Required Exam Question Paper Of Financial Accountancy

Will you provide the exam Question paper of Financial Accountancy?

[Arun Vats]

Few questions of Financial Accountancy exam is given below:

[If the balance sheets at 1 January 2006 and 31 December 2006 show a liability for tax of
€/£21,000 and €/£28,000 respectively and the charge for the year is 35% of operating profit. What figure for tax will appear in the cash flow statement for the year ended 31 December 2009 if operating profit is €/£110,000.
(a) €/£38,500
(b) €/£45,500
(c) €/£28,000
(d) €/£31,500

A government grant of €/£45,000 to help meet the cost of wages and salaries incurred during the year to train staff was treated as deferred income in error. What journal entries are required to correct this error?
(a) debit deferred income, credit wages and salaries
(b) debit wages and salaries, credit deferred income
(c) debit bank, credit deferred income
(d) debit bank, credit wages and salaries

Under the terms of IAS 2 the net realisable value of an inventory item is the:
(a) estimated selling price in the ordinary course of business, less the estimated costs of
completion and estimated costs necessary to make the sale
(b) estimated selling price in the ordinary course of business
(c) actual selling price in the ordinary course of business less selling costs
(d) estimated selling price in the ordinary course of business less the estimated costs of
Completion

Overvaluing closing inventory in the Statement of Profit & Loss results in:
(a) the understatement of Cost of Sales and overstatement of operating profit
(b) the overstatement of Cost of Sales and understatement of operating profit
(c) the understatement of Cost of Sales and understatement of operating profit
(d) the overstatement of Cost of Sales and overstatement of operating profit

Under the terms of IAS 37 contingent liabilities should:
(a) only be disclosed by way of note to the financial statements if material in nature
(b) be recognised in financial statements as it is probable that a cost will be incurred
(c) only be recognised in the financial statements if material in nature
(d) not be recognised in financial statements or disclosed by way of note

What is the ratio for Acid test?
(a) Current assets –closing inventory / non-current liabilities
(b) Current assets – closing inventory / current liabilities
(c) Current assets – average inventory / current liabilities
(d) Current assets – average inventory / non-current liabilities

QUESTION 1
(i) The Turnbull Report attempts to define internal controls and in doing so describes three types of
controls:
(a) Operational controls
(b) Compliance controls
(c) Financial controls
Outline the purpose of each of the above internal controls and provide one example of each.
9 marks

(ii) The Board of Directors of your company has asked you, as Financial Accountant, to advise them on
the need for a robust internal control system and to describe five commonly found internal financial
controls, giving an example of each. 11 marks Total 20 marks

QUESTION 2
The following multiple choice question consists of TEN parts, each of which is followed by FOUR
possible answers. There is ONLY ONE right answer in each part.
Each part carries 1½ marks.

Requirement
Indicate the right answer to each of the following TEN parts.

Total 15 Marks
N.B. Candidates should answer this question by ticking the appropriate boxes on the special green
answer sheet which is supplied with the examination paper.
[1] Under the terms of IAS 2 the net realisable value of an inventory item is the:
(a) estimated selling price in the ordinary course of business, less the estimated costs of
completion and estimated costs necessary to make the sale
(b) estimated selling price in the ordinary course of business
(c) actual selling price in the ordinary course of business less selling costs
(d) estimated selling price in the ordinary course of business less the estimated costs of
completion

QUESTION 2 (cont’d)
[2] An unqualified audit report is saying:
(a) with certainty that the financial statements are 100% accurate
(b) that in the opinion of the auditor the financial statements do not reflect a true and fair view
of the company’s financial affairs
(c) that in the opinion of the auditor the financial statements reflect a true and fair view of the
company’s financial affairs
(d) with certainty that the financial statements reflect a true and fair view of the company’s
financial affairs

[3] Under the terms of IAS 1 assets and liabilities and income and expenses may not be offset against
one another unless:
(a) the elements to be offset are immaterial in nature
(b) the reason for doing so is detailed in the notes to the accounts
(c) the external auditor approves
(d) required or permitted by a standard

[4] Overvaluing closing inventory in the Statement of Profit & Loss results in:
(a) the understatement of Cost of Sales and overstatement of operating profit
(b) the overstatement of Cost of Sales and understatement of operating profit
(c) the understatement of Cost of Sales and understatement of operating profit
(d) the overstatement of Cost of Sales and overstatement of operating profit

[5] What is the ratio for Acid test?
(a) Current assets –closing inventory / non-current liabilities
(b) Current assets – closing inventory / current liabilities
(c) Current assets – average inventory / current liabilities
(d) Current assets – average inventory / non-current liabilities

[6] Under the terms of IAS 8, where the effect of a change in estimate is material to the financial
statements:
(a) the nature and monetary effect of the change on the financial statements must be disclosed
(b) the change in estimate should be applied retrospectively
(c) the change in estimate should only be applied retrospectively where it is deemed necessary
to provide more reliable information
(d) the nature and monetary affect of the change on the financial statements must be disclosed
only where it is deemed necessary to provide more reliable information

QUESTION 2 (cont’d)
[7] Under the terms of IAS 37 contingent liabilities should:
(a) only be disclosed by way of note to the financial statements if material in nature
(b) be recognised in financial statements as it is probable that a cost will be incurred
(c) only be recognised in the financial statements if material in nature
(d) not be recognised in financial statements or disclosed by way of note

[8] A fire which broke out at the shop premises of Sole Trader X resulted in damage being caused to
the accounting records. However the following information is available:
€/£
Bank balance 1 Jan 2010 2,000
31 Dec 2010 2,700 (overdrawn)
Cheque payments 57,000
Trade receivables 1 Jan 2010 6,200
31 Dec 2010 7,800
There are no cash sales. Calculate turnover for the year.
(a) €/£ 60,100
(b) €/£ 59,300
(c) €/£ 53,900
(d) €/£ 63,300

[9] A government grant of €/£45,000 to help meet the cost of wages and salaries incurred during the
year to train staff was treated as deferred income in error. What journal entries are required to
correct this error?
(a) debit deferred income, credit wages and salaries
(b) debit wages and salaries, credit deferred income
(c) debit bank, credit deferred income
(d) debit bank, credit wages and salaries

[10] If the balance sheets at 1 January 2006 and 31 December 2006 show a liability for tax of
€/£21,000 and €/£28,000 respectively and the charge for the year is 35% of operating profit. What
figure for tax will appear in the cash flow statement for the year ended 31 December 2009 if
operating profit is €/£110,000.
(a) €/£38,500
(b) €/£45,500
(c) €/£28,000
(d) €/£31,500

QUESTION 3
Shoebox Ltd., is a shoe manufacturer with an authorised share capital of €/£2,400,000, comprised of
8,000,000 ordinary shares of 25 cent/pence each and €/£400,000 of 8% preference shares of €/£1 each.
The following trial balance was extracted as at 31st December 2009
€/£’000 €/£’000
Ordinary share capital .................................................. .................... 1,200
8% preference share capital .................................................. ........... 200
Retained profits at 1 January 2009 .................................................. 90
10% debenture stock .................................................. ...................... 120
Land at cost .................................................. .................................... 200
Land accumulated depreciation .................................................. ..... 60
Premises at cost .................................................. .............................. 980
Premises accumulated depreciation ................................................. 80
Plant and machinery at cost .................................................. ........... 420
Plant and machinery accumulated depreciation .............................. 180
Motor vehicles at cost .................................................. ................... 120
Motor vehicles accumulated depreciation ....................................... 40
Inventory at 31 December 2009 .................................................. .... 290
Goodwill .................................................. ......................................... 160
Investments (not for re-sale) .................................................. .......... 160
Short term investments .................................................. .................. 40
Bank deposit account .................................................. ..................... 80
Bank balance .................................................. .................................. 260
Trade receivables .................................................. ........................... 372
Provision for doubtful debts at 31 December 2009 ........................ 16
Trade payables .................................................. ............................... 88
Corporation tax owing .................................................. ................... 88
Valued added tax owing .................................................. ................ 28
Accrued expenses .................................................. ........................... 56
Deferred government grants at 1 January 2009 .............................. 48
Loan from director (repayable in 2015) .......................................... 128
Retained profit for the year ended 31 December 2009 ................... 140
.................................................. .................................................. ________ _______
2,822 2,822

ADDITIONAL INFORMATION
(1) The above trial balance has been arrived at after charging depreciation for the year.
(2) A final ordinary dividend of €/£0.025 per share has been approved by the shareholders. The
dividend should be provided for in the year end accounts.
(3) Prepaid expenses valued at €/£24,000 were incorrectly included in operating costs.
(4) Full year debenture interest to be provided for.
(5) Government grants received of €/£40,000 have not been included in the trial balance. These
grants and the grants already provided for in the trial balance should be released to the profit and
loss account over a four year period starting with the current year.

QUESTION 3 (Cont’d)
Requirement
(a) Prepare, in a form suitable for publication, the statement of financial position for SHOEBOX
Ltd., for the year ended 31st December 2009 in as far as the information provided permits.
N. B. You are NOT required to prepare an Statement of Profit & Loss or notes to the accounts. You are
required to submit workings to show the make-up of the figures in the statement of financial
position.
18 Marks
(b) You have been asked by a friend, who does not have a financial background, to explain the
statement of financial position as per (a) above. Prepare a note outlining your understanding of
what the statement of financial position tells you about Shoebox Limited.
5 Marks
Presentation 2 marks
Total 25 Marks

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