10 000 and these are expected to increase by $2000
each month. 10% of sales will be cash sales. Credit customers are expected to pay after one
month.

Which amount will be shown in the cash budget for receipts from customers in March 2014?
A $12000 B $12200 C $13800 D $14000

Q20.
5
UCLES 2013 9706/11/M/J/13 [Turn over
12 A suspense account showed the following.

suspense account
$ $
purchases 300 balance b/d 120
Judy 180
300 300

The business did not maintain control accounts.

Which errors had been made?

purchases Judy
A

purchases journal had
been overcast by $300
credit sales of $460 had been
entered as $640 in Judys account
B

been overcast by $300
C

been undercast by $300
D

been undercast by $300

13 At the start of the year a business had the opening trade payables of $13 000. At the end of the
year it owed $15000 to trade payables.

During the year it paid them $190 000, after taking a cash discount of $10000.

What was the amount of the credit purchases for the year?
A $188000 B $192000 C $198000 D $202000

14 Which error must be corrected by a one-sided journal entry?
A a cheque entered in the cash book but not posted in a ledger account
B a contra entry in the sales ledger control account not entered in the purchases ledger control
account
C an error in the total value of sales ledger balances included in the trial balance
D discount allowed entered in a customers account but not entered in the discount column in
the cash book

Q21. 6
UCLES 2013 9706/11/M/J/13
15 A trader uses his bank statements and paying in books to produce a summary of his receipts and
payments for the year.

Why does he do this?
A in order to calculate his closing inventory
B in order to prepare a bank reconciliation statement
C to be able to calculate total sales and total purchases
D to know the amount of bad debts written off

16 A trader has two departments in his clothes store mens and womens.

The following information is available.

mens womens
sales staff (number) 7 13
floor space 81m
2
99 m
2

value of non-current assets $90000 $135000
annual sales $247000 $403000

The cost of advertising and distribution is $68100.

What is the cost for advertising and distribution for the mens department?
A $23835 B $25878 C $27240 D $30645

17 X and Y are in partnership sharing profits equally. They have capital account balances of $30000
and $80000 respectively. Z joins the partnership and pays $10000 for his share of goodwill. The
new profit-sharing ratio is 2 : 2 : 1.

What is the balance on Ys capital account after Z joins?
A $70000 B $75000 C $85000 D $90000

18 On which basis should inventory be valued?
A historical cost
B lower of cost and net realisable value
C lower of cost and replacement cost
D replacement cost

Q22.
6
UCLES 2013 9706/11/M/J/13
15 A trader uses his bank statements and paying in books to produce a summary of his receipts and
payments for the year.

Why does he do this?
A in order to calculate his closing inventory
B in order to prepare a bank reconciliation statement
C to be able to calculate total sales and total purchases
D to know the amount of bad debts written off

16 A trader has two departments in his clothes store mens and womens.


mens womens
sales staff (number) 7 13
floor space 81m
2
99 m
2

value of non-current assets $90000 $135000
annual sales $247000 $403000

The cost of advertising and distribution is $68100.

What is the cost for advertising and distribution for the mens department?
A $23835 B $25878 C $27240 D $30645

17 X and Y are in partnership sharing profits equally. They have capital account balances of $30000
and $80000 respectively. Z joins the partnership and pays $10000 for his share of goodwill. The
new profit-sharing ratio is 2 : 2 : 1.

What is the balance on Ys capital account after Z joins?
A $70000 B $75000 C $85000 D $90000

18 On which basis should inventory be valued?
A historical cost
B lower of cost and net realisable value
C lower of cost and replacement cost
D replacement cost

Q23.
7
19 A vehicle cost $12000 and its estimated residual value was $2000. The vehicle was depreciated
at 25% per annum using the straight line method. After three years the vehicle was sold for
$3500.

What was the profit or loss on disposal?
A $500 profit B $1000 loss C $1000 profit D $4500 loss

20 What do the reserves of limited companies include?
A debentures
B ordinary shares
C preference shares
D share premium

21 Which stakeholder in a limited company has a voting right?
A company accountant
B debenture holder
C ordinary shareholder
D preference shareholder

22 Peter is a sole trader whose business is profitable. He is considering going into partnership with
Axel, another sole trader, to improve his liquidity.

Which figure from Axels financial statements is of particular interest to Peter?
A capital
B current assets
C net current assets
D non-current assets

Q24.
8
UCLES 2013 9706/11/M/J/13
23 The profit margins of a company over two years showed the following.

31 March
year 1
31 March
year 2
gross profit margin 37.2% 39.1%
net profit margin 12.2% 11.8%

Which combination of factors could have caused these changes?
A a change in the combination of goods sold leading to lower selling costs
B a loss of trade discounts on purchases but an increase in cash discounts taken from
suppliers
C an advertising campaign to promote higher sales leading to higher selling prices
D an increase in both production and selling costs

24 The following information has been extracted from the statement of financial position of a limited
company.

$
6% debenture (2016 2018) 20000
ordinary share capital
issued 400000 ordinary shares of $1 each 400000
5% preference shares of $1 each 200000
share premium account 50000
retained earnings 75000

What is the value of the shareholders equity?
A $525000 B $545000 C $695000 D $725000

25 A company has the following items on its statement of financial position.

$000
ordinary shares 12000
10% preference shares 5000

The company had made a profit of $5000000 of which $2000000 is paid in dividends, including
$500000 paid to preference shareholders.

What is the return on capital employed?
A 12.5% B 18.75% C 20.83% D 26.32%
Q25.
8
UCLES 2013 9706/11/M/J/13
23 The profit margins of a company over two years showed the following.

31 March
year 1
31 March
year 2
gross profit margin 37.2% 39.1%
net profit margin 12.2% 11.8%

Which combination of factors could have caused these changes?
A a change in the combination of goods sold leading to lower selling costs
suppliers

24 The following information has been extracted from the statement of financial position of a limited
company.

$
6% debenture (2016 2018) 20000
issued 400000 ordinary shares of $1 each 400000
5% preference shares of $1 each 200000

What is the value of the shareholders equity?
A $525000 B $545000 C $695000 D $725000

25 A company has the following items on its statement of financial position.

$000
ordinary shares 12000
10% preference shares 5000

The company had made a profit of $5000000 of which $2000000 is paid in dividends, including
$500000 paid to preference shareholders.

A 12.5% B 18.75% C 20.83% D 26.32%
Q26.
10
UCLES 2013 9706/11/M/J/13
29 A company manufactures and sells chairs. The following financial information is available.

per unit $
selling price 25
direct material and labour 12
other variable production costs 3
variable selling costs 2
fixed costs 4

The company has the option of buying in the chairs for resale instead of making them.

At which purchase price would the companys profit be unchanged?
A $15 B $17 C $19 D $21

30 Purchases in January 2014 are expected to be $20 000 and to increase by $1000 each month.
20% of purchases are for cash. Credit purchases are paid for in the month following purchase.

Which amount will be shown in the cash budget for payments to credit suppliers in March 2014?
A $16800 B $17600 C $20200 D $21200

Q27.
10
UCLES 2013 9706/11/M/J/13
29 A company manufactures and sells chairs. The following financial information is available.

per unit $
selling price 25
direct material and labour 12
other variable production costs 3
variable selling costs 2
fixed costs 4

The company has the option of buying in the chairs for resale instead of making them.

At which purchase price would the companys profit be unchanged?
A $15 B $17 C $19 D $21

30 Purchases in January 2014 are expected to be $20 000 and to increase by $1000 each month.
20% of purchases are for cash. Credit purchases are paid for in the month following purchase.

Which amount will be shown in the cash budget for payments to credit suppliers in March 2014?
A $16800 B $17600 C $20200 D $21200

Q28.
3
5 What does the application of the accounting principle of consistency ensure?
A that all losses are provided for
B that assets are recorded at their actual cost
C that financial statements are produced annually
D that profits are calculated the same way each year

6 A trader recently purchased a non-current asset for his business at a cost of $6500. A friend told
him he could buy a similar asset on-line for $5000. The trader is now unsure how to value the
asset in the books of account.

Which principle should the trader apply?
A accruals
B business entity
C historical cost
D materiality

7 At the financial year end of a business the following information is available.

$
debit balance on the bank statement 1000
lodgements not yet credited by the bank 600
bank charges and interest charged not yet entered in the cash book 150

What is the current balance in the cash book?
A $400 credit B $400 debit C $550 credit D $550 debit

8 Which error would result in the creation of a suspense account?
A crediting the commission received account with rent received
B crediting the discounts allowed account with the discounts received
C debiting the bank interest paid account with bank interest received
D debiting the petrol account with a purchase of a new car

Q29.
6
UCLES 2013 9706/12/M/J/13
17 A business sells some inventory for $80 on credit. This originally cost $50.

How does this affect the statement of financial position?

current assets owners capital
A decrease by $30 decreases by $30
B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

18 A vehicle is sold for $1000. It had cost $6000 and $2800 depreciation had been provided on it.

What is the profit or loss on disposal?
A loss $2200
B loss $4200
C profit $2200
D profit $4200

19 A company has ordinary shares of $1 each. Each year it pays a dividend of 10% of the nominal
value of the shares.

It now wishes to raise a further $120000 by an issue of shares. This would bring in additional
profit of $10000 and dividends paid would increase by $2500 a year.

At which price should the company issue the new shares to maintain the percentage of dividend?
A $1.00 B $1.20 C $1.60 D $4.80

20 An extract from a statement of financial position is as follows.

$
general reserve 10000
10% debentures 20000

What is the value of the shareholders funds?
A $50 000 B $54000 C $64000 D $80000

Q30.
7
21 A company had a trade receivables collection period of 80 days in 2011 and 100 days in 2012.
Total revenue was the same for both years.

Which statement explains the change?
A Customers took advantage of cash discounts.
B Profit margins have improved.
C Several major customers suffered cash flow problems.
D The company entered into a debt factoring arrangement.

22 A companys financial statements show the following.

$
profit from operations 160000
finance charges 40000
debentures 300000

A 15.2% B 16% C 21.3% D 24%

23 The following information has been taken from a statement of financial position.

$
non-current assets 150000
capital and reserves 170000
current liabilities 5000

What is the current ratio?
A 3 : 1 B 4 : 1 C 5 : 1 D 6 : 1

Q31.
8
UCLES 2013 9706/12/M/J/13
24 A company has ordered a new machine, to be delivered in six months. In the short term, the
machine hours will be a limiting factor. It has made the following calculations.

product X product Y product Z
contribution per unit made $24 $12 $20
machine hours used per unit 6 1 2

What will be the most profitable ranking order for production?
A X Y Z
B X Z Y
C Y Z X
D Z Y X

25 The following data is available for the production department of a manufacturing company.
Overheads are absorbed on a direct labour hour basis.

direct
labour hours
total
overhead costs
$
budgeted 96000 242880
actual 97600 253760

What is the over or under absorption of overheads for the period?
A $6832 over absorbed
B $6832 under absorbed
C $10880 over absorbed
D $10880 under absorbed

26 The following information applies to a business.

output
(units)
sales
$
profits
$
375 750000 100000
500 1000000 250000

What is the contribution to sales ratio?
A 25% B 40% C 50% D 60%

Q32.
10
UCLES 2013 9706/12/M/J/13
30 A company plans to make the following payments in June 2014.

1 an insurance premium for the 12 months from 1 July 2014
2 the payment for equipment to be delivered in April 2014 and which will start
production in May 2014

In which months will these appear in the cash budget for 2014?

1 2
A June April
B June June
C July April
D July May

Q33
6
UCLES 2013 9706/13/M/J/13
14 A new business was established with opening capital of $15000. At the end of the year net
assets were $20 000. During the year the proprietors drawings were $3000 and this resulted in
an overdraft at the end of the year of $4000.

What was the profit for the year?
A $2000 B $5000 C $7000 D $8000

15 The manufacturing account of a business includes the following.

$
prime costs 143 260
production overheads 92170
opening work-in-progress 5720
closing work-in-progress 6840
opening inventory of finished goods 29480
closing inventory of finished goods 25990

What was the cost of production?
A $234 310 B $235 430 C $236 550 D $237 800

16 S and T are in partnership sharing profits and losses in the ratio 3: 2.

Their fixed capital accounts have balances of S $80000 and T $60 000. Interest is allowed on
these at the rate of 6% per year.

Profit for the year was $100000.

What is the division of profits between the partners?

S
$
T
$
A 49 400 50 600
B 50 600 49 400
C 59 760 40 240
D 60 000 40 000

Q34
8
UCLES 2013 9706/13/M/J/13
20 The following is an extract from the statement of financial position of a company.

$
ordinary shares of $0.25 each 35 000
6% cumulative preference shares 40 000

No dividend was paid on the preference shares last year but the directors propose to pay a
dividend this year. The directors also propose a final ordinary share dividend of $0.05 per share.

What is the amount of dividends to be paid?

ordinary shares
$
cumulative
preference shares
$
A 1750 2400
B 1750 4800
C 7000 2400
D 7000 4800

21 A shareholder in a company sells his shares to another person.

What is the effect on the share capital account of the company?
A It is increased by any premium paid for the shares.
B It is increased by the selling price of the shares.
C It is reduced by the value of shares sold.
D It remains unaltered.

22 The following shows extracts from the statement of financial position of a company.

at 30 September
$
non-current assets 120 000
inventory 35 000
trade receivables 23 000
cash at bank (debit balance) 12 000
bank loan repayable within 12 months 40 000

What is the acid test (liquid) ratio?
A 0.64 : 1 B 1.27 : 1 C 2.33 : 1 D 4.67 : 1
Q35.
11
UCLES 2013 9706/13/M/J/13
29 Which type of organisation would use process costing?
A charity
B college
C oil refinery
D supermarket

30 Why does a company prepare a cash budget?
A to establish the figure for cash for inclusion in the financial statements
B to identify a month in which there will be a cash shortage
C to look for seasonal trends in profitability
D to reconcile bank statement figures with cash book figures

Q36.
2
UCLES 2012 9706/11/O/N/12
1 A business makes up its financial statements to 30 April each year.

Included in the ledger account balances on 1 May 2011 was insurance (debit) $800.

On 31 October 2011 an insurance premium of $2100 was paid for the year ending 31 October 2012.

Which amount was charged for insurance in the income statement for the year ended
30 April 2012?
A $1050 B $1850 C $2100 D $2900

2 A business increases its provision for doubtful debts by $1600.

What will be the effect of this adjustment on the financial statements?

profit for the year trade receivables (net)
A decrease by $1600 decrease by $1600
B decrease by $1600 increase by $1600
C increase by $1600 decrease by $1600
D increase by $1600 increase by $1600

3 The dividends receivable account shows dividends of $7500 received during the year. Dividends
of $1200 are due at the year end.

How will dividends be shown in the financial statements?

income statement $
statement of
financial position
$
A credit 7500 other receivables 1200
B credit 8700 other receivables 1200
C debit 7500 other payables 1200
D debit 8700 other payables 1200

4 Which statement is correct?
A All reserves are created by a transfer from retained earnings.
B Revaluation reserves appear in the non-current assets section of the statement of financial
position.
C Some reserves are treated as current liabilities at the financial year end.
D Total reserves form part of shareholders equity.

Q37.
4
UCLES 2012 9706/11/O/N/12
8 Alfredo received his bank statement which showed a balance of $937 overdrawn. This did not
agree with his cash book.

On investigation he noted the following.

Bank charges of $76 had not been entered in the cash book.
There was an unpresented cheque of $214.
Alfredo had paid $35 cash into his bank account but this was not showing on the
statement.

At which value was the bank overdraft shown in the statement of financial position?
A $758 B $937 C $1116 D $1192

9 The purchases ledger control account has a closing balance of $15 300. Discounts received of
$600 have been entered on the wrong side of the control account.

What is the corrected balance?
A $14 100 B $14 700 C $15 900 D $16 500

10 Which statement about trial balance totals is correct?
A They may not agree since a trial balance is not a statement of financial position.
B They may not agree until various adjustments are made.
C They should, in the absence of errors, always agree.
D They will not agree because the trial balance does not include a figure for closing inventory.

11 A manufacturer has inventories of

1 finished goods
2 work-in-progress
3 raw materials

Which inventories appear in the manufacturing account?
A 1 and 2 only
B 1 and 3 only
C 1, 2 and 3
D 2 and 3 only

Q38.
7
18 A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January
Year 3, having depreciated it at 10% a year using the straight line method.

The company provides a full years depreciation in the year of purchase and none in the year of
disposal.

Which amount for profit or loss will appear in the disposal account and on what side of the
disposal account will it be shown?
A $1500 on the credit side
B $1500 on the debit side
C $2500 on the credit side
D $2500 on the debit side

19 A company raises cash by issuing 8% debentures.

What is the effect on the companys profits and net current assets in the year of issue?

profits net current assets
A decrease decrease
B decrease increase
C increase decrease
D increase increase

20 A company is financed by 25 000 $1 ordinary shares.

The company wishes to finance expansion by issuing 5000 $1 ordinary shares at a premium of
$0.20 and $10 000 debentures.

What will be the new equity figure in the statement of financial position?
A $30 000 B $31 000 C $40 000 D $41 000

21 What does the current ratio show?
A if inventory is being used efficiently
B the profit that has been made
C whether a business is able to pay its debts
D whether revenue is likely to increase or decrease

Q39.
10
UCLES 2012 9706/11/O/N/12
27 A business has fixed costs for a month of $150 000. It sells its single product for $20 per unit and
has a contribution/sales ratio of 0.75. It wishes to make a profit of $300 000 for the month.

How many units does the business need to sell?
A 10 000 B 20 000 C 22 500 D 30 000

28 When valuing inventory of finished goods on an absorption cost basis, which costs should be
included?
A production
B production and administration
C production, marketing and distribution
D production, marketing, administration and distribution

29 A hospital budgets for overheads totalling $11 500 000 for a financial year. It expects to treat
25 000 patients in the year. Each patient stays an average of 10 days and the hospital absorbs
overheads on a patient /day basis. Its direct costs for the year are budgeted at $25 000 000.

What is its overhead absorption rate per patient day?
A $46 B $100 C $146 D $460

30 The following data applies to a business.

budgeted labour hours 10 000
actual labour hours 9 500
budgeted overheads $150 000
actual overheads $160 000

What is the amount of overhead under-absorbed?
A $7500 B $8000 C $10 000 D $17 500

Q40
8
UCLES 2012 9706/11/O/N/12
22 A company has the following year end information.

$000
credit purchases 320
credit sales 800
total purchases 440
total sales 900
trade payables 40

How long does the company take to pay its trade suppliers?
A 34 days B 46 days C 65 days D 73 days

23 The following information is extracted from a company's financial statements.

income statement $000
finance charges (20)
180
taxation (70)
profit for the year 110

statement of financial position $000
net assets 1 000
non-current liabilities (100)
900
share capital and reserves 900

What is the return on total capital employed?
A 12.2 % B 18 % C 20 % D 22.2%

Q41
2
UCLES 2012 9706/12/O/N/12
1 Rent for premises is paid monthly in advance on the first day of each month. The payments
during the last financial year were as follows.

up to and including 1 January $1000 per month
from 1 February $1200 per month

Which amount(s) will appear in the financial statements for the year ended 30 April?

income statement
statement of
financial position
A $12 400
B $12 600
C $12 600 $1200 accrual
D $12 600 $1200 prepaid

2 Which item is revenue expenditure?
A cost of painting new office premises during construction
B cost of repairs to factory plant and machinery
C legal fees for the purchase of new factory premises
D wages of a companys own workmen for building an office extension

3 The following items appear in a statement of financial position.

an estimate of a liability in a court case, the outcome of which is uncertain
an unrealised surplus from the revaluation of a non-current asset
accumulated depreciation on non-current assets
an estimate of future loss arising from bad debts

How many of these are provisions and how many are reserves?

provisions reserves
A 1 3
B 2 2
C 3 1
D 4 0

Q42
3
4 A trial balance shows the following information.

$
premises at cost 150 000
accumulated depreciation on premises 25 000

On 1 January the premises are revalued at $270 000. At the same time 200 000 shares of $1
each are issued for $300 000.

What is the value of the reserves created on 1 January?
A $120 000 B $145 000 C $220 000 D $245 000

5 Which accounting principle attempts to deal with off-balance-sheet transactions?
A consistency
B going concern
C prudence
D substance over form

6 Draft financial statements show revenue of $106 000 and closing inventory of $2100.

There were 100 items which had cost $10 an item but which were for sale at $6 an item. At the
year end these were with a customer on a sale or return basis. These items were treated as
having been sold although no sale had been agreed.

What are the values of revenue and inventory when the principle of prudence is applied?

revenue
$
inventory
$
A 105 000 2700
B 105 000 3100
C 105 400 2700
D 105 400 3100

7 Inventory is valued at the lower of cost and net realisable value.

Which accounting principle is being applied?
A going concern
B matching
C materiality
D prudence

Q43.
6
UCLES 2012 9706/12/O/N/12
15 The following information relates to the annual membership subscriptions of a cricket club for the
year ended 31 December.

1 January
$
31 December
$
subscriptions in arrears 7200 7800
subscriptions paid in advance 2800 4200

Cash received during the year for subscriptions totalled $81 000.

Which amount should be shown in the income and expenditure account for membership
subscriptions?
A $80 200 B $81 000 C $81 600 D $81 800

16 A business does not keep complete accounting records. The following information is known:

$
capital at start of year 52 000
capital at end of year 55 000
owners drawings in year 13 000
capital introduced during the year 25 000

What is the profit/loss for the year?
A loss $9000
B profit $9000
C loss $15 000
D profit $15 000

17 The table shows information relating to closing inventory.

$
cost 50 000
realisable value 45 000
costs of realisation 5 000
replacement cost 35 000

What is the value of the closing inventory?
A $35 000 B $40 000 C $45 000 D $50 000

Q44.
7
18 A company uses the straight-line method of depreciation for all its non-current assets.

On 1 January the company bought machinery on hire purchase. The cash price was $115 000
and the interest for the year is $19 550. The estimated useful life of the machinery is five years
with no residual value.

What is the charge for depreciation for the year ended 31 December?
A $19 090 B $23 000 C $26 910 D $42 550

19 A company has issued non-cumulative preference shares and ordinary shares.

Which statement is correct?
A If no preference dividend is paid, it is carried forward to a future year.
B Preference shareholders always get a dividend.
C Preference shareholders and ordinary shareholders always get a dividend.
D Preference shareholders may get a dividend.

20 A company has an authorised share capital of 1 000 000 $0.50 ordinary shares. Its issued share
capital is 800 000 shares. An ordinary dividend of 7% is declared.

How much is payable to the shareholders?
A $30 000 B $37 500 C $60 000 D $75 000


$000
credit sales 630
total purchases 280
total sales 840
trade payables 30

How long do the companys credit customers take to pay?

Q45.
7
18 A company uses the straight-line method of depreciation for all its non-current assets.

On 1 January the company bought machinery on hire purchase. The cash price was $115 000
and the interest for the year is $19 550. The estimated useful life of the machinery is five years
with no residual value.

What is the charge for depreciation for the year ended 31 December?
A $19 090 B $23 000 C $26 910 D $42 550

19 A company has issued non-cumulative preference shares and ordinary shares.

A If no preference dividend is paid, it is carried forward to a future year.
B Preference shareholders always get a dividend.
C Preference shareholders and ordinary shareholders always get a dividend.
D Preference shareholders may get a dividend.

20 A company has an authorised share capital of 1 000 000 $0.50 ordinary shares. Its issued share
capital is 800 000 shares. An ordinary dividend of 7% is declared.

How much is payable to the shareholders?
A $30 000 B $37 500 C $60 000 D $75 000


$000
credit sales 630
total purchases 280
total sales 840
trade payables 30

How long do the companys credit customers take to pay?

Q46.
10
UCLES 2012 9706/12/O/N/12
28 The budget for a product is shown.

unit sales 620 000
$
selling price per unit 31
variable cost per unit 16
contribution per unit 15

fixed costs $7 500 000

If the fixed costs rise to $7 800 000, the selling price is reduced to $29 per unit, and the variable
cost remains unchanged at $16 per unit, the sales are likely to reach 660 000 units.

By what percentage will the break-even point increase?
A 4.0 % B 11.2 % C 16.7 % D 20.0%

29 When are the reported profits under marginal costing and absorption costing principles the same
amount?
A when sales revenue exceeds cost of sales
B when units produced equals sales in units
C when units produced exceeds sales in units
D when unit sales exceeds production in units

30 A business provides the following information.

month
number of
labour hours
overheads
$
May 68 000 986 000
June 134 000 1 316 000

The variable overhead rate per labour hour was $5.

What was the monthly fixed overhead cost?
A $330 000 B $340 000 C $646 000 D $670 000

Q47. 2
UCLES 2012 9706/13/O/N/12
1 A business maintains a sales journal, a purchases journal, a cash book and a general journal.

Which items would be posted to the ledger accounts from the journal?

1 depreciation charge for the year
2 write off of a bad debt
3 discount allowed on settlement of a debt
4 interest on overdue accounts

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

2 A companys accounting year end is 31 December. It always pays its insurance premiums
annually, in advance, on the due date, 1 September.

During the last few years the following premiums have been paid:

Year 1 $2400
Year 2 $2760
Year 3 $3840

What will be the charge for insurance in the companys income statement for Year 3?
A $2760 B $3120 C $3480 D $3840

3 A. Spender owns a road haulage business.

What would be classified as capital expenditure?
A number plates for new lorries
B replacement fuel pump for lorries
C replacement tyres for lorries
D road tax licence for new lorries

4 Which of these statements are correct?

1 A share premium account is classified as a reserve.
2 A revaluation reserve may be negative if a non-current asset decreases in value.

A 1 only
B 2 only
C both 1 and 2
D neither 1 nor 2

Q48.
3
A Assets cannot be revalued by companies at all.
B Companies have to disclose their policy on revaluation in their accounts.
C Companies must carry out revaluations every year.
D Every asset in a particular class must be revalued by companies, not just one.

6 The following payments have been made for property rates.

$
8 November 2011 paid rates for 6 months to 31 March 2012 1300
4 May 2012 paid rates for 6 months to 30 September 2012 1800

Which amount for rates is shown in the statement of financial position at 30 June 2012?
A accrual $900
B accrual $1800
C prepayment $900
D prepayment $1800

7 Which action is an application of the prudence principle?
A applying the same depreciation method each year
B excluding the owners personal spending from the accounts
C making an allowance for debts which may go bad
D valuing assets on the assumption that the business will continue to trade

8 The table shows a bank reconciliation statement prepared as at 31 December.

$
balance per bank statement 862 523
add outstanding lodgements 73 540
bank charges not entered in cash book 15 200
951 263
less unpresented cheques 40 826
balance per cash book 910 437

Which amount will be included in the statement of financial position as at 31 December as cash
at bank?
A $862 523 B $877 723 C $895 237 D $910 437
Q49.
5
13 A companys income statement includes the following.

$000
dividend 300
increase in inventory 200
overheads 400
ordinary goods purchased 800

If the net profit percentage is 20%, what is the figure for revenue?
A $1 120 000 B $1 250 000 C $1 625 000 D $1 750 000

14 Which statement regarding partnerships, constituted under a partnership agreement, is always
correct?
A Each partner is paid interest on capital.
B Each partner must introduce the same amount of capital.
C Each partner must share profits and losses equally.
D Each partner receives a salary only if set out in the agreement.

15 X and Y are in partnership, sharing profits and losses in the ratio of 2:1.

X had taken goods costing $1500 from the business for his own use. The goods had been treated
as a sale and credited to the sales account at their normal selling price of $2400.

It was agreed that the goods should have been credited to the purchases account and not to
sales and the records were corrected accordingly.

Which entries should be made in the partners current accounts to make the correction?

current accounts

X
$
Y
$
A credit 300 debit 300
B debit 600 debit 300
C debit 1000 debit 500
D debit 1600 debit 800

Q50.
7
19 The profits of Bronte Ltd are:
Year ended 31 December 2010 nil
Year ended 31 December 2011 $60 000
Bronte Ltd has in issue 200 000 5% preference shares of $1 each.
What is the profit available for distribution to ordinary shareholders for the year ended
31 December 2011, if the preference shares are (i) cumulative or (ii) non-cumulative?
(i) Cumulative
(ii) Non -
cumulative
A $40 000 $40 000
B $40 000 $50 000
C $50 000 $40 000
D $50 000 $50 000

20 Which statements about debentures and ordinary shares are correct?

debentures ordinary shares
A can be issued at a premium are never issued at a premium
B holders are owners of a company holders are creditors of a company
C interest is a charge against profit dividends are an appropriation of profit
D interest varies from year to year dividends are paid at the same rate each year

21 A company published the financial statements for the year ending 31 December 2011, an extract
of which is detailed below.

$
retained earnings at 1 January 2011 90 000
profit for year 10 000
retained earnings at 31 December 2011 100 000
share capital 20 000

What is the return on capital employed based on average capital?
A 8.70 % B 10.00% C 11.11% D 50.00%

Q51
7
19 The profits of Bronte Ltd are:
Year ended 31 December 2010 nil
Year ended 31 December 2011 $60 000
Bronte Ltd has in issue 200 000 5% preference shares of $1 each.
What is the profit available for distribution to ordinary shareholders for the year ended
31 December 2011, if the preference shares are (i) cumulative or (ii) non-cumulative?
(i) Cumulative
(ii) Non -
cumulative
A $40 000 $40 000
B $40 000 $50 000
C $50 000 $40 000
D $50 000 $50 000

20 Which statements about debentures and ordinary shares are correct?

debentures ordinary shares
A can be issued at a premium are never issued at a premium
B holders are owners of a company holders are creditors of a company
C interest is a charge against profit dividends are an appropriation of profit
D interest varies from year to year dividends are paid at the same rate each year

21 A company published the financial statements for the year ending 31 December 2011, an extract
of which is detailed below.

$
retained earnings at 1 January 2011 90 000
profit for year 10 000
retained earnings at 31 December 2011 100 000
share capital 20 000

What is the return on capital employed based on average capital?
A 8.70 % B 10.00% C 11.11% D 50.00%

Q52.
9
25 Which item is a variable production cost?
A cleaners wages
B depreciation of equipment
C factory business rates
D purchases of raw materials

26 The diagram illustrates the cost behaviour of a typical telephone invoice.

total
cost
($)
level of
activity
0

Which term best describes the behaviour of this cost?
A fixed
B semi-variable
C stepped
D variable

27 Contribution is an important feature of marginal costing.

How can the total contribution from a given activity be calculated?
A total direct costs minus total profit
B total fixed costs plus total profit
C total sales minus total fixed costs
D total sales minus total profit

28 A business forecasts its margin of safety for the next month as 20% of budgeted sales. It expects
to sell 10 000 units in the month. The selling price per unit is $5 and the marginal cost is $3.50.

What is the forecast fixed cost?
A $12 000 B $12 500 C $15 000 D $18 000

Q53.
10
UCLES 2012 9706/13/O/N/12
29 What is the reason for overhead absorption in a manufacturing business?
A to control overhead expenditure
B to determine the net realisable value of inventory
C to enable overheads to be apportioned to cost centres
D to establish costs per unit of product

30 A business reports a profit using marginal costing of $75 000 for a month.

Opening inventory was 10 000 units and closing inventory 15 000 units.

The fixed production overhead absorption rate is $5 per unit.

What is the profit using absorption costing?
A $25 000 B $50 000 C $100 000 D $125 000

Q54.
3
5 The following items appear in the books of a builder.

$
rent of own home 3 000
rent of builders yard 2 500
housekeeping expenses 2 000
overalls 100
loose tools 300
equipment 3 000
lorries 1 500
rates on business premises 650
rent of business premises 3 500
assistants wages 3 000

What is the total business expenditure?
A $11 250 B $14 550 C $16 550 D $19 550

6 The table shows details relating to a companys banking transactions at 31 December.

$
balance at bank as per bank statement 22 650
uncleared lodgements 3 110
unpresented cheques 6 290
bank credit recorded twice by bank in error 650

Which balance for cash at bank should appear in the statement of financial position at
31 December?
A $18 820 B $20 120 C $25 180 D $26 480

7 A companys accounts showed a gross profit for the year of $32 500. After the draft financial
statements were prepared it was found that the opening inventory had been overstated by $2400
and the closing inventory had been understated by $3400.

What is the corrected gross profit for the year?
A $26 700 B $31 500 C $33 500 D $38 300

Q55.
6
UCLES 2012 9706/11/M/J/12
14 A company has an issued share capital of 200 000 6% cumulative preference shares of $1 each
fully paid and 800 000 ordinary shares of $1 each fully paid.

Assuming that the company earns no profit in the year, which statement is correct?
A Both preference and ordinary shares are paid a dividend in the year.
B The unpaid dividends for both preference and ordinary shares are carried forward to a future
year.
C The unpaid preference dividend is carried forward to a future year.
D The preference shares are paid a total dividend of $12 000 in the year.

15 A company raises finance by issuing debentures.

What is the effect on net current assets and short term profits?

net current
assets
profits
A decrease decrease
B decrease increase
C increase decrease
D increase increase

16 A business finds that it is unable to pay its trade payables because of a poor cash flow.

What should it do to improve its cash flow?
A factor its trade receivables
B increase its trade receivables
C increase its inventory
D repay its overdraft

17 Which accounting ratio is used to assess working capital management?
A gross profit ratio
B net profit ratio
C rate of inventory turnover
D return on capital employed

Q56.
7
18 The following are extracts from a companys financial statements.

$
profit for the year before finance charges 100 000
issued share capital 200 000
reserves 80 000
non-current liabilities 260 000

What is the companys return on capital employed?
A 18.5 % B 21.7 % C 35.7 % D 50.0 %

19 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the
inventory increases.

What effect does this have on inventory holding and inventory turnover?

inventory holding
(in days)
inventory turnover
(times)
A decrease decrease
B decrease increase
C increase decrease
D increase increase

20 Which item accounts for the difference between the current and liquid ratios?
A cash and cash equivalents
B inventory
C trade payables
D trade receivables

21 Arun wishes to invest in a business with a skilled workforce which will make a profit in each of the
next five years.

Which aspect of financial statements helps Arun to decide where to invest?
A Financial statements deal with past performance.
B Historic cost is based on objective figures.
C Non-monetary values are excluded.
D Provisions can be based on estimates.

Q57.
7

$
reserves 80 000

A 18.5 % B 21.7 % C 35.7 % D 50.0 %



inventory holding
(in days)
inventory turnover
(times)
A decrease decrease
B decrease increase
C increase decrease
D increase increase

B inventory
C trade payables
D trade receivables

next five years.


Q58.
8
UCLES 2012 9706/11/M/J/12
22 Which statement best describes a sunk cost?
A a cost which is irrelevant for the future
B a cost which must be matched against the revenue
C a cost which remains the same at all levels of production
D a cost which varies with the level of production

23 A business has the following costs.

raw materials $3 per unit
direct labour $2 per unit
stepped costs of $5000 for every 10 000 units

What is the cost of producing 15 000 units?
A $75 000 B $82 500 C $85 000 D $105 000

24 Which statement best describes fixed costs?
A costs that are constant in total over a range of output.
B costs that are the same in total over any output level.
C costs that are constant per unit as output increases.
D costs that are the same as stepped costs.

25 Ehsen Nadeen manufactures one product, the miji. Each miji has a selling price of $10 and
variable costs of $8 and annual fixed costs total $12 000. Ehsen wishes to make a profit of
$14 000 a year.

How many mijis should Ehsen make each year?
A 2600 B 6000 C 7000 D 13 000

26 Which costing method is most suitable for fixing a selling price and which for deciding whether to
make or buy in a product?

fixing of selling price
decision to make or
buy in a product
A absorption costing absorption costing
B absorption costing marginal costing
C marginal costing absorption costing
D marginal costing marginal costing

Q59.
8
UCLES 2012 9706/11/M/J/12



A $75 000 B $82 500 C $85 000 D $105 000


$14 000 a year.

A 2600 B 6000 C 7000 D 13 000


decision to make or
buy in a product

Q60.
8
UCLES 2012 9706/11/M/J/12



A $75 000 B $82 500 C $85 000 D $105 000


$14 000 a year.

A 2600 B 6000 C 7000 D 13 000


decision to make or
buy in a product

Q61
9
UCLES 2012 9706/11/M/J/12
27 A business provides the following data.

output level 1 2
direct labour hours 8 500 9 250
total overheads $123 250 $124 563

The variable overhead cost is $1.75 per direct labour hour.

What is the fixed overheads cost when 8500 labour hours are used?
A $1313 B $14 875 C $108 375 D $123 250

28 The following information is forecast for May.

units
opening inventory 25 200
closing inventory 28 200
$
marginal cost profit 100 800
absorption cost profit 120 300

What is the overhead absorption rate?
A $3.57 B $4.27 C $4.77 D $6.50

29 The manufacture of which product is best suited to job costing?
A aeroplanes
B medicines
C newspapers
D paint

30 What is the purpose of a job cost sheet?
A to enable the business to recover its overheads
B to ensure the customer knows the split between materials and labour
C to inform the customer of the profit margin
D to let the business find the price for a quotation

Q62.
2
UCLES 2012 9706/12/M/J/12
A Carriage inwards is a credit.
B Carriage outwards is a debit.
C Purchase returns is a debit.
D Sales returns is a credit.

2 The table shows opening and closing balances for the rent receivable account.

start of year
$
end of year
$
rent received in advance 4200 1600
rent due in arrears 2000 2400

During the year, $111 000 rental income was received.

What is the total rent receivable for the year?
A $110 600 B $111 000 C $113 200 D $114 000

3 A non-current asset costing $206 000, with a net book value of $131 000, is revalued to
$275 000.

How should the revaluation be recorded?
A Dr Asset at cost $69 000
Cr Revaluation reserve $69 000

B Dr Provision for depreciation $75 000
Dr Asset at cost $69 000

C Dr Provision for depreciation $144 000

D Dr Revaluation reserve $144 000
Cr Asset at cost $69 000
Cr Provision for depreciation $75 000

Q63
6
UCLES 2012 9706/12/M/J/12
13 A business sells goods at cost plus 25 %.

Information for a year is shown.

$
revenue 240 000

What is the total of purchases for the year?
A $180 000 B $186 000 C $192 000 D $198 000

14 The inventory records of a business show the following information for product X.

units
cost per unit
$
1 January opening balance 100 3
3 January receipts into inventory 50 4
8 January inventory issued 120

What is the value of the inventory issued on 8 January using the first in first out (FIFO) method?
A $360 B $380 C $410 D $420

15 A company has an issued share capital of 200 000 6% cumulative preference shares of $1 each
fully paid and 800 000 ordinary shares of $1 each fully paid.

Assuming that the company earns no profit in the year, which statement is correct?
A Both preference and ordinary shares are paid a dividend in the year.
B The unpaid dividends for both preference and ordinary shares are carried forward to a future
year.
C The unpaid preference dividend is carried forward to a future year.
D The preference shares are paid a total dividend of $12 000 in the year.

Q64
2
UCLES 2012 9706/12/M/J/12
A Carriage inwards is a credit.
B Carriage outwards is a debit.
C Purchase returns is a debit.
D Sales returns is a credit.

2 The table shows opening and closing balances for the rent receivable account.

start of year
$
end of year
$
rent received in advance 4200 1600
rent due in arrears 2000 2400

During the year, $111 000 rental income was received.

What is the total rent receivable for the year?
A $110 600 B $111 000 C $113 200 D $114 000

3 A non-current asset costing $206 000, with a net book value of $131 000, is revalued to
$275 000.

How should the revaluation be recorded?
A Dr Asset at cost $69 000

B Dr Provision for depreciation $75 000
Dr Asset at cost $69 000

C Dr Provision for depreciation $144 000

D Dr Revaluation reserve $144 000
Cr Asset at cost $69 000
Cr Provision for depreciation $75 000

Q65.
7
17 A business has noticed a significant increase in its trade receivables collection period.

What would be the most appropriate action to help the firm improve its liquidity position?
A factoring
B issue of shares
C long-term bank loan
D reducing sales

18 Which accounting ratio is used to assess working capital management?
A gross profit ratio
B net profit ratio
C rate of inventory turnover


$
reserves 80 000

A 18.5 % B 21.7 % C 35.7 % D 50.0 %



inventory holding
(in days)
inventory turnover
(times)
A decrease decrease
B decrease increase
C increase decrease
D increase increase

Q66
6
UCLES 2012 9706/13/M/J/12
14 The table shows transactions relating to a product during July.

units $ (per unit)
purchased 50 4
sold 30 10

Of the remaining units, 8 are damaged and therefore worthless.

What is the profit for July?
A $68 B $100 C $148 D $180

15 The table shows the capital and reserves for a company.

$000
ordinary shares of $1 fully paid 200
8 % preference shares of $1 fully paid 100
general reserve 120

What is the value of each ordinary share if valued on a balance sheet (net assets) basis?
A $1 B $1.40 C $2.25 D $2.75

16 The following information is given in the financial statements of Primecrop Limited.

$
ordinary shares 1 200 000
6 % preference shares 250 000
general reserve 120 000
retained earnings 710 000
8 % debentures 400 000

What is the value of ordinary shareholders funds?
A $1 910 000 B $2 030 000 C $2 280 000 D $2 430 000

Q67
6
UCLES 2012 9706/13/M/J/12
14 The table shows transactions relating to a product during July.

units $ (per unit)
purchased 50 4
sold 30 10

Of the remaining units, 8 are damaged and therefore worthless.

What is the profit for July?
A $68 B $100 C $148 D $180

15 The table shows the capital and reserves for a company.

$000
ordinary shares of $1 fully paid 200
8 % preference shares of $1 fully paid 100
general reserve 120

What is the value of each ordinary share if valued on a balance sheet (net assets) basis?
A $1 B $1.40 C $2.25 D $2.75

16 The following information is given in the financial statements of Primecrop Limited.

$
ordinary shares 1 200 000
general reserve 120 000
retained earnings 710 000
8 % debentures 400 000

What is the value of ordinary shareholders funds?
A $1 910 000 B $2 030 000 C $2 280 000 D $2 430 000

Q68.
8
UCLES 2012 9706/13/M/J/12
B inventory
C trade payables
D trade receivables

next five years.


23 A company is going to sell a surplus non-current asset.

Which term describes the net book value of the non-current asset in respect of the decision to
sell?
A a fixed cost
B a stepped cost
C a sunk cost
D a variable cost

24 What usually makes up the total cost of a manufactured product for inventory valuation
purposes?
A cost of production and selling and distribution overhead
B direct materials and direct labour
C direct materials and manufacturing overhead
D prime cost and manufacturing overhead

Q69.
2
UCLES 2011 9706/11/O/N/11
1 A business purchases a machine for $3200. It is estimated that it will have a useful life of 5 years
and a residual value of $700. Straight line depreciation is charged each year.

What is the net book value at the end of year 2?
A $1920 B $2200 C $2560 D $2700

2 A bank statement showed an overdraft of $750.

A cheque issued in payment of rent for $570 had not been presented, and a cheque for $624
received was omitted from the statement.

The statement included a bank charge of $50 but it had not been entered in the cash book.

What amount should appear in the balance sheet?
A bank balance $646
B bank balance $1894
C bank overdraft $494
D bank overdraft $696

3 A company pays rates annually in advance on 1 April each year. $4000 is paid by them on
1 April 2009 and $4800 on 1 April 2010. The companys accounting year end is 31 December.

What is the charge for rates in the 2010 income statement?
A $4000 B $4200 C $4600 D $4800

4 At the end of its financial year a business had accounts receivable of $16 000 and had a bad
debts provision of $640. The provision is to be maintained at 5% of accounts receivable.

Which amount is shown in the income statement?

5 What might stop financial statements showing a true and fair view?
A changes in depreciation methods from year to year
B changes in dividend policy
C creation of an asset revaluation reserve
D inclusion of purchased goodwill in a balance sheet

Q70
3
6 A company has been depreciating its IT equipment over 5 years, but now finds that it is becoming
obsolete in 3 years.

What does the consistency principle permit the company to do?
A change the depreciation policy to 3 years and highlight the effect of this in its financial
statements
B change the depreciation policy to 3 years without indicating the effect on profits
C continue to depreciate over 5 years as per the existing policy
D continue to depreciate over 5 years but note that after 3 years the equipment will be obsolete

7 Which error would cause an entry in the suspense account?
A A page total from the purchases journal was posted as $9780 rather than the correct figure of
$9870.
B Carriage outwards is credited to the carriage outwards account but correctly accounted for in
the cash book.
C Discounts allowed are debited to the discounts allowed account and credited to the
purchases ledger control account.
D Repairs to a vehicle are debited to the vehicles account.

8 A companys purchases ledger control account showed an opening balance of $24 640 credit.

The following information is available for the year.

$
purchases journal (including invoice for $910 entered twice) 17 100
receivables ledger control contra 850
credit notes issued by suppliers 1 250
discounts received 420

The purchases ledger control account balance at the year end was $19 870 credit.

How much cash was paid to creditors during the year?
A $18 440 B $20 140 C $20 940 D $22 640

Q71.
3

statements

7 Which error would cause an entry in the suspense account?
A A page total from the purchases journal was posted as $9780 rather than the correct figure of
$9870.
B Carriage outwards is credited to the carriage outwards account but correctly accounted for in
the cash book.
C Discounts allowed are debited to the discounts allowed account and credited to the
purchases ledger control account.
D Repairs to a vehicle are debited to the vehicles account.

8 A companys purchases ledger control account showed an opening balance of $24 640 credit.

The following information is available for the year.

$
purchases journal (including invoice for $910 entered twice) 17 100
receivables ledger control contra 850
credit notes issued by suppliers 1 250
discounts received 420

The purchases ledger control account balance at the year end was $19 870 credit.

How much cash was paid to creditors during the year?
A $18 440 B $20 140 C $20 940 D $22 640

Q72
5
12 There are 75 members of a tennis club, paying an annual subscription of $95 each.

The treasurer has provided the following information for the year.

$
subscriptions received 7 305
overheads: tennis balls - purchased
- opening inventory
- closing inventory
850
110
95
other overheads 4 700

How much surplus will the clubs income and expenditure account for the year show?
A $1560 B $1670 C $1740 D $1850

13 A businessman marks up his cost of sales by 50 %. At the end of his trading year the following
data is available.

$
ordinary goods purchased 35 000

What is his sales figure for the year?
A $51 000 B $52 500 C $54 000 D $66 000

14 The financial year of a manufacturer ends on 31 December. Finished goods are valued at factory
cost plus 20 %.

The following information is available:

1 January
$
31 December
$
inventory of finished goods 2400 3000

What is the amount to be deducted for the provision for unrealised profit in the income
statement?
A $100 B $120 C $500 D $600

Q73.
6
UCLES 2011 9706/11/O/N/11
15 The following information relates to the non-current assets of a business formed three years ago.

$
cost at start of year 1 10 000
accumulated depreciation at end of year 3 6 000
profit for year 3 18 000

Depreciation has been consistently charged using the straight line method.

What would the profit be in year 3 if the method of depreciation for that year is changed to the
reducing balance method at a rate of 25%?
A $16 500 B $17 500 C $18 500 D $19 000

16 What could be used to fund a bonus issue of shares?

1 asset revaluation reserve
2 general reserve
3 retained earnings
4 share premium

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

17 An investor owns 10 000 5 % preference shares in Howdo Limited.

One year Howdo does not have enough profits to pay the preference dividend.

The investor is not too worried as he expects the profits to improve and he thinks the directors will
pay the missed dividend the following year.

Which type of preference shares does the investor own?
A cumulative
B non-cumulative
C participating
D redeemable

Q74.
8
UCLES 2011 9706/11/O/N/11
21 A company is operating in a very competitive market.

Which ratios represent the reaction to the competition?

gross profit
percentage
period of credit
allowed to customers
A 20 % 30 days
B 20 % 60 days
C 25 % 30 days
D 25 % 60 days

22 The balance sheet of a business at 30 June includes the following items:

Year 1 Year 2
trade receivables 47 000 63 000
other receivables 1 900 2 700

Total sales for Year 2 amounted to $450 000 of which $85 000 were cash sales.

What is the average trade receivables collection period during the year ended 30 June Year 2?

23 The opening inventory of a business is $10 000 and the cost of goods sold is $200 000.

Using the average figure of opening and closing inventory, what value of closing inventory is
needed to give an inventory turnover of 10 times?
A $10 000 B $20 000 C $30 000 D $40 000

24 What are major assumptions in contribution / sales (c / s) analysis?

1 Costs can be identified as either variable or fixed.
2 Fixed cost per unit is constant as activity rises.
3 Variable cost per unit fluctuates with the volume of activity.
4 Volume of activity is the only factor that affects revenue and variable costs.


Q75.
8
UCLES 2011 9706/11/O/N/11
21 A company is operating in a very competitive market.

Which ratios represent the reaction to the competition?

gross profit
percentage
period of credit
allowed to customers
A 20 % 30 days
B 20 % 60 days
C 25 % 30 days
D 25 % 60 days


Year 1 Year 2




A $10 000 B $20 000 C $30 000 D $40 000




Q76.
9
25 Which statements about marginal costing are correct?

1 The marginal cost of a product includes an allowance for fixed overheads.
2 The marginal cost of a product represents the additional cost of making one extra
unit.
3 If inventory decreases during a period, the profits under absorption costing will be
lower than under marginal costing.

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

26 A company absorbs overheads on machine hours which are budgeted at 11 250. The budgeted
overhead is $281 250.

Results show actual hours of 10 980 and overhead of $276 652.

What is the under/over-absorption?
A overhead over-absorbed by $2152
B overhead over-absorbed by $4598
C overhead under-absorbed by $2152
D overhead under-absorbed by $4598

27 A company uses absorption costing and makes and sells one product. In the last month budgeted
overheads totalled $60 000. Budgeted production was 15 000 units and budgeted sales were
14 000 units.

The company now decides to apply marginal costing principles for the last month.

Which effect will this have on profits?
A $3500 decrease
B $4000 decrease
C $4000 increase
D no effect

Q77.
9

unit.





14 000 units.


A $3500 decrease
B $4000 decrease
C $4000 increase
D no effect

Q78
11
UCLES 2011 9706/11/O/N/11
30 A business has the following budgeted and actual results for a period.

$
budgeted fixed overheads 354 000
actual fixed overheads 360 000
under absorption of overheads 3 000

The fixed overheads are absorbed per unit.

The budgeted number of units was 118 000.

What is the actual level of activity in units?
A 118 000 B 119 000 C 120 000 D 121 000

Q79.
2
UCLES 2011 9706/12/O/N/11
1 The table gives data about rental income for the year ended 31 March 2011.

$
rents owing 31 March 2010 1 400
rents received in advance 31 March 2010 1 300
cash received 13 700
rents written off 560
rents owing at 31 March 2011 1 750
rents paid in advance at 31 March 2011 1 600

Which value of rental income will appear in the income statement for the year ended
31 March 2011?
A $14 010 B $14 210 C $14 310 D $14 510

2 Expenditure on a machine during a year has included the following.

$
insurance costs 2 400
new engine machine will now produce more products per hour 22 300
cleaning costs 7 200

How much of this expenditure should be treated as capital expenditure?
A none B $22 300 C $24 700 D $31 900

3 What should companies not show as non-current assets in their balance sheets?
A plant bought on hire purchase
B plant fully depreciated
C plant held on finance leases
D plant held on operating leases

Q80
6
UCLES 2011 9706/12/O/N/11
14 Subscriptions received by a sports club were as follows.

received year ended 31 December

2008
$
2009
$
2010
$
for membership in the year ended
31 December

2008 1900 100
2009 300 2100 400
2010 200 2500

Note: all subscriptions for 2009 are included above.

A receipts and payments account and an income and expenditure account have been prepared
for the year ended 31 December 2009.

What are the amounts of membership subscriptions shown in the receipts and payments account
and the income and expenditure account for 2009?

receipts and
payments account
$
income and
expenditure account
$
A 2100 2100
B 2400 2100
C 2400 2800
D 2800 2400

Q81
8
UCLES 2011 9706/12/O/N/11
18 When is working capital most likely to increase?
A when the business increases its selling prices
B when the credit period allowed to customers is reduced
C when the credit period taken from suppliers is increased
D when the value of inventory decreases

19 What occurs in a rights issue of shares?
A Any premium on the issue is added to a capital reserve.
B Any premium on the issue is added to a revenue reserve.
C Any premium on the issue is written off to the income statement.
D The nominal value of the issue is written off to the income statement.

20 A business has a rate of inventory turnover of 17 times a year.
What is the numerator in the calculation?
A average inventory
B closing inventory
C cost of sales
D credit sales

21 The following items appear on a balance sheet.

$
inventory 20 000
balance at bank 2 000
cash in hand 1 500
provision for doubtful debts 500

The current ratio is 3 : 1.

How much do the trade receivables owe?
A $9 500 B $10 000 C $12 000 D $12 500

Q82
2
UCLES 2011 9706/13/O/N/11
1 A bank statement showed an overdraft of $750.

A cheque issued in payment of rent for $570 had not been presented, and a cheque for $624
received was omitted from the statement.

The statement included a bank charge of $50 but it had not been entered in the cash book.

What amount should appear in the balance sheet?
A bank balance $646
B bank balance $1894
C bank overdraft $494
D bank overdraft $696

2 A company pays rates annually in advance on 1 April each year. $4000 is paid by them on
1 April 2009 and $4800 on 1 April 2010. The companys accounting year end is 31 December.

What is the charge for rates in the 2010 income statement?
A $4000 B $4200 C $4600 D $4800

3 At the end of its financial year a business had accounts receivable of $16 000 and had a bad
debts provision of $640. The provision is to be maintained at 5 % of accounts receivable.

Which amount is shown in the income statement?

4 What might stop financial statements showing a true and fair view?
A changes in depreciation methods from year to year
B changes in dividend policy
C creation of an asset revaluation reserve
D inclusion of purchased goodwill in a balance sheet


statements

Q83.
4
UCLES 2011 9706/13/O/N/11
9 An analysis of a businesss record of inventory for an item shows the following:

On 1 January the business had an inventory of 100 units at a cost of $10 each.

units purchased units sold
February 50 units
March 60 units at $11 each
April 70 units at $12 each 100 units
May 30 units

All sales are made at $13 per unit. The business values its inventory on a FIFO basis.

What is the value of the inventory at the end of May?
A $500 B $550 C $600 D $650

10 X, Y and Z are in partnership, sharing profits in the ratio 2 : 2 : 1. X is allowed an annual salary of
$10 000. Y has made a loan to the partnership on which the partnership pays interest of $5000
each year. Profit for the year before appropriations is $150 000.

What is Zs total appropriation of profit for the year?
A $27 000 B $28 000 C $29 000 D $30 000

11 There are 75 members of a tennis club, paying an annual subscription of $95 each.

The treasurer has provided the following information for the year.

$
subscriptions received 7 305
- opening inventory
- closing inventory
850
110
95
other overheads 4 700

How much surplus will the clubs income and expenditure account for the year show?
A $1560 B $1670 C $1740 D $1850

Q84.
8
UCLES 2011 9706/13/O/N/11

Year 1 Year 2




A $10 000 B $20 000 C $30 000 D $40 000





unit.


Q85.
9



14 000 units.


A $3500 decrease
B $4000 decrease
C $4000 increase
D no effect

27 What does the diagram show about costs?

1 2 3 4 5
fixed costs
$000
profit
years
sales revenue
revenue
and
costs

A Fixed costs are increasing.
B Total costs as a percentage of sales are decreasing.
C Variable costs per unit are decreasing.
D Variable costs per unit are increasing.

Q86.
2
UCLES 2011 9706/11/M/J/11
1 A business paid $10 000 for waste disposal in the year.

The opening prepayment was $1500 and the closing accrual was $2000.

What was the charge for waste disposal for the year?
A $6500 B $9500 C $10 500 D $13 500

2 The non-current assets of a business are shown.

end of year
$
start of year
$
cost 360 000 300 000
accumulated depreciation 120 000 75 000
net book value 240 000 225 000

During the year, non-current assets costing $110 000 were bought and non-current assets with a
net book value of $20 000 were sold.

What was the depreciation charge for the year?
A $35 000 B $45 000 C $50 000 D $75 000

3 Which transaction would increase the current assets of a business?
A paying invoices $950, after receiving $50 cash discount
B purchasing a machine on credit for $1200
C purchasing inventory for $1100 cash and selling it on credit for $1500
D selling inventory with an original cost of $800 at below cost price

4 The following summarised information has been taken from the balance sheet of a partnership.

$
non-current assets 42 000
capital accounts 36 000
current accounts (debit) 5 000
current liabilities 7 000

What is the amount of current assets?
A $6000 B $11 000 C $17 000 D $21 000

Q87.
3
5 Accountants prefer the commercial reality of a transaction to a strictly legal approach.

A consistency
B materiality
C prudence

6 There is great uncertainty about the continuance of a business. This has caused the proprietor to
make a large reduction in the valuation of the year-end inventory.

Which accounting principle does this illustrate?
A going concern
B matching
C materiality

7 The cash book of a business shows a credit balance of $12 500 at 30 June. Bank charges of
$2000 have not yet been entered in the cash book.

A cheque for $20 000 received from a debtor, and a cheque for $3000 paid to a creditor have
been entered in the cash book, but have not yet been shown on the bank statement.

What is the balance shown on the bank statement at 30 June?
A $2500 credit
B $2500 debit
C $31 500 credit
D $31 500 debit

8 Closing inventory has been overvalued.

What is the effect on the financial statements?

net current assets profit from operations
A overstated overstated
B overstated understated
C understated overstated
D understated understated

Q88.
4
UCLES 2011 9706/11/M/J/11
9 What is the main use of a computerised age analysis of debtors?
A aid debt collection procedures
B match sales invoices against orders
C reconcile sales ledger balances
D show credit notes issued

10 A manufacturing company has the following balances at its year end.

$
closing inventory of raw materials 24 500
direct manufacturing wages 162 800
purchases of raw materials 85 200
supervisors wages 44 000
opening inventory of raw materials 27 800

What is the prime cost for the year?
A $244 700 B $248 000 C $251 300 D $295 300

11 A partnership provides the following financial information for the year ended 30 June 2011.

$000
bank interest payable 21
interest credited to current accounts 15
drawings 100
partnership salaries 95

What is the residual balance of profits to be appropriated between the partners?
A $9000 B $104 000 C $109 000 D $204 000

12 A new business was established with opening capital of $20 000.

At the end of the first year, assets less liabilities were $26 000. The owner withdrew $7000 as
drawings during the year and this resulted in a bank overdraft of $5000 at the end of the year.

What was the profit during the first year?
A $8000 B $12 000 C $13 000 D $18 000

Q89.
5
13 At the year end a company discovers that some inventory is damaged.

This inventory originally cost $2000 and to replace it would now cost $1900.

It would normally sell for $2400 but can now only be sold for $2200 if repairs costing $400 are
undertaken.

At what value should the damaged inventory be shown in the financial statements?
A $1800 B $1900 C $2000 D $2200

14 A club charges each of its 100 members an annual subscription of $12.

At the end of a year four members had not paid their annual subscription.

What will be the entries in the financial statements for subscriptions?

income and
expenditure account
$
balance sheet
A 1152 current asset $48
B 1152 current liability $48
C 1200 current asset $48
D 1200 current liability $48

15 How should goodwill be treated by a limited company?
A Goodwill should always be written off immediately.
B Non-purchased goodwill is shown in the balance sheet.
C Purchased goodwill is shown in the balance sheet and written off over its useful life.
D Purchased goodwill remains on the balance sheet as a permanent item.

16 A company issues for cash 50 000 shares of $5 each at a premium of $15 each and $300 000
4 % debentures.

By what amount will the net assets of the company increase?
A $250 000 B $550 000 C $1 000 000 D $1 300 000

Q90.
9
27 A business provides the following information for a month.

actual direct labour hours worked 8000
actual overhead expenditure $88 000
budgeted direct labour hours 7500
budgeted overhead expenditure $90 000

What is the amount of the overhead over / under recovery?
A $2000 over-recovered
B $2000 under-recovered
C $8000 over-recovered
D $8000 under-recovered

28 The following information is provided by a company for a month.

actual direct labour hours worked 4500
budgeted direct labour hours 5000
budgeted overhead expenditure $80 000
overheads under-recovered $12 000

What is the amount of the actual overhead expenditure?
A $60 000 B $68 000 C $72 000 D $84 000

Q91.
10
UCLES 2011 9706/12/M/J/11
28 Which graph shows the fixed cost per unit produced in a manufacturing process?

0
fixed cost
per unit
quantity produced
A
0
fixed cost
per unit
quantity produced
B
0
fixed cost
per unit
quantity produced
C
0
fixed cost
per unit
quantity produced
D

29 A companys sales are made evenly over a year (360 days). 10 % of the sales are for cash,
debtors total $26 700 and the trade receivables turnover period is 30 days.

What are the total sales (cash and credit) for the year?
A $320 400 B $356 000 C $801 000 D $890 000

30 A business sells goods at a mark up of 33.3 %.

Information for a year is given.

$
revenue 600 000

What are the total purchases for the year?
A $415 000 B $435 000 C $450 000 D $465 000

Q92.
2
UCLES 2011 9706/12/M/J/11

A consistency
B materiality
C prudence

2 There is great uncertainty about the continuance of a business. This has caused the proprietor to
make a large reduction in the valuation of the year-end inventory.

Which accounting principle does this illustrate?
A going concern
B matching
C materiality



A $2500 credit
B $2500 debit
C $31 500 credit
D $31 500 debit




Q93.
4
UCLES 2011 9706/13/M/J/11


A $2500 credit
B $2500 debit
C $31 500 credit
D $31 500 debit




10 What is the main use of a computerised age analysis of debtors?
A aid debt collection procedures
B match sales invoices against orders
C reconcile sales ledger balances
D show credit notes issued

Q94.
2
UCLES 2010 9706/11/O/N/10
1 On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were
made of $250 each. On 31 December 2009, the business still owes $200 rent on account for
2009.

The business owner has charged the rent payments made during 2009 in his income (profit and
loss) account.

What is the effect on net profit?
A $200 too high
B $200 too low
C $250 too high
D $250 too low

2 A customer paid a deposit in advance for goods to be supplied at a later date.

How should this be recorded in the sellers books?

debit credit
A cash customer
B cash sales
C customer prepayment
D customer sales

3 Non current (fixed) assets of a company were:

start of year
$
end of year
$
at cost 460 000 505 000
cumulative depreciation 215 000 237 000

During the year non current (fixed) assets costing $92 000 were purchased and non current
(fixed) assets with a net book value of $16 000 were sold.

A $22 000 B $23 000 C $53 000 D $69 000

Q95.
2
UCLES 2010 9706/11/O/N/10
1 On 1 January 2009 a business had prepaid rent of $50. During 2009, three rent payments were
made of $250 each. On 31 December 2009, the business still owes $200 rent on account for
2009.

The business owner has charged the rent payments made during 2009 in his income (profit and
loss) account.

What is the effect on net profit?
A $200 too high
B $200 too low
C $250 too high
D $250 too low



debit credit
A cash customer
B cash sales
D customer sales

3 Non current (fixed) assets of a company were:

start of year
$
end of year
$
at cost 460 000 505 000

During the year non current (fixed) assets costing $92 000 were purchased and non current
(fixed) assets with a net book value of $16 000 were sold.

A $22 000 B $23 000 C $53 000 D $69 000

Q96
3

5 At 30 June the balance sheet of a business includes the following.

$
trade receivables (debtors) 46 000
provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid
$303 800 after deducting a 2% cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?
A $15 200 B $16 000 C $22 200 D $76 000

6 Which error will not affect the trial balance?
A posting of $3000 purchases to the debit of the motor vehicle account
B posting of $3000 purchases to the credit of the motor vehicle account
C posting of $3000 road tax refund to the debit of the motor vehicle account
D posting of $3000 sales to the debit of the motor vehicle account

7 Closing inventory (stock) has been overvalued.


net current assets net profit
A no effect understated
B overstated no effect
C overstated overstated

Q97.
4
UCLES 2010 9706/11/O/N/10
8 The trade receivable (debtors) control account of Y shows a balance of $14 320.

Customer X, who owes Y $1000, has also supplied Y with $400 of goods.

The supply of goods, $400, is to be offset by Y.

What is the corrected trade receivable (debtors) control account balance?
A $13 720 B $13 920 C $14 720 D $14 920

9 An electricity accrual of $375 was treated as a prepayment in preparing a traders income (profit
and loss) account.

What was the effect on profit?
A overstated by $375
B overstated by $750
C understated by $375
D understated by $750

10 At the end of a financial year the following information is available.

$
sales 200 000
opening inventory (stock) 15 000
closing inventory (stock) 18 000

If the business makes a standard mark-up of 25%, what were the purchases?
A $147 000 B $153 000 C $157 000 D $163 000

11 For the eleven months ended 31 August 2009, snack bar takings were correctly recorded at
$109 340. For September 2009, the snack bar takings were mixed up with other income. The
snack bar profit margin was 30.%.

The table shows figures for the snack bar for September 2009.

$
opening inventory (stock) at cost 6 303
purchases 8 844
closing inventory (stock) at cost 7 370

What was the gross profit of the snack bar for the year ended 30 September 2009?
A $27 566 B $36 135 C $36 593 D $43 912

Q98.
7
17 A business has two departments, mens clothing and ladies clothing. The following information is
available.

mens department ladies department
sales assistants 7 9
floor space 160 m
2
200 m
2

value of non current (fixed) assets $59 000 $61 000
annual sales $450 000 $750 000

The cost of heating and lighting is $17 692.

What is the cost of heating and lighting for the mens department?
A $6634.50 B $7740.25 C $7863.11 D $8698.57

18 A company makes a bonus issue of shares.

What is the effect on the net assets and the reserves in the balance sheet?

net assets reserves
A increase decrease
B increase unchanged
C unchanged decrease
D unchanged increase

19 The table shows extracts from the trial balance of a company at 31 December 2009.

$
ordinary share capital 750 000
6 % debentures (2015) 150 000
bank loan repayable (2012) 75 000
bank overdraft 110 000
mortgage on buildings (repayable 2010) 120 000

What is the total of non current liabilities in the balance sheet at 31 December 2009?
A $195 000 B $225 000 C $345 000 D $595 000

Q99.
10
UCLES 2010 9706/11/O/N/10
25 In a job costing system, what is the correct entry to record the return of unused direct materials
from production to stores?

debit credit
A cost of sales work in progress
B stores control finished goods
C stores control work in progress
D work in progress stores control

26 A company manufactures two products.

product X
$
product Y
$
selling price 20 30
direct labour (per unit) 10 20
direct materials (per unit) 4 2

Total fixed costs are $48 000.

Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?
A 1800 B 3000 C 4000 D 8000

27 A factory produces a product with a variable cost of $0.60 per unit.

Fixed costs are $15 000 per quarter, including rent of $6000 per quarter.

If more than 20 000 units are made per quarter, additional space is required which increases the
rent by 50%.

What is the total cost per unit of producing 30 000 units in a quarter?
A $0.60 B $0.90 C $1.10 D $1.20

Q100.
10
UCLES 2010 9706/11/O/N/10
25 In a job costing system, what is the correct entry to record the return of unused direct materials
from production to stores?

debit credit
A cost of sales work in progress
B stores control finished goods
C stores control work in progress
D work in progress stores control

26 A company manufactures two products.

product X
$
product Y
$
selling price 20 30
direct labour (per unit) 10 20
direct materials (per unit) 4 2

Total fixed costs are $48 000.

Only 3000 units of Y can be made and sold.

How many units of product X must be made and sold to break even?
A 1800 B 3000 C 4000 D 8000

27 A factory produces a product with a variable cost of $0.60 per unit.

Fixed costs are $15 000 per quarter, including rent of $6000 per quarter.

If more than 20 000 units are made per quarter, additional space is required which increases the
rent by 50%.

What is the total cost per unit of producing 30 000 units in a quarter?
A $0.60 B $0.90 C $1.10 D $1.20

Q101.
11
28 A manufacturer has 700 units of finished goods in stock on 1 March.

On 31 March the total number of units in stock is 770.

At present, stock is valued using the total costing method.

What would be the effect on the operating profit if the marginal costing method is used for stock
valuation?
A increase operating profit
B no change in operating profit
C no change in operating profit but a 10 % increase in gross profit
D reduce operating profit

29 A job cost sheet showed the following estimates.

$
materials 680
labour at $20 per hour 200
overheads at $10 per labour hour 100
profit 280
price of job 1 260

The job actually took 25% more labour hours than were estimated.

What was the profit?
A $205 B $230 C $330 D $355

Q102.
3

5 At 30 June the balance sheet of a business includes the following.

$
trade receivables (debtors) 46 000
provision for doubtful debts 5 % 2 300

During July, sales of $350 000 were made of which 20 % were in cash. Credit customers paid
$303 800 after deducting a 2 % cash discount.

How much did the trade receivables (debtors) owe to the business at 31 July?
A $15 200 B $16 000 C $22 200 D $76 000

6 Which error will not affect the trial balance?
A posting of $3000 purchases to the debit of the motor vehicle account
B posting of $3000 purchases to the credit of the motor vehicle account
C posting of $3000 road tax refund to the debit of the motor vehicle account
D posting of $3000 sales to the debit of the motor vehicle account

7 Closing inventory (stock) has been overvalued.


B overstated no effect
C overstated overstated

Q103.
9
23 A business has the following assets and liabilities.

$000 $000
non current (fixed) assets 420
inventory (stocks) 120
trade receivables (debtors) 310
430
trade payables (creditors) (220)
net current assets 210
total assets less current liabilities 630
long term loan (130)
net assets 500

What is the business's quick (acid test) ratio?
A 1.41 : 1 B 1.95 : 1 C 2.43 : 1 D 3.86 : 1

24 The table shows the year end information for three companies.

company
sales
$
operating profit as %
of all sales
capital employed
$
X 500 000 15 100 000
Y 200 000 8 40 000
Z 400 000 10 80 000

How should the companies rank in order of return on the actual capital employed?
return on capital employed

highest lowest
A X Z Y
B Y Z X
C Z X Y
D Z Y X

Q104.
2
UCLES 2010 9706/11/M/J/10
1 A business purchases a vehicle for $10 000. The business depreciates its non current (fixed)
assets at 20 % using the diminishing value method.

What is the depreciation charge for year 2?
A $1600 B $2000 C $6400 D $8000

2 An item of capital expenditure has been incorrectly treated as revenue expenditure in the
accounts of a business.

What is the effect of this error on the accounts of the business?

assets profit

3 A business has a bank overdraft of $4800. It pays for materials invoiced at $3000 less a trade
discount of 20 % and a settlement discount of 5 %.

A cheque for $500 is received from a debtor.

What is the bank balance after these transactions?
A $2020 overdraft
B $6580 overdraft
C $7150 overdraft
D $7580 overdraft

4 Which of the following items will be debited to accounts in the purchases ledger?
1 discount allowed
2 payments to suppliers
3 purchases
4 purchases returns


Q105
3
5 The personal spending of the owner of a business is not recognised as a business expense.

A business entity
B consistency
C money measurement
D prudence

6 A business obtained a machine by means of a hire purchase agreement. It showed the machine
in its balance sheet at the cash price of $30 000 although only $10 000 has been repaid.

Which accounting principle is involved?
A accruals
B materiality
C prudence


details $
credit sales invoiced during financial year 79 000
goods sent to customers on 28 April 2010 and invoiced 4 May 2010 6 100
8 300

What is the amount of sales for the year ended 30 April 2010?
A $76 800 B $85 100 C $85 300 D $93 400

8 Which item will be entered in a purchase ledger control account?
A discount allowed
B discount received
C prepaid rent
D returns inwards

Q106
3
5 The personal spending of the owner of a business is not recognised as a business expense.

A business entity
B consistency
C money measurement
D prudence

6 A business obtained a machine by means of a hire purchase agreement. It showed the machine
in its balance sheet at the cash price of $30 000 although only $10 000 has been repaid.

Which accounting principle is involved?
A accruals
B materiality
C prudence


details $
credit sales invoiced during financial year 79 000
goods sent to customers on 28 April 2010 and invoiced 4 May 2010 6 100
8 300

What is the amount of sales for the year ended 30 April 2010?
A $76 800 B $85 100 C $85 300 D $93 400

8 Which item will be entered in a purchase ledger control account?
A discount allowed
B discount received
C prepaid rent
D returns inwards

Q107.
6
UCLES 2010 9706/11/M/J/10
15 The table shows transactions relating to an inventory (stock) item during a period.

number of units per unit
bought 100 cost $16
sold 60 selling price $25

Of the remaining units, 20 are damaged and can only be sold for $10 each.

What is the profit for the period?
A $220 B $300 C $420 D $540

16 X, Y and Z are in partnership sharing profits and losses in the ratio 5 : 2 : 3. Y is entitled to a salary
of $18 000 per annum. Partners receive interest at 6 % per annum on their capital account
balances at the start of the year.

At the beginning of the year, capital account balances were:

X $30 000
Y $22 000
Z $20 000

The net profit before salary and interest for the year is $140 000.

What is Ys share of the total profits?
A $23 536 B $28 000 C $42 856 D $46 000

17 L and M are in partnership.

Which item should appear in the partnership appropriation account?
A additional capital contributed by M
B cash drawings of L and M during the year
C salary due to L
D salary paid to Ms wife

18 A company is set up with an authorised share capital of $3 million.

It plans to purchase immediately a factory for $1 million. Preliminary expenses will be $100 000
and the immediate requirement for working capital will be $800 000. It will also require new
equipment costing $600 000 in 12 months time.

What is the minimum amount the company needs to raise now?
A $1 000 000 B $1 900 000 C $2 500 000 D $3 000 000

Q108.
9
26 The table shows costs at three activity levels.

activity levels 65 units 90 units 100 units
$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

What is the fixed cost?
A $1600 B $4000 C $5200 D $5600

27 A customer places an order for 20 000 bricks.

Which costing method will the supplier use to price the order?
A batch
B job
C marginal
D unit

28 A company has total production costs of $6000 to make 10 000 units, and $13 000 to make
24 000 units.

What is its total cost to make 20 000 units?
A $1000 B $10 000 C $11 000 D $12 000

29 A business makes wedding dresses. Each machinist is paid $30 a day and each supervisor $40 a
day. Each supervisor can work with up to 10 machinists and each machinist can produce one
wedding dress a day.

If 95 wedding dresses a day are produced, what is the daily labour cost?
A $2850 B $3210 C $3230 D $3250

Q109
9

$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

A $1600 B $4000 C $5200 D $5600


A batch
B job
C marginal
D unit

24 000 units.

A $1000 B $10 000 C $11 000 D $12 000


A $2850 B $3210 C $3230 D $3250

Q110.
9

$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200

A $1600 B $4000 C $5200 D $5600


A batch
B job
C marginal
D unit

24 000 units.

A $1000 B $10 000 C $11 000 D $12 000


A $2850 B $3210 C $3230 D $3250

Q111.
6
UCLES 2010 9706/11/M/J/10
15 The table shows transactions relating to an inventory (stock) item during a period.

number of units per unit
bought 100 cost $16
sold 60 selling price $25

Of the remaining units, 20 are damaged and can only be sold for $10 each.

What is the profit for the period?
A $220 B $300 C $420 D $540

16 X, Y and Z are in partnership sharing profits and losses in the ratio 5: 2 : 3. Y is entitled to a salary


X $30 000
Y $22 000
Z $20 000


A $23 536 B $28 000 C $42 856 D $46 000


C salary due to L



A $1 000 000 B $1 900 000 C $2 500 000 D $3 000 000

Q112.
6
UCLES 2010 9706/12/M/J/10
15 X, Y and Z are in partnership sharing profits and losses in the ratio 5: 2 : 3. Y is entitled to a salary


X $30 000
Y $22 000
Z $20 000


A $23 536 B $28 000 C $42 856 D $46 000


C salary due to L



A $1 000 000 B $1 900 000 C $2 500 000 D $3 000 000

Q113.
7
18 At 1 January 2009 the capital structure of a company was as follows.

$
issued share capital 100 000 ordinary shares of $1 each 100 000
share premium account 30 000

On 1 April 2009 the company made a rights issue of 20 000 shares of $1 each for $36 000.

On 1 June 2009 a bonus issue of one share for every six in issue was made. The share premium
account was used for this purpose.

What is the balance on the share premium account at 31 December 2009?
A $26 000 B $34 000 C $46 000 D $56 000

19 When is a share premium account opened?
A when shares are issued at a price above nominal value
B when shares are redeemed by the company at a premium
C when shares are sold by a shareholder at a price above their nominal value
D when the company issues bonus shares

20 A company buys and re-sells goods. It has a higher gross profit margin than its rivals.

Which reason could explain this?
A Rival companies pay less for goods than the company.
B Rival companies spend less on advertising than the company.
C The Company charges a higher selling price than its rivals.
D The Company charges a lower price than its rivals.

21 A business has trade payables (creditors) of $8000 and a bank overdraft of $2000. Its current
ratio is 2 : 1 and its quick (acid test) ratio is 1.5 : 1.

What is the value of its inventory (stock)?
A $4000 B $5000 C $28 000 D $35 000

Q114.
8
UCLES 2010 9706/12/M/J/10
22 A companys sales during a 365 day year are shown in the table.

$
cash sales 179 580
credit sales 927 100
total sales 1 106 680

The trade receivables (debtors) turnover ratio at the year end is 42 days.

What is the end-of-year trade receivables (debtors) balance?
A $22 074 B $98 460 C $106 680 D $127 344

23 The following information is given about four products.

Which product makes the most gross profit?

inventory (stock)
turnover (per annum)
average inventory
(stock) in units
mark up on cost
%
A 8 times 1000 15
B 6 times 1000 30
C 7 times 1000 25
D 10 times 1000 20

24 A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a direct
materials cost of $2500.

Direct labour involved 200 hours at a cost of $2000, and overheads are absorbed at the rate of
$15 per direct labour hour.

What is the cost of a tin of soup?
A $0.25 B $0.45 C $0.55 D $0.75

Q115.
8
UCLES 2010 9706/12/M/J/10
22 A companys sales during a 365 day year are shown in the table.

$
cash sales 179 580
credit sales 927 100
total sales 1 106 680

The trade receivables (debtors) turnover ratio at the year end is 42 days.

What is the end-of-year trade receivables (debtors) balance?
A $22 074 B $98 460 C $106 680 D $127 344

23 The following information is given about four products.

Which product makes the most gross profit?

inventory (stock)
turnover (per annum)
average inventory
(stock) in units
mark up on cost
%
A 8 times 1000 15
B 6 times 1000 30
C 7 times 1000 25
D 10 times 1000 20

24 A soup manufacturer uses batch costing. It produces a batch of 10 000 tins of soup with a direct
materials cost of $2500.

Direct labour involved 200 hours at a cost of $2000, and overheads are absorbed at the rate of
$15 per direct labour hour.

What is the cost of a tin of soup?
A $0.25 B $0.45 C $0.55 D $0.75

Q116.
2
UCLES 2009 9706/11/O/N/09
1 The table shows balances at the end of a year.

$
expenses prepaid 6 000
expenses accrued 4 000
trade creditors 13 400
trade debtors 10 500
loan (2015) 20 000

What is the total of current liabilities?
A $16 500 B $17 400 C $28 900 D $48 900

2 The accounting year end of a business is 31 October.

On 1 April the business rents out part of its warehouse for an annual rent of $6000. Payments
were received in equal instalments on 1 April, 1 July, 1 October and 1 January.

At 31 October what would the final accounts show?

profit and loss account
$
balance sheet
$
A rental income 3500 current asset 1000
B rental income 3500 current liability 1000
C rental income 4500 current liability 1000
D rental income 6000 current asset 1500

3 A business paid $15000 for electricity in the year. The opening prepayment was $1000 and the
closing accrual was $2000.

What was the charge for electricity for the year?
A $15 000 B $16 000 C $17 000 D $18 000

4 A business makes a provision for doubtful debts equal to 5% of its debtors.

At 31 March 2008 the provision for doubtful debts was $850.

At 31 March 2009 the debtors after the provision for doubtful debts were $17 100.

How much is the increase in the provision for doubtful debts for the year ended 31 March 2009?
A $45 B $50 C $850 D $900

Q117.
8
UCLES 2009 9706/11/O/N/09
20 What will result in a reduction of working capital?
A decreasing the rate of stock turnover
B reducing the debtor collection period by offering discounts
C reducing the time taken to pay suppliers
D selling some surplus fixed assets

21 A bank manager has reviewed the financial statements of a business. He notes that the liquidity
ratio has fallen but that the sales for the year have remained constant.

What explains this fall in the liquidity ratio?
A a decrease in stocks of finished goods
B a decrease in the overdraft
C an increase in cash
D an increase in trade creditors

22 The following information relates to the final accounts of a business.

$000
opening stock 2 470
closing stock 2 156
cost of sales for year 12 500
sales for year 21 660

What was the stock turnover in days?
A 68 B 72 C 126 D 144

23 A company has a share price that gives a dividend yield of 4%. Earnings per share are $0.32 and
half the earnings are paid out as dividends.

What is the share price?
A $2.00 B $4.00 C $6.00 D $8.00

24 When are the reported profits under marginal costing and absorption costing principles the same
amount?
A when sales revenue exceeds cost of sales
B when units produced equals sales in units
C when units produced exceeds sales in units
D when unit sales exceeds production in units
Q118.
9
25 Which cost will fall as production is reduced?
A fixed costs per unit
B total fixed costs
C total variable costs
D variable costs per unit

26 A particular cost is classified as semi-variable.

What effect will a 20 % reduction in activity have on the unit cost?
A decrease by 20 %
B decrease by less than 20 %
C increase by 20 %
D increase by less than 20 %

27 A business uses job costing to calculate the cost of vehicle repair jobs.

Overheads are allocated on an absorption costing basis.

What is the effect of this method of allocation?
A overheads will include both fixed and variable overhead costs
B overheads will include direct costs only
C overheads will include fixed overhead costs only
D overheads will include variable overhead costs only

28 A company has a product which sells for $1 per unit. The variable costs are $0.60 per unit, and
production of 200 000 units is planned.

Fixed costs are $0.20 per unit at the budgeted production level.

What is the break-even level?
A 40 000 units B 66 667 units C 100 000 units D 160 000 units

29 How is total contribution calculated?
A actual sales revenue less break-even sales revenue
B sales revenue less fixed costs
C sales revenue less total costs
D sales revenue less variable costs

Q119.
6
UCLES 2009 9706/12/O/N/09
14 An extract from the accounts of a manufacturing company shows the following.

$
depreciation of factory machinery 16 700
direct factory labour 476 200
factory cleaning costs 18 300
factory heat, light and power 22 600
factory supervisors salary 18 200
indirect factory labour 52 470
purchases of raw materials 184 300
stock of raw materials
- opening stock 21 500
- closing stock 17 900

What is the prime cost of production?
A $660 500 B $664 100 C $680 800 D $716 570

15 An extract from a companys balance sheet is given.

$000
issued ordinary share capital 250
issued preference shares 180
profit and loss account 320
8 % debentures 100

What are the ordinary shareholders funds?
A $695 000 B $775 000 C $875 000 D $975 000

Q120.
2
UCLES 2009 9706/01/M/J/09
1 A vehicle cost $30 000. The vehicle was later sold for $9000 and the profit on disposal was
$1500.

What was the accumulated depreciation of the vehicle on disposal?
A $7500 B $9000 C $21 000 D $22 500

2 A transport business owned by a sole proprietor purchases a motor vehicle. This is charged to
the Motor expenses account.

What are the effects of this on the end-of-year balance sheet?
A fixed assets understated current assets understated
B fixed assets overstated current assets overstated
C fixed assets overstated capital account overstated
D fixed assets understated capital account understated

3 A business buys a computer for $2200 on 1 January 2007. The computer will be used for four
years, after which time it will be sold for $280. The business uses the straight-line method of
depreciation.

What is the depreciation charge for the year ended 31 December 2008?
A $480 B $550 C $960 D $1100

4 The following information is taken from the stationery account of a business.

$
stock of stationery at beginning of the year 600
cash paid for stationery during the year 7000
amount owing for stationery at end of year 480
stock of stationery at end of year 800

How much should be debited to the profit and loss account for stationery?
A $6680 B $6800 C $7280 D $8080

5 Development costs are capitalised.

A business entity
B historic cost
C matching
D materiality
Q121.
4
UCLES 2009 9706/01/M/J/09
9 The correct balance on the purchases ledger control account is $63 000 but has been entered in
the trial balance as $36 000. The difference on the trial balance has been entered in a suspense
account.

Which journal entry corrects this error?

account to be debited $ account to be credited $
A purchases ledger control account 27 000 suspense account 27 000
B - suspense account 27 000
C suspense account 27 000 -
D suspense account 27 000 purchases ledger control account 27 000

10 Who is most likely to use the creditors ledger?
A cashier
B credit controller
C creditors
D purchases controller

11 A business sells some of its stock for $500 on credit to a customer. The stock originally cost
$600.

What is the effect of this transaction on the balance sheet?

A decrease by $100 decrease by $100
B decrease by $100 increase by $100
C increase by $100 decrease by $100
D increase by $100 increase by $100

12 A companys policy is to depreciate its equipment by 30 % annually using the reducing balance
method.

A piece of equipment which was two years old was sold for $6000 and the profit on sale was
$1590.

What was the cost price of the equipment?
A $7590 B $9000 C $9600 D $11 025

Q122.
6
UCLES 2009 9706/01/M/J/09
16 An extract from a companys trial balance is shown.

debit
$
credit
$
debtors control account debit balances 225 000
debtors control account credit balances 2 800
creditors control account debit balances 3 200
creditors control account credit balances 261 000
investment in another company 12 000

How much should be shown as trade debtors in the companys financial statements?
A $222 200 B $228 200 C $237 400 D $240 200

17 The following items appear in the subscriptions account of a club for a financial year.

$
subscriptions received owed from the previous year 3 000
subscriptions paid in advance for next year 1 000
subscriptions income transferred to the income and expenditure account 50 000
subscriptions outstanding at year end 2 000

How much cash was received from members in the year?
A $46 000 B $50 000 C $52 000 D $56 000

18 The directors of a company provide the following information.

$
equipment 12 000
long term loan 8 000
petty cash 900
stocks 2 500
trade creditors 3 000
trade debtors 2 000

What is the amount of the net current assets?
A $1200 B $2400 C $3600 D $5200

Q123.
7
19 A company profit and loss account includes:

$000
dividend 300
increase in stock 200
overheads 400
purchases 800

If the net profit percentage is 20 %, what is the figure for sales?
A $1 120 000 B $1 250 000 C $1 625 000 D $1 750 000

20 A shareholder sells some ordinary shares for more than he paid for them.

What is the effect on the company balance sheet?

ordinary share capital share premium account
A decrease decrease
B decrease increase
C no effect decrease
D no effect no effect

21 At the beginning of the year a company has authorised share capital of 800 000 ordinary shares
of $0.25 each and an issued share capital of 400 000 ordinary shares of $0.25. During the year
the company makes a further issue of 200 000 ordinary shares at a price of $0.60.

What is the balance on the share capital account at the end of the year?
A $150 000 B $220 000 C $250 000 D $350 000

Q124.
10
UCLES 2009 9706/01/M/J/09
30 The following figures are given for a factorys overheads and machine hours worked.

machine hours total overhead costs
overhead
absorption rate
budgeted 122 000 $268 400 $2.20
actual 116 000 $261 000 $2.25

What was the under- or over-absorption of overhead for the quarter?
A $5800 over-absorbed
B $5800 under-absorbed
C $7400 over-absorbed
D $7400 under-absorbed

Q125.
4
UCLES 2008 9706/01/O/N/08
8 A creditor for $720 transferred from the purchases ledger has been entered on the wrong side of
the sales ledger control account.

The sales ledger control account has a closing balance of $92 460, before correcting the transfer.
A provision for doubtful debts of 1000 is to be made.

What is the correct balance on the sales ledger control account?
A $90 020
B $91 020
C $91 740
D $92 180

9 Closing stock has been undervalued.


B overstated overstated
C understated no effect

10 A traders cash book shows a debit balance of $12 460 at 30 April. Bank charges of $4500 have
not been entered in the cash book.

A cheque for $14 470 received from a debtor and a cheque for $1740 paid to a creditor appear in
the cash book but not on the bank statement.

What is the balance shown on the bank statement at 30 April?
A $4770 credit
B $4770 debit
C $20 690 credit
D $20 690 debit

11 How can net profit be calculated?
A Closing Capital + Drawings Additional Capital Opening Capital
B Closing Capital Drawings + Additional Capital Opening Capital
C Opening Capital + Drawings Additional Capital Closing Capital
D Opening Capital Drawings Additional Capital Closing Capital

Q126.
5
12 A companys capital expenditure of $200 000 has been debited in error to the purchases account.

Depreciation is provided at the rate of 15 % per annum on the cost of all fixed assets held at each
year end.

How will this affect the net profit?
A $170 000 understated
B $200 000 overstated
C $200 000 understated
D $230 000 overstated

13 A business sells some of its stock for $80 on credit to a customer. The stock originally cost $50.

Which statement reflects the effect of this transaction on the balance sheet?

A decrease by $30 decreases by $30
B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

14 Which transaction would appear in both the receipts and payments account and the income and
expenditure account of a cricket club?
A the club bank balance
B the depreciation of the club pavilion
C the purchase of a motorised lawn mower
D the rent of the cricket ground

15 The stock records of a business show the following information for product X.

amount in units
cost per unit
$
1 January opening balance 100 3
3 January receipts into stock 50 4
8 January stock issued 120 -

What is the value of the stock issued on 8 January using the First In First Out (FIFO) method?
A $360 B $380 C $410 D $420

Q127.
6
UCLES 2008 9706/01/O/N/08
16 A business uses the weighted average cost (AVCO) method of stock valuation. During March the
following transactions took place.

$
1 March opening stock 200 units at $6.00 per unit 1200
14 March received 300 units at $6.50 per unit 1950
20 March issued 250 units to production at $7.00 per unit 1750
28 March received 100 units at $6.70 per unit 670

What is the value of stock at 31 March?
A $2195 B $2245 C $2295 D $2450

17 A business has the following assets and liabilities.

$
short-term investment 6 000
loan interest owing 1 500
loan repayable within one year 12 000
deposits from customers for orders 4 500
creditors 27 000
debtors 39 000
pre-payments 3 500

What is the amount of net current assets?
A $3500 B $4500 C $8000 D $15 500

18 Information about the final accounts of a partnership is given.

$
net profit before interest 160 000
interest on bank loan 14 000
interest credited to capital accounts 15 000
drawings 70 000
partnership salaries 24 000

What is the remaining balance of profits to be appropriated amongst the partners?
A $66 000 B $107 000 C $121 000 D $137 000

Q128.
9
26 The graph shows a break-even chart.

0 1000 2000
units of sales
3000 4000
50
40
30
20
10
0
$000
sales revenue
total costs

What are the fixed costs?
A $0 B $10 000 C $20 000 D $30 000

27 What is a benefit of using absorption costing?
A It allows a business to calculate the break-even point for production.
B It allows a business to calculate the total cost of goods produced.
C It allows a business to calculate the profit to be made on a product.
D It allows decision-making on utilising spare capacity by increasing production.

28 A business provides the following data for the year.

budgeted output (units) 10 000
actual output (units) 8 000
$
budgeted fixed production costs 1 200 000
budgeted variable production costs 800 000
budgeted fixed selling overhead 600 000

What is the absorption cost per unit used for stocktaking?
A $200 B $250 C $260 D $325

Q129
3
4 A trial balance at 30 June, before making end of year adjustments, showed:

debit
$
credit
$
trade debtors 35 600 -
provision for doubtful debts - 1 160

At 30 June, it was decided to write off a bad debt of $1600 and to make a provision for doubtful
debts equal to 2 % of trade debtors.

What was the total expense in the profit and loss account for bad and doubtful debts for the year
ended 30 June?
A $680 B $1120 C $2080 D $2280

5 A company has two fixed assets. Details are given in the table.

asset date bought
cost
$
depreciation method
residual
value
X 1 Jan, Year 1 10 000 straight line life 5 years $2000
Y 1 Jan, Year 1 20 000 reducing balance rate 20 % nil

What is the depreciation charge for the year ended 31 December, Year 2?
A $4800 B $5200 C $5600 D $6000

6 Which transaction applies the matching concept?
A a machine acquired on long-term rental is included in fixed assets
B computer equipment is depreciated over two years
C a building is revalued following a fall in property prices
D a waste-paper basket is treated as revenue expenditure

7 The following debit balance appears on a trial balance after preparing the manufacturing account
for the year.

loose tools $18 000

What is this item?
A a creditor for loose tools
B the annual charge for loose tools
C a prepayment for loose tools
D stock of loose tools

Q130.
4
UCLES 2008 9706/01/M/J/08
8 At the year-end a cash book shows a credit balance of $4800.

The bank statement included bank charges of $25 which had not been included in the cash book.

Cheque payments entered in the cash book before the year end to the value of $250 had not yet
cleared the bank.

How would the bank balance be shown in the balance sheet?

$
A current asset 4775
B current liability 4825
C current asset 5025
D current liability 5075

9 A company makes purchases from X Ltd and also sells goods to X Ltd. At the year-end the
company owes X Ltd $500 and X Ltd owes the company $750.

What are the correct entries to contra (offset) these amounts?

purchases ledger control account
debit
$
sales ledger control account
credit
$
A 250 250
B 500 500
C 750 500
D 750 750

10 The following information is taken from the books of a business at 30 April.

$
total of sales ledger balances 84 000
balance on sales ledger control account 83 100

What could have caused the difference between the sales ledger balances and the sales ledger
control account balance?
A an invoice for $900 not entered in the sales journal
B an invoice in the sales journal for $2100 entered in the sales ledger account as $1200
C the sales journal total for March overstated by $900
D the sales journal total for April, $9800, entered in the sales ledger control account as
$8900

Q131
7
19 A companys capital is

$
ordinary shares of $1.00 each 200 000
share premium account 80 000
revenue reserves 160 000

Changes now to be made (in the order given)

A one for one bonus issue
A rights issue of 100 000 ordinary shares of $1.00 each at $1.40 per share

The company wishes to maximise the amounts available to pay dividends.

What will be the ordinary capital and reserves of the company?

$
share premium
$
revenue reserves
$
A 500 000 40 000 40 000
B 500 000 80 000 nil
C 540 000 nil 40 000
D 540 000 40 000 40 000

20 A companys sales are made evenly over a year (360 days). 10 % of the sales are for cash. The
debtor balance is $26 700 and the debtor collection period is 30 days.

What are the total sales (cash and credit) for the year?
A $320 400 B $356 000 C $801 000 D $890 000

21 A business has a gross profit to sales ratio of 40 %, and a net profit to sales ratio of 10 %.

If the sales volume increases by 8 % which of the following will generally be true?

gross profit to
sales ratio
net profit to
sales ratio
A increase decrease
B increase increase

Q132
9
25 The diagram shows a break-even chart.

number of units
costs and
revenues
$
W X
Y
Z
0

Which line represents the margin of safety?
A WX B WY C XY D XZ

26 Assuming all other factors remain unchanged, the break-even point of a business can be lowered
by increasing its
A budgeted sales
B fixed costs
C marginal costs
D selling prices

27 A company uses a predetermined direct labour rate of $5.40 per hour to absorb production
overhead. Each unit of product manufactured requires four direct labour hours.

The following information is available for a period.

actual production overhead $518 400
under-absorbed production overhead $32 400

What was the actual output of the product in the period?
A 22 500 units B 24 000 units C 25 500 units D 30 000 units

Q133
10
UCLES 2008 9706/01/M/J/08
28 The information relates to the production of 50 000 units of a product.

per unit $
selling price 25
variable costs 15
contribution 10

The fixed costs are $300 000. The margin of safety is 20 000 units.

The unit selling price is increased by 10%.

What is the percentage increase in the margin of safety?
A 13.6 % B 20 % C 24.2 % D 30%

29 A company manufactures and sells a single product.

At an output of 1000 units per month the budget shows

$
selling price 120 000
variable cost 40 000
fixed cost 50 000
profit 30 000

Fixed costs are due to increase by $10 000 per month and the selling price will be increased to
maintain the profit at $30 000.

What is the effect on the break-even point to the nearest unit?
A decrease by 42 units
B increase by 42 units
C decrease by 125 units
D no change

Q134.
11
UCLES 2008 9706/01/M/J/08
30 A company sells two products, X and Y.

X Y
sales (units) 1000 2000
$ $
selling price per unit 22 12
contribution per unit 12 4

Which would increase the companys profit by $10 000?
A a 30 % increase in the sales of X
B a 50 % increase in the sales of both products
C an increase in the selling price of X by $1 and Y by $6
D a reduction in the variable costs of both products by $5

Q135
2

UCLES 2007 9706/01/O/N/07
1 A clubs income and expenditure account for 2006 showed rent and rates as $4000.

On 31 December rent owing was $600 and rates paid in advance was $800.

What was the amount shown in the receipts and payments account for rent and rates for the year
ended 31 December 2006?
A $3800 B $4000 C $4200 D $5400

2 When preparing a sole traders annual accounts, no adjustments were made for prepayments at
the end of the year.

What is the effect of these omissions?

A net profit overstated creditors understated
B net profit understated creditors understated
C current assets overstated owners capital overstated
D current assets understated owners capital understated

3 A business prepares its accounts to 31 December. Insurance premiums paid were:

date paid $
January 2006 paid for 6 months to 31 December 2005 940
July 2006 paid for 6 months to 30 June 2006 1120
January 2007 paid for 6 months to 31 December 2006 1245
March 2007 paid for 6 months to 30 June 2007 1880

Which amount should be shown in the profit and loss account for the year ended
31 December 2006?
A $1120 B $2060 C $2365 D $3305

Q136.
3

4 Fixed assets of a company were:

start of year 10
$
end of year 10
$
at cost 460 000 505 000

During the year fixed assets costing $92 000 were purchased and fixed assets with a net book
value of $16 000 were sold.

A $22 000 B $23 000 C $53 000 D $69 000

5 What is the purpose of providing for depreciation?
A To apply the matching principle.
B To ascertain the true value of fixed assets.
C To ensure that money is available for repair of fixed assets.
D To provide cash in the business for replacement.

6 A pocket calculator costs $9.50 and has a useful life of 5 years. The bookkeeper has decided to
treat the purchase of the calculator as revenue expenditure.

Which accounting principle has been applied?
A accruals
B materiality
C prudence

7 Which accounting treatments illustrate the use of the matching principle?

1 valuation of stock at net realisable value rather than cost
2 using the First In First Out method of valuation each year
3 charging depreciation on fixed assets

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

Q137
5

11 Partnership capitals are $60 000 for X and $90 000 for Y. The partnership agreement provides for
interest on capitals at 10% per annum, but makes no other financial provisions.

Profits for the current year total $75 000.

How will the total profits be divided between the partners?

X
($)
Y
($)
A 30 000 45 000
B 36 000 39 000
C 37 500 37 500
D 39 000 36 000

12 A business sells goods at cost plus 25%.

Information for a year is shown.

$
turnover 240 000
opening stock 42 000
closing stock 48 000

What is the total of purchases for the year?
A $180 000 B $186 000 C $192 000 D $198 000

13 The following information relates to the annual membership subscriptions of a cricket club for the
year ended 31 December.

1 January
$
31 December
$
subscriptions in arrears 7200 7800
subscriptions paid in advance 2800 4200

Cash received during the year for subscriptions totalled $81 000.

Which amount should be shown in the income and expenditure account for membership
subscriptions?
A $80 200 B $81 000 C $81 600 D $81 800

Q138
8

UCLES 2007 9706/01/O/N/07
21 The table shows information for a business at the year end.

$000
average stock 25
credit sales 150
total purchases 140
trade creditors 28
trade debtors 39

What is the payment period for creditors (to the nearest day)?

22 The accounts of a business show that it has increased its sales revenue by 50 % in one year
whilst its cost of sales has increased by 60 % over the same period.

What is the explanation for the change in profit margin?
A an increase in marketing expenses
B an increase in sales price
C an increase in sales volume
D an increase in supplier price

23 The table shows the capital structure of a company.

$000
ordinary shares of $1 each 100
retained profits 300
600
15 % loan stock (issued 5 years ago) 400
1000

Operating profits average $260 000 per annum.

What is the return on shareholders funds?
A 26.0 % B 33.3 % C 43.3 % D 66.7 %

Q139.
5

12 A business has two items in stock which need to be repaired before sale.

cost
$
selling price
$
repair costs
$
item 1 2 160 2 450 190
item 2 3 190 3 060 320

What is the total stock value of these items?
A $4900 B $5000 C $5510 D $5640

13 A business does not keep complete accounting records. The following information is known:

$
capital at start of year 52 000
capital at end of year 55 000
owners drawings in year 13 000
capital introduced during the year 25 000

What is the net profit/loss for the year?
A net loss $9 000
B net profit $9 000
C net loss $15 000
D net profit $15 000

14 The following information is available for the partnership of Atul and Mansoor at 31 December:

$
net profit before appropriations 60 000
salary of Atul 9 000
drawings:
Atul
Mansoor

12 000
13 000
interest on capital:
Atul
Mansoor

400
500

Residual profits are shared between Atul and Mansoor in the ratio 2 : 1.

What is Mansoors share of total profit for the year?
A $16 200 B $17 000 C $17 100 D $17 200
Q140.
6

UCLES 2007 9706/01/M/J/07
15 At the beginning of the financial year stock was valued at $15 000. During the year, sales of
$21 000 and purchases of $18 000 were made. Unfortunately, all stock was stolen on the last day
of the financial year.

Goods are marked up by 50% to calculate selling price.

What is the cost of the stolen stock?
A $7 500 B $11 000 C $19 000 D $22 500

16 A company transfers manufactured items from factory to warehouse at cost plus 10 %. This year
the transfer value was $93 500 and at the end of the year the closing stock was 20 % of the
years production.

How will the stock of finished goods be shown?

Trading Account
$
Balance Sheet
$
A 17 000 17 000
B 18 700 16 830
C 18 700 17 000
D 18 700 18 700

17 A company receives payment for 20 % of its sales in the month of sale, 50 % in the following
month and 30% two months after the month of sale.

The table shows sales for four months.

$
January 180 000
February 240 000
March 270 000
April 220 000

How much were total cash receipts in April?
A $220 000 B $228 000 C $249 000 D $251 000

Q141.
7

18 A company makes a bonus issue of shares.

What is the effect on the net assets and the reserves in the balance sheet?

net assets reserves
A increase decrease
B increase unchanged

19 The capital structure of a company is shown.

$
700 000 ordinary shares of $0.25 each
175 000
8 % loan stocks 160 000

During the year the company made profits before interest of $105 000. The directors wish to
distribute as much of the profits as possible by way of dividend.

What is the dividend per share?
A $0.1317 B $0.15 C $0.5268 D $0.60

20 What does the ratio of current assets/ current liabilities show?
A asset usage
B liquidity
C profitability

21 A business turns over its stock 5 times a year. Average stock is $54 000 and sales are made at a
mark-up of one third.

How much are the sales?
A $240 000
B $270 000
C $320 000
D $360 000

Q142
9

25 The break-even chart for a product is shown.

X
Y
sales volume
costs and
revenues
$000
break-even
point
sales
revenue
total costs

What does XY represent?
A fixed costs
B gross profit
C net loss
D variable costs

26 What will cause under-absorption of fixed production overheads?
A absorption of overheads is based on actual expenditure and actual activity
B actual expenditure of overheads is below budget expenditure
C actual activity is above budgeted activity
D actual activity is below budgeted activity and actual expenditure is as budgeted

27 The cost of producing 2000 units of a product is shown.

$
insurance 2 000
labour 30 000
materials 10 000
rent 6 000
telephone rental 4 000

What is the variable cost of one unit?
A $20 B $22 C $23 D $24
Q143.
8

UCLES 2007 9706/01/M/J/07
22 A company has the following information in its balance sheet:

$000
taxation due 40
debtors 150
bank overdraft 90
stock 110
proposed dividend 70
creditors 80

What is the liquidity (acid test or quick) ratio?
A 0.54 : 1 B 0.88 : 1 C 0.93 : 1 D 1.85 : 1

23 A business has cash sales of $69 030 and credit sales of $1 406 070 in a year (360 days). The
debtors collection period is 40 days.

What is the closing debtors balance?
A $35 152 B $36 878 C $156 230 D $163 900

24 A firm has calculated the following accounting ratios for the year ended 30 June:

year ended
30 June 2005 30 June 2006
gross profit on sales 30% 33 %
net profit on sales 15% 14 %

What could explain the changes in the percentages?
A A fall in interest payments was equal to an increase in administration costs.
B An increase in raw material costs was covered by an increase in selling price.
C An increase in the advertising budget has allowed the firm to increase the selling price.
D An increase in the advertising budget has led to a rise in sales volume.

Q144.
4

UCLES 2006 9706/01/O/N/06
10 A cheque for payment of wages of $214 has been debited to the purchases account as $241. A
suspense account is created.

What are the correcting entries?

account to
be debited
$
account to
be credited
$
A

purchases
suspense
214
27
wages 241
B

wages 214 suspense 214
C

wages
suspense
214
27
purchases 241
D

purchases 241 wages
suspense
241
27

11 A bank statement shows a credit balance of $8360. Comparison with the cash book reveals:

Cheques totalling $18 725, sent to suppliers, have not been presented.
Cheques totalling $16 223, received from customers, have not been credited by the bank.
Bank charges of $124 have not been entered in the cash book.

What is the correct cash book balance?
A $5734 credit
B $5734 debit
C $5858 debit
D $10 986 credit

12 The balance on a sales ledger control account is $40 000.

The following items are then discovered:

$
total of sales day book understated 500
discounts allowed not entered in sales ledger control account 1 200
bad debts written off not recorded in sales ledger control account 400
provision for doubtful debts 2 500

What is the total of the balances in the sales ledger?
A $37 900 B $38 600 C $38 900 D $41 100

Q145.
8

UCLES 2006 9706/01/O/N/06
23 A business has a current ratio of 1.75 : 1 and a quick (acid test) ratio of 1 : 1. The business sells
stock on credit at its usual mark-up.

What is the effect of this on the current ratio and quick (acid test) ratio?

current ratio quick (acid test) ratio
A decrease decrease
B decrease increase
C increase decrease
D increase increase

24 During the year ended 31 March 2006 a business made sales of $560 000 of which 25 % were for
cash. The trade debtors at 31 March 2005 were $52 000 and at 31 March 2006 they were
$56 000.

What is the debtors collection period based on average debtors?

25 The following data is available:

this year
$
last year
$
credit sales 60 000 50 000
credit purchases 40 000 28 000
creditors (average) 10 000 16 000
debtors (average) 12 000 8 000

A Debtors and creditors turnover ratios have improved.
B Debtors and creditors turnover ratios have worsened.
C Debtors are paying faster, but creditors are being paid more slowly.
D Debtors are paying more slowly, but creditors are being paid faster.

Q146.
3

4 On 30 September 2005 a manufacturers current assets totalled $28 000. The next day only two

1 Stock bought for cash.
The list price of $2000 was subject to a trade discount of 20 % and a cash discount of 5 %.
Payment was made immediately.

A $27 680 B $28 080 C $29 520 D $29 600

5 A business uses the straight line method to provide for depreciation of equipment.

Why should it continue to use this method in subsequent years?
A accounting principles never allow accounting methods to be changed
B other methods of depreciation are unsuitable for depreciating equipment
C to ensure that profits are stated on a consistent basis over time
D to ensure that the Balance Sheet always shows the market value for equipment

6 Stock has been damaged.

The stock cost $1200.
It would have sold for $1800 when perfect.
It can be sold for $1700 if repairs are undertaken at a cost of $600.
To replace the stock would cost $1000.

At what value should the damaged stock be shown in the final accounts?
A $1000 B $1100 C $1200 D $1800

7 Which accounting policies illustrate the matching principle?

1 charging depreciation on fixed assets
2 revaluing fixed assets on a regular basis
3 using the reducing balance method of depreciation

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

Q147.
10

UCLES 2006 9706/01/M/J/06
28 The following figures are given for a factorys overheads and machine hours worked.

machine hours total overhead costs
overhead
absorption rate
budgeted 122 000 $268 400 $2.20
actual 116 000 $261 000 $2.25

What was the under- or over-absorption of overhead for the quarter?
A $5800 under-absorbed
B $5800 over-absorbed
C $7400 under-absorbed
D $7400 over-absorbed

29 A company manufactures a single product with a selling price of $75 per unit. The table shows
the costs, based on sales and production volume of 8000 units.

$000
prime costs 158
variable manufacturing overheads 74
fixed manufacturing overheads 80
variable selling overheads 20
fixed administration overheads 100

If absorption costing is applied, what is the gross profit on each unit sold?
A $21.00 B $36.00 C $43.50 D $46.00

30 A company has two departments X and Y. Management provides the following information.

department X department Y total
power used 7 500 kwh 17 500 kwh 25 000 kwh
area 30 000 square metres 20 000 square metres 50 000 square metres

The power bill for the year is $20 000 and the rent is $100 000.

What is the total amount for rent and heating to be attributed to department X?
A $54 000 B $62 000 C $66 000 D $72 000

Q148.
4

UCLES 2005 9706/01/O/N/05
7 A business sells its freehold premises to a bank and agrees to repurchase them in five years
time. The business continues to use the premises on lease from the bank. The premises remain
in the balance sheet of the business.

What is the reason for this accounting treatment?
A the asset must be treated in the same way from year to year
B the commercial reality of the transaction is that the business still owns the asset
C the cost of the asset must be matched with the periods expected to benefit from its use
D the income from the sales proceeds must not be anticipated

8 A company excludes from its Balance Sheet machinery for which spare parts are no longer
obtainable.

Which concept is being applied by the company?
A going concern
B materiality
C prudence

9 A companys financial year ends on 31 December.

At 31 December Year 1 the company carried forward a debit balance of $36 200 on the Rent
account.

During Year 2 payments made for 12 months rent, to 31 March Year 3, were $157 200.

What is the amount of rent to be charged against profit in the year ended 31 December Year 2?
A $121 000 B $154 100 C $160 200 D $193 400

10 The following errors in the accounting records have been found and corrected:

1 a purchase invoice for $250 was omitted from the books of account
2 a sale for $120 to X was debited to the account of Y
3 the sales day book was over-added by $100

The gross profit for the year before correcting the errors was $60 200.

What is the correct gross profit for the year?
A $59 850 B $59 970 C $60 350 D $60 550

Q149.
6

UCLES 2005 9706/01/O/N/05
15 Why is a provision for depreciation made in accounts?
A to charge the cost of fixed assets against profits
B to make a provision for repairs
C to make cash available to replace fixed assets when necessary
D to show the current market values of fixed assets

16 A building cost $340 000 several years ago. At 30 June 2004 the accumulated depreciation on
the building was $47 600 and it was decided to revalue the building to its market value of
$560 000.

What will be the balance on the Revaluation Reserve?
A $172 400 B $220 000 C $267 600 D $512 400

17 X and Y are sole traders. On 1 October 2004 they agreed to form a partnership which would take
over the assets of the separate businesses.

At 30 September 2004 the following information was available:

X
$
Y
$
Goodwill 15 000 12 000
machinery 25 000 18 000
stock and debtors 8 000 3 000
cash at bank / (overdraft) 10 000 (4 000)

What was the total of the tangible assets taken over by the partnership?
A $60 000 B $64 000 C $87 000 D $91 000

Q150
3

5 The following items of expenditure take place during the first month of a transport business.

$
rent 1 000
insurance of building 1 300
insurance of vehicle 350
road tax 500
purchase of vehicle 15 000
number plate for vehicle 150
painting of vehicle in company colours 750
wages for lorry driver 100
wages for painting vehicle 150

What is the total capital expenditure?
A $15 000 B $15 500 C $16 050 D $16 550

6 A manufacturer has paid $3000 for electricity from his private bank account.

The electricity charges are apportioned as follows:

%
factory 50
sales office 10
private 40

Which entries for electricity are necessary in the business accounts?

factory sales office capital account
A credit $1000 credit $200 debit $1200
B credit $1500 credit $300 debit $1800
C debit $1000 debit $200 credit $1200
D debit $1500 debit $300 credit $1800

Q151
2

UCLES 2005 9706/01/M/J/05
1 A business purchases a new van.

The table shows the purchase invoice details:

$
purchase price 13 000
delivery charge 500
sign writing 200
road tax 200
tank of fuel 50

How much should be debited to the motor van account?
A $13 500 B $13 700 C $13 900 D $13 950

2 A company has completed arrangements for the closure of part of its business next year.

What should the company create in this years accounts for the closure costs?
A a contingency
B a liability
C a provision
D a reserve

3 The journal entry Debit Subscription Income, Credit Creditors was made in the accounting
records of a club.

What does this represent?
A subscriptions owed by members
B subscriptions received by cheque
C subscriptions received in advance
D subscriptions refunded to members

4 A business makes a provision for doubtful debts equal to 5% of its debtors.

At 31 March 2003 net debtors were shown in the Balance Sheet as $17 100.

At 31 March 2004 the balance on its Sales Ledger Control account was $19 000. In the year
ended 31 March 2004 a bad debt of $800 had been written off.

How much should be debited in the Profit and Loss Account for the year ended 31 March 2004
for the provision for doubtful debts?
A $10 B $50 C $55 D $95
Q152.
5

12 A manufacturer has stocks of:

1 finished goods
2 work-in-progress
3 raw materials

Which stocks will appear in the Manufacturing account?
A 1 and 2 only
B 1 and 3 only
C 1, 2 and 3
D 2 and 3 only

13 What is a factory overhead expense in a Manufacturing account?
A cost of raw materials used
B depreciation of factory machinery
C royalties paid per item produced
D wages of production machine operators

14 The wages of staff employed in getting goods into a saleable condition have been debited in the
Profit and Loss Account.

What is the effect of this error?

Gross profit Net profit
A overstated no effect
B overstated overstated
C understated no effect

15 A company has two items in stock which require to be repaired before sale.

cost $ selling price $ repair costs $
item 1 5 260 7 600 880
item 2 2 360 2 450 190

What is the total stock value of these items?
A $6550 B $7520 C $7620 D $8980

Q153
3

5 At the end of year 1 a company had a debit balance of $760 on its Rent Payable account.

Payments for rent in year 2 totalled $10 600 and at the end of the year rent prepaid was $1290.

How much rent was charged against profit in year 2?
A $8550 B $10 070 C $10 600 D $11 130

6 Businesses anticipate losses but not profits in preparing their annual accounts.

Which accounting concept is being applied here?
A accruals
B consistency
C going concern
D prudence

7 What is an example of the application of the concept of accounting for substance over form?
A accounting for stock losses
B recording an asset acquired under a hire purchase agreement as a fixed asset
C recording the premium on the issue of ordinary shares in a share premium account
D writing off a debt from a customer in liquidation

8 The following information is extracted from the books of a company.

$000
freehold premises at cost 125
provision for depreciation of freehold premises 50

The premises are revalued at $180 000.

Which entries are required in the companys books to record the revaluation?

Profit and Loss
Account
Freehold Premises
at Cost account
Provision for
depreciation
Revaluation
Reserve
A none debit $55 000 debit $50 000 credit $105 000
B debit $50 000 debit $55 000 none credit $105 000
C debit $55 000 debit $75 000 debit $50 000 credit $180 000
D debit $75 000 debit $55 000 debit $50 000 credit $180 000

Q154.
7

19 The table shows information from a companys accounts.

$ 000
Turnover 135
Gross profit 34
Profit before interest and tax 11
Profit after tax 8
Fixed assets 59
Current assets 50
Debentures 12
Current liabilities 40

What is the return on total capital employed?
A 8.1 % B 11.3 % C 14.0 % D 15.9 %

20 A company has a high liquidity ratio.

Which of the following will reduce liquidity?
A doubling the annual rates of depreciation
B making a bonus issue to existing shareholders
C converting loan stock into shares
D replacing machinery earlier than planned

21 A company has revalued its fixed assets upwards during the most recent accounting period.

What will be the effect of this?
A to increase capital employed and increase profits
B to increase capital employed and reduce profits
C to reduce capital employed and reduce profits
D to reduce capital employed and no effect on profits

22 Which statement correctly expresses the relationship between return on capital employed, net
asset turnover and profit margin?
A net asset turnover = return on capital employed profit margin
B
turnover asset net
margin profit
= return on capital employed
C profit margin + net asset turnover = return on capital employed
D return on capital employed = net asset turnover x profit margin
Q155.
8

UCLES 2005 9706/01/M/J/05
23 The following information has been calculated from the accounts of a business.

days taken to pay creditors 36
days taken by debtors to pay 65
stock turnover in days 14

What is the cash operating cycle?

24 The following information is given for a business at 31 December 2004.

current ratio 3.6 : 1
$
average stock 12 000
debtors 4 000
creditors 5 000

What was the value of stock at 1 January 2004?
A $9400 B $10 000 C $12 000 D $14 000

25 A particular cost is classified as semi-variable.

Which effect will a 20 % reduction in activity have on the unit cost?
A decrease by 20 %
B decrease by less than 20 %
C increase by 20 %
D increase by less than 20 %

Q156.
10

UCLES 2005 9706/01/M/J/05
28 The following information applies to X Ltd.

output
(units)
sales
$ 000
profits
$ 000
750 750 100
1000 1000 250

A 25 % B 40 % C 60 % D 87 %

29 What may result in an under-absorption of fixed overhead?
A absorption based on actual expenditure and actual activity
B activity above budget
C activity below budget
D expenditure below budget


1 costs can be identified as either variable or fixed
2 fixed cost per unit is constant as activity rises
3 variable cost per unit fluctuates with the volume of activity
4 volume of activity is the only factor that affects revenue and variable costs

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

Q157.
10

UCLES 2005 9706/01/M/J/05

output
(units)
sales
$ 000
profits
$ 000
750 750 100
1000 1000 250

A 25 % B 40 % C 60 % D 87 %




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

Q158.
10

UCLES 2005 9706/01/M/J/05

output
(units)
sales
$ 000
profits
$ 000
750 750 100
1000 1000 250

A 25% B 40% C 60% D 87%


30 What are major assumptions in contribution/ sales (c/ s) analysis?


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

Q159.
3
5 A company has the following balances.
$
trade debtors at 31 December 2003 125 400
provision for doubtful debts at 1 January 2003 1 800
During the year ended 31 December 2003 bad debts of $20 500 were written off. The company
provides for 5% of trade debtors at each year end.
What is the doubtful debts expense for the year ended 31 December 2003?
A $3445 B $4470 C $5245 D $6270
6 Of which concept is the writing off of a bad debt an example?
A going concern
B matching
C prudence
7 A company purchases machinery on hire purchase over four years but does not own the
machinery until the final payment has been made.
At the end of year 1 the company shows the machinery in its Balance Sheet as a fixed asset and
also records the liability for the amount still owed.
A consistency
B materiality
C prudence
$
balance at bank per bank statement 22 650
Which balance for cash at bank should appear in the Balance Sheet at 31 December?
A $18 820 B $20 120 C $25 180 D $26 480
Q160.
3
5 A company has the following balances.
$
trade debtors at 31 December 2003 125 400
provision for doubtful debts at 1 January 2003 1 800
During the year ended 31 December 2003 bad debts of $20 500 were written off. The company
provides for 5% of trade debtors at each year end.
What is the doubtful debts expense for the year ended 31 December 2003?
A $3445 B $4470 C $5245 D $6270
6 Of which concept is the writing off of a bad debt an example?
A going concern
B matching
C prudence
7 A company purchases machinery on hire purchase over four years but does not own the
machinery until the final payment has been made.
At the end of year 1 the company shows the machinery in its Balance Sheet as a fixed asset and
also records the liability for the amount still owed.
A consistency
B materiality
C prudence
$
balance at bank per bank statement 22 650
Which balance for cash at bank should appear in the Balance Sheet at 31 December?
A $18 820 B $20 120 C $25 180 D $26 480
Q161.
4
UCLES 2004 9706/01/O/N/04
9 A companys trial balance includes a Suspense account. It was found that the only errors were
What is the double entry required to clear the Suspense account balance?
account
DR
$
CR
$
A Discounts Allowed
Discounts Received
Suspense
312
240
72
B Discounts Received
Suspense
Discounts Allowed
240
72
312
C Discounts Allowed
Discounts Received
Suspense
624
480
144
D Discounts Received
Suspense
Discounts Allowed
480
144
624
10 X, Y and Z are in partnership, sharing profits in the ratio 2 : 2 : 1. X is allowed an annual salary of
$10 000. Y has made a loan to the partnership on which the partnership pays interest of $5000
each year. Profit for the year before appropriations is $150 000.
What is Zs total appropriation of profit for the year?
A $27 000 B $28 000 C $29 000 D $30 000
11 In the absence of a partnership agreement the partners claim that they are:
1 entitled to interest on the capitals at the rate of 5 % per annum
2 entitled to interest on loans to the firm at 5 % per annum
3 entitled to interest on loans to the firm at 10 % per annum
4 not entitled to interest on capitals
5 not entitled to interest on loans to the firm
Which claims are correct?
Q162.
5
12 Interest charged on a Partners Drawings account should be
A debited to the Profit and Loss Account.
B credited to the Profit and Loss Account.
C debited to the Appropriation Account.
D credited to the Appropriation Account.
13 In a period of rising prices, a company has valued its stock of goods using the Last In, First Out
(LIFO) basis. The directors have decided that the stock should be valued using the First In, First
Out (FIFO) basis.
What is the effect of the change in the valuation of the stock on the gross and net profits of the
company?
gross profit net profit
A decrease no effect
B decrease decrease
C increase no effect
D increase increase
14 A company sells goods on sale or return at a mark up of 25 %.
At the Balance Sheet date the following information is available.
goods in warehouse $300 000 (cost)
goods sent on sale or return $200 000 (at invoice price)
What will be the value of closing stock in the company accounts?
A $300 000 B $450 000 C $460 000 D $500 000
15 A and B are in partnership, sharing profits and losses equally. As capital account is $6000 and
Bs capital account is $5000. Goodwill is valued at $12 000, but is not shown in the accounts.
They agree to admit Z as a new partner and to share profits and losses equally.
What is As new capital account balance?
A $4000 B $8000 C $10 000 D $12 000
Q163.
10
UCLES 2004 9706/01/O/N/04
27 You are given the following information concerning a product.
$ per unit
selling price 10.00
variable labour costs 3.50
raw material costs 2.50
break-even point 2500 units
What is the total fixed cost?
A $10 000 B $15 000 C $16 250 D $18 750
28 What is a direct expense for a printing business?
A depreciation of printing machinery
B paper used in the printing process
C rent and rates of the factory premises
D the capital cost of printing machinery
29 A business uses absorption costing.
Which cost is used to value finished stock?
A full cost
B prime cost
C variable cost of production
D variable cost of sales
30 The following relate to a factory.
1 carriage inwards
2 depreciation of factory machinery
3 machine operators wages
4 insurance of machinery
5 royalties on production
Which items make up factory overhead?
Q164
8
UCLES 2004 9706/01/O/N/04
22 Which gives the return on capital employed?
A
sales
profit net
x
sales
employed capital
x 100
B
sales
profit net
x
employed capital
sales
x 100
C
profit net
sales
x
sales
employed capital
x 100
D
profit net
sales
x
employed capital
sales
x 100
23 The debtor collection period of a business has increased from 55 to 90 days.
Which reason could not account for this?
A a large bad debt written off
B a large credit sale made just before the year end
C a major customer in financial difficulty
D poor credit control
24 What does the diagram show about costs?
1 2 3 4 5
fixed costs
$000
profit
years
sales revenue
revenue
and
costs
A fixed costs are increasing
B total costs as a % of sales are decreasing
C variable costs per unit are decreasing
D variable costs per unit are increasing
Q165.
2
UCLES 2004 9706/01/M/J/04
1 Expenditure on a machine during a year has included the following:
$
insurance costs 2 400
new engine machine will now
produce more products per hour
22 300
cleaning costs 7 200
How much of this expenditure should be treated as capital expenditure?
A none B $22 300 C $24 700 D $31 900
2 An item of capital expenditure has been incorrectly treated as revenue expenditure in the
What is the effect of this error on the accounts of the business?
assets profit
3 A business buys a computer for $2200 on 1 January 2002. The computer will be used for four
years, after which time it will be sold for $280. The business uses the straight-line method of
depreciation.
What is the depreciation charge for the year ended 31 December 2003?
A $480 B $550 C $960 D $1100
4 A vehicle was part exchanged for a new vehicle. The value placed on the old vehicle was
$12 000.
Which entries record the $12 000 part exchange?
account debited account credited
A Cash Motor Vehicles
B Motor Vehicles Cash
C Disposals Motor Vehicles
D Motor Vehicles Disposals
Q166.
3
5 At the end of a financial period, a business has the following balances.
$
total debtors balances 10 620
bad debt not yet written off 260
provision for doubtful debt brought forward 460
What should the business do if it wishes to maintain the bad debt provision at 5% of debtors?
A decrease the existing provision by $58
B increase the existing provision by $58
C decrease the existing provision by $71
D increase the existing provision by $71
6 A fixed asset is purchased on 1 April 2000 at a cost of $240 000. It has an estimated residual
value of $40 000 at the end of its 5 year life and is to be depreciated on the reducing balance
basis at the rate of 30 % each year.
What is the depreciation charge for the year ending 31 March 2002 (to the nearest $)?
A $42 000 B $50 400 C $98 000 D $117 600
7 What does the going concern principle mean?
A a business is profitable
B a business will continue to operate for the foreseeable future
C the assets of a business exceed its liabilities
D the assets of a business should be valued at disposal value
8 When a businessman introduces capital into his business, the transaction is debited in the Cash
Book and credited to his Capital account.
Of which accounting principle is this an example?
A entity
B going concern
C matching
D prudence
Q167.
4
UCLES 2004 9706/01/M/J/04
9 A company does not include the value of skills gained by its employees from training
programmes in its financial statements.
A consistency
B materiality
C money measurement
10 When preparing a bank reconciliation statement the following information is available.
$
bank balance shown by the cash book 20 000 debit
uncleared bankings 1 400
standing order shown on the bank statement
(not in a cash book)
300
What is the balance on the bank statement?
A $18 600 B $19 200 C $20 800 D $21 400
11 A trial balance does not balance. The difference has been entered in a Suspense account.
The following errors are found.
1 The Purchase Ledger Control account balance of $48 300 has been
included as a debit balance.
2 Provision for depreciation has been overcast by $960.
3 A cash payment of $630 for rent has been credited in the cash book
and debited to the Bad Debts account.
What is the correcting debit entry to the Suspense account?
A $47 340 B $95 010 C $95 640 D $97 560
Q168
7
18 When a company is short of liquid funds, for what purpose may the reserves be used?
A to finance the take-over of another business the company is anxious to acquire
B to maintain dividends during periods of low profitability
C to pay creditors promptly so as to obtain discounts
D to write down assets whose value to the business has fallen
19 A companys share capital consists of 150 000 ordinary shares of $0.50 each.
It makes a rights issue of 1 ordinary share for every 3 already held at $1.20 per share.
It then makes a bonus issue of 1 share for every 5 held.
Which amount will be shown in the Balance Sheet for share capital?
A $120 000 B $145 000 C $155 000 D $165 000
20 Which statement about bonus shares is true?
A They may be issued as repayment of debentures.
B They may be issued at a premium.
C They may be issued to the holders of preference shares.
D They may be issued using the premium received from an issue of preference shares.
21 The table shows the gross profit margin and net profit margin of a company.
year ended
31 March 2003
year ended
31 March 2004
% %
gross profit margin 38.6 40.1
net profit margin 13.5 13.1
What caused these changes between 2003 and 2004?
A a change in products sold leading to lower selling costs
suppliers
Q169.
5
12 An item of revenue expenditure has been incorrectly treated as capital expenditure in the
What effect will the correction of this error have on the accounts?
net profit net assets
A decrease decrease
B decrease increase
C increase decrease
D increase increase
13 A club charges each of its 100 members an annual subscription of $12.
At the end of a year four members had not paid their annual subscription.
What will be the entries in the financial statements for subscriptions?
Income and
Expenditure account
Balance Sheet
A $1 152 current asset $48
B $1 152 current liability $48
C $1 200 current asset $48
D $1 200 current liability $48
14 Which item will be included in a Balance Sheet as a creditor?
A loan stock issued by a company
B preference shares issued by a company
C revaluation reserve
D Share Premium account
Q170.
9
26 The diagram shows a break-even chart.
revenue and
costs
$
level of activity
sales revenue
total cost
fixed cost
budgeted level of activity
O
X
Y
What does line XY represent?
A the break-even point revenue
B the margin of safety in terms of revenue
C the profit at break-even point
D the total contribution at break-even point
27 Production overhead expenditure in a period totalled $102 660 compared with a budget of
$105 270.
Direct labour hours are used to absorb production overheads. 8700 direct labour hours were
worked in the period and production overhead was over-absorbed by $1740.
What was the production overhead absorption rate per direct labour hour?
A $11.60 B $11.80 C $12.00 D $12.10
28 A company sells two products, X and Y.
X Y
sales (units) 1000 2000
$ $
selling price/ unit 22 12
contribution/ unit 12 4
Which would increase the company's profit by $10 000?
A a 30% increase in the sales of X
B a 50% increase in the sales of both products
C an increase in the selling price of X by $1 and Y by $6
D a reduction in the variable costs of both products by $5
Q171.
4
9706/1 Nov03
8 A business has chosen to use the straight line method of providing for depreciation of equipment.
A Accounting principles never allow accounting methods to be changed.
B Other methods of depreciation are unsuitable for depreciating equipment.
C To ensure that profits are stated on a consistent basis over time.
D To ensure that the Balance Sheet always shows the market value for equipment.
Which accounting concept has been applied?
A accruals
B materiality
C prudence
10 A business omitted discounts allowed of $700 from its trial balance. During the year a machine
had been sold for cash of $500 but the only accounting entry made was a debit in the Bank
account.
What is the balance on the Suspense account?
A $200 debit B $1200 debit C $200 credit D $1200 credit
11 A business has a draft net profit of $84 000. It is discovered that the closing stock was overvalued
by $4000 and that discounts received of $1500 were treated as an expense.
What is the corrected net profit?
A $81 500 B $83 000 C $89 500 D $91 000
12 A bank reconciliation statement shows a credit balance of $400 in the Cash Book and a balance
in hand of $100 in the bank statements.
The bank reconciliation statement includes unpresented cheques of $700 in addition to cheques
banked and not yet credited in the bank statements.
What is the total of cheques banked and not yet credited?
A $200 B $400 C $1000 D $1200
Q172.
4
9706/1 Nov03
8 A business has chosen to use the straight line method of providing for depreciation of equipment.
A Accounting principles never allow accounting methods to be changed.
B Other methods of depreciation are unsuitable for depreciating equipment.
C To ensure that profits are stated on a consistent basis over time.
D To ensure that the Balance Sheet always shows the market value for equipment.
Which accounting concept has been applied?
A accruals
B materiality
C prudence
10 A business omitted discounts allowed of $700 from its trial balance. During the year a machine
had been sold for cash of $500 but the only accounting entry made was a debit in the Bank
account.
What is the balance on the Suspense account?
A $200 debit B $1200 debit C $200 credit D $1200 credit
11 A business has a draft net profit of $84 000. It is discovered that the closing stock was overvalued
by $4000 and that discounts received of $1500 were treated as an expense.
What is the corrected net profit?
A $81 500 B $83 000 C $89 500 D $91 000
12 A bank reconciliation statement shows a credit balance of $400 in the Cash Book and a balance
in hand of $100 in the bank statements.
The bank reconciliation statement includes unpresented cheques of $700 in addition to cheques
banked and not yet credited in the bank statements.
What is the total of cheques banked and not yet credited?
A $200 B $400 C $1000 D $1200
Q173.
5
9706/1 Nov03 [Turn over
13 A business owner suspects a loss of cash has occurred. He provides the data shown.
$
cash balance at the start of the month 150
cash balance at the end of the month 100
cash banked 10 200
cash sales per till rolls 10 500
How much cash has been lost?
A $200 B $250 C $300 D $350
14 Which of the following is a realised gain?
A a surplus on revaluation of trade investments to current market value
B a surplus arising from a professional revaluation of the company office block
C a surplus arising on the sale of patents
D Goodwill arising on the purchase of another business
15 Which of the following will increase profit?
A increasing depreciation rates
B increasing distributable reserves
C increasing the provision for doubtful debts
D increasing the value of closing work-in-progress
16 A company uses the Weighted Average Cost (AVCO) method of stock valuation. During January
the following transactions took place.
January
Total
$
1 opening stock 100 units @ $2.00 per unit 200
12 received 150 units @ $2.10 per unit 315
15 issued 100 units -
What is the value of stock at 31 January?
A $419 B $420 C $425 D $440
Q174.
5
9706/1 Nov03 [Turn over
13 A business owner suspects a loss of cash has occurred. He provides the data shown.
$
cash balance at the start of the month 150
cash balance at the end of the month 100
cash banked 10 200
cash sales per till rolls 10 500
How much cash has been lost?
A $200 B $250 C $300 D $350
14 Which of the following is a realised gain?
A a surplus on revaluation of trade investments to current market value
B a surplus arising from a professional revaluation of the company office block
C a surplus arising on the sale of patents
D Goodwill arising on the purchase of another business
15 Which of the following will increase profit?
A increasing depreciation rates
B increasing distributable reserves
C increasing the provision for doubtful debts
D increasing the value of closing work-in-progress
16 A company uses the Weighted Average Cost (AVCO) method of stock valuation. During January
the following transactions took place.
January
Total
$
1 opening stock 100 units @ $2.00 per unit 200
15 issued 100 units -
What is the value of stock at 31 January?
A $419 B $420 C $425 D $440
Q175.
8
9706/1 Nov03
24 Which of the following actions would improve the liquidity (acid test) ratio of a business in the
short term?
1 debtors paying their debts
2 delaying paying creditors
3 selling a number of surplus fixed assets
4 selling stock
25 Which of the following is always included in prime cost?
A carriage outwards
B depreciation of machinery
C opening work-in-progress
D royalties on production
26 The graph shows the way in which a cost increases according to the level of activity of the
business.
level of activity (units)
total cost
$
0
Which cost follows this pattern?
A administrative salaries
B commission on sales
C depreciation of factory
D office rent
Q176.
8
9706/1 Nov03
24 Which of the following actions would improve the liquidity (acid test) ratio of a business in the
short term?
1 debtors paying their debts
2 delaying paying creditors
3 selling a number of surplus fixed assets
4 selling stock
25 Which of the following is always included in prime cost?
A carriage outwards
B depreciation of machinery
C opening work-in-progress
D royalties on production
26 The graph shows the way in which a cost increases according to the level of activity of the
business.
level of activity (units)
total cost
$
0
Which cost follows this pattern?
A administrative salaries
B commission on sales
C depreciation of factory
D office rent
Q177.
10
9706/1 Nov03
30 Which item should be treated as capital expenditure?
A the addition of a back-up system on an existing computer at a cost of $900
B costs incurred in repairing a car when the costs cannot be recovered from the insurance
company
C rent paid on a factory, whilst the company negotiated the purchase of that same factory
D the replacement of a wooden fence with a new fence
Q178.
2
9706/1 Jun03
1 The following information relates to a business for a period.
$
selling price per unit 100
variable costs per unit 60
total fixed costs 90 000
net profit 15 000
How many units were sold in the period?
A 1500 B 1750 C 2250 D 2625
debit credit
A cash customer
B cash sales
D customer sales
3 A trial balance at 30 April 2003, before making end of year adjustments, showed:
debit
$
credit
$
Trade debtors 17 800 -
Provision for doubtful debts - 580
At 30 April 2003 it was decided to write off a bad debt of $800 and to make a provision for
doubtful debts of 2 % of trade debtors. During the year an amount of $200 was received from a
customer relating to a debt that was written off in the year ended 30 April 2002.
What was the total bad and doubtful debts expense for the year ended 30 April 2003?
A $360 B $560 C $940 D $1140
Q179.
3
9706/1 Jun03 [Turn over
4 The table shows information relating to a companys fixed assets.
$
cost at 1 January 2002 10 500
accumulated depreciation at 1 January 2002 4 900
purchases for the year ended 31 December 2002 2 500
disposals for the year ended 31 December 2002 700
Depreciation is 25 % per annum on the reducing balance basis.
What is the depreciation charge for the year?
A $1850 B $2025 C $2200 D $3250
5 A business that purchases a shop incurs the following costs.
$
purchase price of the shop 680 000
legal fees incurred in the purchase of the shop 7 200
cost of initial stock 12 500
cost of installing air conditioning 47 300
Which amount will be capitalised as the cost of the shop?
A $680 000 B $687 200 C $734 500 D $747 000
6 Which of the following is the definition of a business as a going concern?
A The assets owned by the business exceed its liabilities.
B The business has accumulated revenue reserves.
C The business is currently liquid and able to pay its creditors.
D The business will continue in operational existence for the foreseeable future.
7 A sole trader pays private expenses from the business bank account and records them as
drawings.
Which accounting principle is applied?
A business entity
B going concern
C matching
D prudence
Q180.
7
17 The treasurer of a tennis club has provided the following information for a year.
number of members 75
$
annual subscription 95
subscriptions received 7305
- opening stock
- closing stock
850
110
95
other overheads 4700
What will the clubs Income and Expenditure account show?
A $1560 surplus B $1670 surplus C $1740 surplus D $1850 surplus
18 A company is financed by:
10 000 $1 ordinary shares
$5000 10 % loan
Net profit before interest and taxation is $2500.
Tax payable is $400.
What is the maximum dividend per share payable from this years profits?
A $0.16 B $0.20 C $0.21 D $0.25
19 When a shareholder sells some shares for less than he paid for them, what will happen to
the share capital of the company?
A It will fall by the nominal value of the shares sold.
B It will fall by the sales proceeds of the shares sold.
C It will increase by the amount received from the sale of the shares.
D It will remain the same as before.
Q181.
4
9706/1 Jun03
8 Which of the following would prevent a trial balance from balancing?
A a credit note from a supplier entered in the sales journal
B a discount allowed posted to the Discounts Received account
C an invoice entered twice in the sales journal
D a refund to a customer wrongly posted to Discounts Allowed account
9 At 31 March 2003, a customers bank statement shows that his bank account is overdrawn by
$10136.
Further information is as follows.
$
cheques drawn, not presented 4998
cheques paid in, not credited 5896
bank interest charged, not in Cash Book 181
What is the correct bank balance to be shown in the customer's Balance Sheet at 31 March
2003?
A $9057 overdrawn
B $9238 overdrawn
C $10 853 overdrawn
D $11 034 overdrawn
10 The balance on the Sales Ledger Control account amounting to $43 000 has been entered in the
trial balance as $34 000. The difference on the trial balance has been entered in a Suspense
account.
Which journal entry is required to correct the error?
A Sales Ledger Control account $9000 Suspense account $9000
B - Suspense account $9000
C Suspense account $9000 -
D Suspense account $9000 Sales Ledger Control account $9000
Q182.
7
$
- opening stock
- closing stock
850
110
95
$5000 10% loan
A $0.16 B $0.20 C $0.21 D $0.25
Q183.
7
$
- opening stock
- closing stock
850
110
95
$5000 10% loan
A $0.16 B $0.20 C $0.21 D $0.25
Q184.
9
24 A company wishes to improve its current ratio and its acid test ratio.
A increasing discounts to debtors
C purchasing additional stock on credit
D selling fixed assets
$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200
A $1600 B $4000 C $5200 D $5600
27 What will result in under-absorption of fixed production overhead?
B actual expenditure below budget expenditure
C actual activity above budget activity
D actual activity below budget and expenditure as budgeted
Q185.
9
24 A company wishes to improve its current ratio and its acid test ratio.
A increasing discounts to debtors
C purchasing additional stock on credit
D selling fixed assets
$ $ $
fixed cost ? ? ?
variable cost ? ? ?
total cost 15 600 19 600 21 200
A $1600 B $4000 C $5200 D $5600
27 What will result in under-absorption of fixed production overhead?
B actual expenditure below budget expenditure
C actual activity above budget activity
D actual activity below budget and expenditure as budgeted
Q186.
3
9706/1/O/N/02 [Turn over
5 Which of the following is a tangible fixed asset?
A patents
B purchased Goodwill
C short leasehold
D trade marks
6 A companys accounts showed a gross profit for the year of $32500. After the accounts were
prepared it was found that the opening stock had been overstated by $2400 and the closing stock
had been understated by $3400.
A $26700 B $31500 C $33500 D $38300
7 The treasurer of a club has decided not to include subscriptions owing by members in the
Balance Sheet at the year-end.
Which accounting concept is being applied?
A accruals
B going concern
C money measurement
D prudence
8 Stock which cost $1200 has been damaged. It would have sold for $1800 when perfect. It can be
sold for $1700 if repairs are undertaken at a cost of $600. To replace the stock would cost $1000.
A $ 1000 B $ 1100 C $ 1200 D $ 1800
This is an example of
A consistency.
B materiality.
C prudence.
D substance over form.
Q187.
3
A patents
C short leasehold
D trade marks
A $26700 B $31500 C $33500 D $38300
A accruals
B going concern
C money measurement
D prudence
A $ 1000 B $ 1100 C $ 1200 D $ 1800
A consistency.
B materiality.
C prudence.
Q188
3
A patents
C short leasehold
D trade marks
A $26700 B $31500 C $33500 D $38300
A accruals
B going concern
C money measurement
D prudence
A $ 1000 B $ 1100 C $ 1200 D $ 1800
A consistency.
B materiality.
C prudence.
Q189.
4
9706/1/O/N/02
10 A trial balance does not balance and a Suspense account is opened.
Subsequently the following errors are found and the Suspense account is cleared.
1 A sales invoice for $1240 had been omitted from the books.
2 Rent paid of $2600 was entered correctly in the cash book but incorrectly as $6200 in the
Rent account.
3 The purchases journal was undercast by $1980.
What was the original balance on the Suspense account?
A $1620 credit
B $4340 debit
C $5580 credit
D $5580 debit
11 The balance at bank in Xs cash book at 30 April is $12 460 debit. However, a cheque for $14470
received from Y and a cheque for $1740 paid to Z appear in the cash book but not on the bank
statement.
A $4770 credit
B $4770 debit
C $20 690 credit
D $20 690 debit
12 A partnership maintains both capital and current accounts for its partners.
Which is the correct accounting entry for recording interest on capital for partner X?
Profit and Loss Appropriation Account
Xs Capital account
Xs Current account
debit credit
Xs Capital account
Xs Current account
A
B
C
D
Q190.
4
9706/1/O/N/02
10 A trial balance does not balance and a Suspense account is opened.
Subsequently the following errors are found and the Suspense account is cleared.
1 A sales invoice for $1240 had been omitted from the books.
2 Rent paid of $2600 was entered correctly in the cash book but incorrectly as $6200 in the
Rent account.
3 The purchases journal was undercast by $1980.
What was the original balance on the Suspense account?
A $1620 credit
B $4340 debit
C $5580 credit
D $5580 debit
11 The balance at bank in Xs cash book at 30 April is $12 460 debit. However, a cheque for $14470
received from Y and a cheque for $1740 paid to Z appear in the cash book but not on the bank
statement.
A $4770 credit
B $4770 debit
C $20 690 credit
D $20 690 debit
12 A partnership maintains both capital and current accounts for its partners.
Which is the correct accounting entry for recording interest on capital for partner X?
Xs Capital account
Xs Current account
debit credit
Xs Capital account
Xs Current account
A
B
C
D
Q191.
5
13 A partnership does not maintain a Goodwill account. It recently admitted a new partner.
No adjustments were made for Goodwill in the partners Capital accounts.
What is the effect of this omission?
14 A manufacturing company transfers its products from factory to warehouse at cost of production
plus 20%.
$
Provision for unrealised profit brought forward at 1 October 2001 9000
Closing stock of finished goods at 30 September 2002 48000
What is shown in the Profit and Loss Account for the year ended 30 September 2002 for the
provision for unrealised profit?
A $600 credit
B $600 debit
C $1000 credit
D $1000 debit
15 A company increases its provision for doubtful debts.
How does this affect the cash flow statement?
A
B
C
D
overstated
understated
understated
overstated
continuing partners Capital
accounts total balances
understated
overstated
understated
overstated
new partners Capital
account balance
A
B
C
D
not required
not required
required
required
decrease
increase
decrease
increase
items in the Profit and Loss
Account not involving the
movement of cash
adjustments for
items affecting the
working capital
Q192.
7
20 Which business is likely to have the lowest Gross Profit/Sales margin?
A a car manufacturer
B a computer software company
C a jewellery shop
D a supermarket
21 The table shows an extract from a companys accounts for the year ended 31 December 2001.
What is the debtor collection period?
22 The table gives information taken from the Balance Sheets of a company for three successive
years.
What do these figures show about the companys liquidity?
A It declined in year 2, but no further in year 3.
B It declined in year 2, but then improved in year 3.
C It has continually declined over the 3 years.
D It has continually improved over the 3 years.
credit sales
cost of sales
debtors
creditors
100000
80000
16438
12329
$
stock at valuation
trade debtors
trade creditors
taxation and dividends payable
$22000
$102000
$63000
$17000
year 1 year 2 year 3
$29000
$91000
$76000
$23000
$27000
$81000
$75000
$22000
Q193.
4
9706/1/M/J/02
9 The balance on a Sales Ledger Control account is $40000.
The following items are then discovered:
What is the total of the balances in the sales ledger?
A $37900 B $38600 C $38900 D $41100
10 The trial balance of a business does not agree. The difference has been entered in a Suspense
account.
The error was caused by a cheque for $400 from Omar being debited to Omars account.
What is the journal entry to correct this?
11 On 6 January 2002 a firm lost all its stock in a fire. Stock had a Balance Sheet valuation of
$650000 on 31 December 2001.
In the period 15 January 2002 purchases were $75000 and sales were $96000.
The average gross profit the firm makes is 25% of selling price.
What was the value of the stock on 5 January?
A $629000 B $647000 C $653000 D $671000
$
Total of sales day book understated 500
Discounts allowed not entered in Sales Ledger Control account 1200
Bad debts written off not recorded in Sales Ledger Control account 400
Provision for bad debts 2500
debit credit with
A Bank account Suspense account $400
B Suspense account Omars account $400
C Suspense account Omars account $800
D Suspense account Bank account $800
www.studyguide.pk
Q194.
7
9706/1/M/J/02 [Turn over
19 A business purchases stock on credit.
Which of the following is now true?
20 A business has a gross profit to sales ratio of 40%, and a net profit to sales ratio of 10%.
If the sales volume increases by 8% which of the following will generally be true?
21 The current ratio of a company increases from 1.4 to 1.9.
Which of the following could explain this movement?
A an issue of more share capital for cash
B the giving of more generous credit terms to customers
C the granting of cash discounts to customers
D the purchase of some short-term investments
22 A companys stock turnover ratio is calculated using the cost of goods sold and the average of
opening and closing stocks.
In each of the last two financial years, closing stock was valued at $5000 more than the
corresponding opening stock.
In both years, the stock turnover was ten times and in the earlier year the cost of goods sold was
$125000.
What was the cost of goods sold in the second year?
A $200000 B $175000 C $150000 D $125000
current ratio acid test
A decreases decreases
B increases increases
C unchanged decreases
D unchanged increases
gross profit to net profit to
sales ratio sales ratio
A increases decreases
B increases increases
C unchanged decreases
D unchanged increases
www.studyguide.pk
Q195.
8
9706/1/M/J/02
23 A business has the following current assets and current liabilities:
The only other item in the working capital is stock.
The current ratio is 2:1. What is the value of the stock?
A $ 2550 B $ 4050 C $ 5550 D $ 7050
24 A video cassette has a selling price of $10.
What is the contribution per video cassette?
A $5.00 B $6.00 C $7.00 D $8.00
25 A company manufactures a variety of products, each of which requires different materials and
grades of labour.
There is little use of machinery in the manufacture of each product.
On which basis should the Overhead Absorption Rate (OAR) be calculated?
A direct labour cost
B direct material cost
C direct labour hours
D machine hours
$
debtors 6000
bank overdraft 1500
cash in hand 50
creditors 5050
$
direct materials 1.20
direct labour 0.80
factory overhead (fixed) 1.40
royalty payment 1.00
administration overhead (fixed) 0.60
www.studyguide.pk
Q196.
9
9706/1/M/J/02 [Turn over
26 Which of the following may result in an under-absorption of fixed overhead?
27 A company manufactures a single product with a selling price of $30 per unit. Based on production
and sales of 4000 units, costs are:
What is the gross profit per unit of the product?
A $5.00 B $10.50 C $15.50 D $18.00
28 Which line, A, B, C or D, in the graph below best represents the behaviour of the total cost of an
item affected by bulk purchase discounts?
cost
$
quantity purchased
A
B
C
D
$ 000
direct costs 48
variable production overhead 10
fixed production overhead 20
variable selling overhead 5
fixed administration overhead 17
total costs 100
www.studyguide.pk
Q197.
2
UCLES 2010 9706/01/SP/10
1 Which of the following is a revenue reserve?

A capital redemption reserve
B general reserve
D share premium account

2 The sales included in the trial balance of a company total $880 000.

This is made up as follows:
$
Cash sales 215 000
Credit sales 536 000
Goods sent on sale or return basis awaiting acceptance by
the consignee 45 000
Goods sent on sale or return for which customers have
accepted invoices 84 000
Total 880 000

Which amount will be shown in the income statement as revenue?

A $751 000 B $796 000 C $835 000 D $880 000


quantity purchased
Cost
$
A
B
C
D

Q198.
2
UCLES 2010 9706/01/SP/10
1 Which of the following is a revenue reserve?

A capital redemption reserve
B general reserve
D share premium account

2 The sales included in the trial balance of a company total $880 000.

This is made up as follows:
$
Cash sales 215 000
Credit sales 536 000
Goods sent on sale or return basis awaiting acceptance by
the consignee 45 000
Goods sent on sale or return for which customers have
accepted invoices 84 000
Total 880 000

Which amount will be shown in the income statement as revenue?

A $751 000 B $796 000 C $835 000 D $880 000


quantity purchased
Cost
$
A
B
C
D

Q199.
4
UCLES 2010 9706/01/SP/10
7 A company decides to change from the straight-line method of depreciation to the reducing
balance method.

Which accounting concept does the proposal disregard?

A consistency
B going concern
C historic cost
D materiality

8 A machine acquired on hire purchase legally belongs to the seller until the final hire purchase
instalment has been paid. However, it is treated for accounting purposes as a non-current asset
in the books of the hire purchaser.

Which accounting concept is this an example of?

A matching
B materiality
C prudence

9 The final accounts of John Gates contain two errors. The closing trade inventories have been
overvalued by $6,000, and uninsured theft of goods costing $9,000 has not been taken into
account.

What effect will the correction of these errors have on John Gatess profits?

Gross profit Profit for the year (Net profit)
A reduced by $6 000 increased by $3 000
B reduced by $3 000 reduced by $3 000
C increased by $3 000 reduced by $6 000
D increased by $6 000 increased by $6 000

Q200
10
UCLES 2010 9706/01/SP/10
26 A company has a current (working capital) ratio of 2:1 and a quick (acid test) ratio of 0.5:1.

What is the effect on the two ratios, if the company uses cash to buy inventory?

current ratio quick ratio
A decrease decrease
B decrease increase
C no change decrease
D no change increase

27 A company sells two products X and Y. The summarized results for the last financial year
included the following:

X Y
$ $
Revenue 50 000 100 000
Less: Cost of sales 30 000 67 500
Gross profit 20 000 32 500

The company wants to improve its gross profit to sales ratio.

Which is the best way to achieve this?

A a reduction in inventory level
B an increase in sales of product X
C a 10% increase in sales of X and Y
D a reduction in the amount of variable overheads shown in the income statement

28 A company manufactures and sells widgets. The directors want to increase profitability and are
considering buying in the widgets instead of manufacturing them.

The company should buy the widgets from an outside supplier if the price is

A less than the marginal cost of production
B more than the marginal cost of production but less than the marginal cost of sales
C more than the marginal cost of sales but less than the total cost
D more than the total cost but less than the selling price

END OF MADNESS :)

Omair Masood: AS Level MCQs Madness

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