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Maintaining Financial Records / Financial Accounting 2
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Final Mock Exam

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FA2 (International)
Maintaining Financial Records

Final Mock Examination

Question Paper

Time allowed 2 hours

This paper is divided into two sections

Section A ALL FIFTY questions are compulsory and MUST be answered

DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER
EXAMINATION CONDITIONS
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1 Beth's draft accounts for the year to 31 October 20X5 showed a loss of $1,486. When she prepared the
accounts, Beth did not include an accrual of $1,625 and a prepayment of $834. Beth subsequently adjusted
the accounts to reflect the accrual and prepayment.
What was Beth's profit or loss for the year to 31 October 20X5 following the inclusion of the accrual and
prepayment?
A A loss of $695
B A loss of $2,277
C A loss of $3,945
D A profit of $1,807 (2 marks)

2 What is the main purpose of a statement of financial position?

A To report the assets, liabilities and capital of the business at a particular date
B To provide a valuation of the business at a particular date
C To provide information about the activities of the business over a period of time
D To report the growth in the value of capital since the business was established
(2 marks)

3 The profit made by a business in 20X7 was $35,400. The proprietor injected new capital of $10,200 during
the year and withdrew a monthly salary of $500.
If net assets at the end of 20X7 were $95,100, what was the proprietor's capital at the beginning of the
year?
A $43,500
B $55,500
C $63,900
D $126,300 (2 marks)

4 Your organisation uses the continuous weighted average cost method of valuing inventories. During
August 20X1, the following inventory details were recorded:
Opening balance 30 units valued at $2 each
5 August Purchase of 50 units at $2.40 each
10 August Issue of 40 units
18 August Purchase of 60 units at $2.50 each
23 August Issue of 25 units
What is the value of the inventory balance at 31 August 20X1?
A $172.50
B $176.25
C $180.00
D $187.50 (2 marks)

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5 Daljit received a cheque for $950 from his insurance company in settlement of a claim for repairs to a van.
The bookkeeper recorded the cheque correctly in the cash day book, but did not complete the double entry.
The total of the trial balance did not agree and a suspense account was opened to record the difference.
What journal entry is required to eliminate the balance on the suspense account?
A Debit Suspense $950
Credit Insurance $950
Being correction of an error of omission
B Debit Insurance $950
Credit Suspense $950
Being correction of an error omission
C Debit Suspense $950
Credit Van repairs $950
Being correction of an error of omission
D Debit Van repairs $950
Credit Suspense $950
Being correction of an error of omission.
(2 marks)

The following information relates to questions 6 and 7

While carrying out the reconciliation of the balance on the payables control account in the general ledger with the
list of balances from the payable ledger, Celine discovered the following errors:
(1) A payment of $1,700 in full settlement of a balance of $1,714 was correctly recorded on the supplier's
account but only $1,700 was posted to the control account.
(2) The total of the purchase day book was understated by $900.
(3) A supplier's credit note was incorrectly recorded the daybook as an invoice.
(4) No entries were made to record an arrangement to offset a balance of $620 against a balance in the
receivables ledger.

6 Which of the above errors require a correcting entry in the general ledger?
A (1) and (2)only
B (2) and (3) only
C (3) and (4) only
D (1), (2), (3) and (4) (2 marks)

7 Which of the above errors should be dealt with as an adjustment to the list of balances from the
payables ledger?
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1), (2), (3) and (4) (2 marks)

8 How is the measurement of assets and liabilities affected by the application of prudence?
Assets should not be Liabilities should not be
A Overstated Understated
B Overstated Overstated
C Understated Understated
D Understated Overstated (2 marks)

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The following information relates to questions 9 and 10
At 31 December 20X3 Anna's inventory was valued at $6,400 and her trial balance included the following
balances:
Debit Credit
$ $
Sales 45,000
Purchases 29,500
Inventory at 1 January 20X3 5,700
Carriage inwards 750
Postage 340
Wages 6,000
Advertising 1,900
Other expenses 2,500

9 What was Anna's gross profit?

A $4,710
B $15,110
C $15,450
D $16,200 (2 marks)

10 What amount should have been reported as expenses in Anna’s income statement?
A $10,400
B $10,740
C $11,490
D $17,190 (2 marks)

11 A non-current asset was disposed of for $2,200 during the last accounting year. It had been purchased
exactly three years earlier for $5,000 and had been depreciated on the reducing balance basis at 20% per
annum.
What was the profit or loss on disposal?
A $360 profit
B $360 loss
C $200 profit
D $200 loss (2 marks)

12 Which of the following is a bank overdraft an example of?

A Asset
B Liability
C Income
D Expense (2 marks)

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13 A partnership employs an inexperienced bookkeeper. He has written up the current account of one of the
partners as follows.

CURRENT ACCOUNT
$ $
Interest on capital 2,800 Balance b/f 270
Salary 1,500 Drawings 6,200
Balance c/f 10,870 Net profit 8,700
15,170 15,170

The balance brought forward is entered correctly and the other entries are all correct in amount. However,
the bookkeeper is not very sure of the difference between debits and credits.
What is the corrected balance carried forward?
A A debit balance of $1,530
B A debit balance of $6,530
C A credit balance of $7,070
D A credit balance of $16,470 (2 marks)

14 In the year to 30 April 20X6, Peter's sales were $182,000. All of his sales were made at a mark up of 30%.
His opening inventory value was $11,800 and his closing inventory value was $9,700.
What was the value of Peter's purchases in the year to 30 April 20X6?
A $125,300
B $137,900
C $140,000
D $142,100 (2 marks)

15 Tony's bookkeeper has prepared the following trade payables ledger reconciliation:
$
Balance on general ledger control account 78,553
Less: Discount not recorded in general ledger 128
78,425
Add: Debit balance of $100 included on list of
balances as credit balance 200
Total of list of balances 78,625

What is the correct payables balance to be reported in the statement of financial position?
A $78,425
B $78,553
C $78,626
D $78,753 (2 marks)

16 How should the balance on the receivables ledger control account be reported in the final accounts?
A As an expense account
B As a non-current asset
C As a current asset
D As a current liability (2 marks)

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The following information relates to questions 17 and 18
Arnold bought a machine for use in his business on 1 November 20X4. He gave the supplier a cheque for $11,570
and traded in an old machine. The supplier allowed him $4,430 in part-exchange for the old machine. Arnold
depreciates machinery on the reducing balance basis at a rate of 20% per annum. The old machine had cost
$12,000 and had been depreciated by $5,856.

17 What was the depreciation charge on the new machine for the year to 31 October 20X5?
A $886
B $1,428
C $2,314
D $3,200 (2 marks)

18 What was the profit or loss on the trade in of the old machine?
A Profit of $1,426
B Profit of $1,714
C Loss of $1,426
D Loss of $1,714 (2 marks)

19 At 1 November 20X4 Dorothy's receivables allowance was $5,670. At 31 October 20X5 she was owed
$275,600 by her customers. She has determined that, based on past experience, an allowance equivalent to
2% of outstanding balances is required at 31 October 20X5.
What should be reported in Dorothy's income statement for the year to 31 October 20X5?
A A credit of $158
B A credit of $5,512
C A charge of $158
D A charge of $5,512 (2 marks)

20 When Ossie completed his extended trail balance the totals were:
Income statement columns Statement of financial position columns
Debit Credit Debit Credit
$ $ $ $
129,685 136,894 149,212 142,003
What is Ossie's profit or loss for the period?
A a loss of $7,209
B a loss of $12,318
C a profit of $7,209
D a profit of $12,318 (2 marks)

21 A trial balance fails to agree by $1,000.

Which of the following errors could have caused its difference?
A A $1,000 cheque received from a customer, F Bloggs, has been credited to J Bloggs’ account in the
payables ledger
B A rent payment of $500 had been debited to a non-current asset account
C A non-current asset costing $500 had been credited to the purchases account
D A $1,000 cheque paid to a supplier had been credited to the supplier’s account in the payables
ledger
(2 marks)

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22 Norman is entering information into the non-current asset register.
Which of the following items of information will be used when carrying out a verification of the physical
presence of non-current assets?
(1) Supplier
(2) Location
(3) Description
(4) Cost
A 1 and 2
B 1 and 3
C 2 and 3
D 3 and 4 (2 marks)

23 John has been asked to provide a copy of his final accounts to his bank manager.
What is the bank manager MOST likely to use the final accounts for?
A To ensure that the profit is sufficient to provide a good income for John
B To calculate the tax payable on John’s business profit
C To ensure that John’s profit margin is as good as the margin earned by other bank customers
D To ensure that the business is able to make the repayments on a loan
(2 marks)

24 Harriet is carrying out a reconciliation of her payables ledger. She needs to make correcting entries due to
the following errors:
(1) A payment to Bennett Dawson has been posted to the account of Dawson Bennett
(2) An invoice for $435 has been entered in the purchase day book as $345
Which of the corrections will result in an entry in the general ledger?
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2 (2 marks)

25 Janet valued her inventory at 30 June at its cost of $22,960. This includes some items which cost $1,950
which have been difficult to sell. Janet intends to have these items repacked at a cost of $400. She can then
sell them for $900.
What will be the value of closing inventory in Janet’s accounts at 30 June?
A $20,610
B $21,510
C $22,310
D $24,260 (2 marks)

26 Adele runs a restaurant. In August 20X3 she received a letter from a lawyer representing a customer who
claims he suffered food poisoning after eating in the restaurant. The customer is claiming damages of
$3,000. Adele offered to pay $300. Her lawyer’s advice is that in the event of the case going to court, she is
likely to be required to pay $1,500. The solicitor also advised that the court case is unlikely to take place
before April 20X4.
What amount should be provided for in respect of the claim in Adele’s final accounts for the year ended
30 September 20X3?
A $nil
B $300
C $1,500
D $3,000 (2 marks)

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27 Ari is registered for sales tax and he has purchased goods for resale. The invoice shows the cost of the
goods as $357·50, which includes sales tax at 10%.
What debit entry should be made in the goods for resale account?
A $325.00
B $357.50
C $321.75
D $393.25 (2 marks)

28 At 1 September 20X1 the balance on Hai’s capital account was $31,754. In the year to 31 August 20X2 he
invested an additional amount of $40,000 of personal funds and took a loan of $80,000 for the business.
The income statement for the year to 31 August 20X2 reported a profit of $48,634 and Hai’s drawings
during the year were $28,500.
What is Hai’s closing capital balance at 31 August 20X2?
A $43,254
B $91,888
C $123,254
D $151,754 (2 marks)

29 When Frank prepared his year end accounts, he made a calculation error and overstated the value of his
closing inventory.
What is the effect of this error on the profit for the year and the net assets at the year end?
A Both profit and net assets will be understated
B Both profit and net assets will be overstated
C Profit will be understated and net assets will be overstated
D Profit will be overstated and net assets will be understated (2 marks)

30 John prepared his draft year end accounts, but did not adjust these for a prepayment of $1,500 and an
accrual of $400.
How will John’s profit and net assets be affected by including the prepayment and the accrual?
A Net profit will increase by $1,100 Net assets will reduce by $1,100
B Net profit will reduce by $1,900 Net assets will increase by $1,900
C Net profit will increase by $1,100 Net assets will increase by $1,100
D Net profit will reduce by $1,900 Net assets will reduce by $1,900
(2 marks)

31 At 1 October 20X1, Bakari’s bank overdraft was $3,270. During the year to 30 September 20X2, he issued
cheques with a total value of $189,642. His total lodgements during the year were $191,729. In addition,
bank charges of $827 were incurred.
What is Bakari’s bank balance brought forward at 1 October 20X2 as per his accounting records?
A $2,010 credit
B $4,530 debit
C $356 credit
D $6,184 debit (2 marks)

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32 At 31 October the balance on the payables control account in Tim’s general ledger is $79,850 and the total
of the list of balances on the personal accounts is $79,310. Tim has discovered that the difference is
because a payment for $60 was entered correctly in the day book but was recorded as $600 on the
supplier’s account.
What is the correct value of creditors to be reported on Tim’s statement of financial position at 31
October?
A $79,250
B $79,310
C $79,790
D $79,850 (2 marks)

33 Margaret compared her bank statement with the bank account in her general ledger and found they did not
agree. She found two possible reasons for this.
(1) Some cheques have not been lodged by her suppliers
(2) The bank debited fees on her account
Which of the reasons require an entry in the bank account in the general ledger?
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 nor 2 (2 marks)

34 Alex and Jose are in partnership. Under the terms of the partnership, Alex is entitled to a salary of $11,000
per annum. In the year to 31 December 20X1, the net profit of the partnership was $43,877. Interest on
capital and interest on drawings for the year have been calculated as:
Alex Jose
Interest on capital $8,000 $9,500
Interest on drawings $3,500 $5,400
What is the residual profit for the year to 31 December 20X1?
A $35,277
B $24,277
C $52,477
D $41,477 (2 marks)

35 Which of the following statements regarding inventory valuation is correct?

A Inventory valuation should exclude profit which has not yet been earned
B All items held in inventory should be valued at cost
C Inventory should be valued at anticipated selling price less any cost which will be incurred
D The purchase price of items which have been held for the longest period is an acceptable method
for valuing inventory
(2 marks)

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36 Samantha has prepared the following bank reconciliation statement at 31 March:
$
Balance on bank statement 1,250 (overdrawn)
Outstanding cheques 748
Outstanding lodgement 2,200
Balance on ledger account 202 (debit)
How should the bank balance be reported in Samantha’s statement of financial position as at 31
March?
A $1,250 as a current asset
B $1,250 as a current liability
C $202 as a current asset
D $202 as a current liability (2 marks)

37 At 30 November, Charles is owed a total of $72,660 by his customers. His receivables allowance brought
forward from the previous year end is $11,700. He estimates that his receivables allowance should be
equivalent to 15% of the amounts due from customers.
What value should be included in the income statement for receivables expense for the year to 30
November?
A $801 debit
B $10,899 debit
C $801 credit
D $10,899 credit (2 marks)

38 Sarah’s bank ledger control account at 30 April shows a balance at the bank of $2,280. Comparison with
the bank statement at the same date reveals the following differences:
$
Unpresented cheques 780
Bank charges not in cash book 40
Receipts not yet credited by the bank 450
Dishonoured cheque not in cash book 120
What is the correct bank ledger control account balance at 30 April?
A $1,340
B $2,120
C $2,360
D $1,950 (2 marks)

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39 Jessie’s trial balance at 30 September 20X0 included:
Debit $ Credit $
Receivables ledger control account 90,350
Allowance for doubtful debts brought forward 2,490
The following information is also available:
(1) No entries have been made in respect of cash of $1,320 received from Jeffrey whose balance had
been written off last year, and
(2) At 30 September 20X0 an irrecoverable balance of $1,950 is to be written off and the debtors
allowance is to be adjusted to 1·5% of the remaining balance
What figure will be reported in the statement of financial position at 30 September for receivables?
A $89,564
B $85,754
C $87,074
D $88,994 (2 marks)

40 Alan purchased a machine on 1 March 20X1 for $12,000. He incurred additional costs for transportation of
$1,300 and installation of $2,000. Shortly after he started to use the machine, it broke down and the repairs
of the machine cost $600. Alan charges depreciation at 10% per annum on straight line basis with a full
year’s charge in the year of acquisition.
What is the correct net book value of the machine at the year end date of 31 December 20X1?
A $10,800
B $13,770
C $14,370
D $15,300 (2 marks)

41 Luis and David are in partnership sharing profits and losses in the ratio 3:2. David is entitled to a salary of
$9,000 and interest on capital is paid at a rate of 8% per annum. The partners’ capital balances are:
Luis $75,000
David $60,000
The partnership income statement for the year shows a profit of $58,500.
How much of the total profit is Luis entitled to?
A $23,220
B $38,220
C $29,220
D $35,100 (2 marks)

42 Which of the following correctly states the accounting equation?

A Assets plus liabilities equals capital
B Assets plus capital equals liabilities
C Capital plus liabilities equals assets
D Capital minus liabilities equals assets (2 marks)

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43 Lorna is preparing her monthly receivables ledger reconciliation. She has discovered that a credit balance
of $79 on a customer’s account has been treated as a debit balance.
To complete the reconciliation, what adjustment should Lorna make to the total of the list of balances?
A Reduce the total by $79
B Increase the total by $79
C Increase the total by $158
D Reduce the total by $158 (2 marks)

44 Nandita has bought goods for resale on credit from Pascale. The goods cost $600 before sales tax, which
is calculated at 10%.
When the transaction is posted to the general ledger, which of the following entries should be
included?
(1) Sales tax – credit entry
(2) Purchase ledger control account – credit entry
(3) Purchases – debit entry
(4) Bank – credit entry
A 2 and 3
B 1 and 2
C 3 and 4
D 1 and 4 (2 marks)

45 At 30 September 20X3 Pamela’s inventory was valued at $6,400 and her trial balance included the
following balances:
Debit ($) Credit ($)
Sales 45,000
Purchases 29,500
Inventory at 1 October 20X2 5,700
Carriage inwards 750
Postage 340
Wages 6,000
Advertising 1,900
Other expenses 2,500
What is Pamela’s gross profit for the year to 30 September 20X3?
A $4,710
B $15,110
C $15,450
D $16,200 (2 marks)

46 At 30 November 20X3, Zoltan’s bank current account was overdrawn. He also had a bank loan on which
monthly capital repayments will commence in February 20X5.
How should these balances be reported on his statement of financial position at 30 November 20X3?
Bank current account Bank loan
A Current liability Current liability
B Non-current liability Current liability
C Current asset Non-current liability
D Current liability Non-current liability (2 marks)

15
47 James has been advised that one of his customers has ceased trading and that he will not recover the
balance of $720 owed by his customer
What entry should James make in his general ledger?
A Dr Receivables ledger control $720 Cr Receivables expense $720
B Dr Receivables expense $720 Cr Receivables ledger control $720
C Dr Receivables ledger control $720 Cr Bank $720
D Dr Bank $720 Cr Receivables ledger control $720
(2 marks)

48 The amount owed to Jane by her customers at 31 October was $34,729. A year earlier she was owed
$27,641. During the year Jane had lodged $327,684 to her bank account. This included payments received
from her customers as well as $45,000 which Jane had received from the sale of her holiday home.
What was the value of Jane’s sales for the year to 31 October?
A $334,772
B $327,684
C $282,684
D $289,772 (2 marks)

49 Which method of inventory valuation is used when issues are assumed to be taken from inventory in
the order in which they were received?
A Last in, first out
B First in, first out
C Periodic weighted average
D Continuous weighted average
(2 marks)

50 Which accounting principle is applied when two similar transactions are treated in the same way?
A Consistency
B Materiality
C Double entry
D Accruals (2 marks)

(Total = 100 marks)

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