PRACTICE QUESTION BANK FFA Fundamental Level

1 Which of the following are true of sole traders?

1 A sole trader's financial statements are private; a company's financial statements are sent
to shareholders and may be publicly filed
2 Only companies, and not sole traders, have capital invested into the business
3 A sole trader is fully and personally liable for any losses that the business might make; a
company's shareholders are not personally liable for any losses that the company might make
A 1 and 2 only
B 2 and 3 only
C 1 and 3 only
D 1, 2 and 3
(2 marks)
2 Who is responsible for the preparation of the financial statements of a company?
1 The finance department
2 The board of directors
3 The external auditors
A 1 only
B 1 and 2 only
C 2 only
D 1, 2 and 3
(2 marks)
3 Which TWO of the following are advantages of trading as a partnership?
1 Additional capital can be raised because more people are investing in the business
2 A partnership has a separate legal identity from the individual partners
3 Partners have limited liability and are not personally liable for the debts of the partnership
4 A partnership is not required to make its financial accounts publicly available
A 1 and 2
B 1 and 4
C 2 and 4
D 2 and 3
(2 marks)
4 Which TWO of the following are disadvantages of trading as a limited liability company?
1 The shareholders of the company have limited liability for the debts of the company
2 A company must publish annual financial statements
3 Raising finance is easier as a company, as more shares can be issued
4 The financial statements of larger limited liability companies must be audited
A 1 and 2
B 1 and 4
C 2 and 3
D 2 and 4
(2 marks)
5 What should be the main aim for a director of a company?
A To manage the affairs of the company in order to earn a good bonus
B To manage the affairs of the company in order to create wealth for the shareholders
C To manage the affairs of the company in order to generate the largest profits in the
shortest time
D To manage the affairs of the company in order to contribute to the general wellbeing of society
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

(2 marks)
6 The IASB's Conceptual framework for financial reporting gives four enhancing qualitative
characteristics.
Which of the following are examples of those qualitative characteristics?
A Faithful representation, neutrality and business entity concept
B Verifiability, comparability and true and fair view
C Comparability, timeliness and understandability
D Relevance, accruals and going concern
(2 marks)
7 Which of the following statements is/are correct?
1 Materiality means that only items having a physical existence may be recognised as assets
2 The substance over form convention means that the legal form of a transaction must
always be shown in financial statements even if this differs from the commercial effect
3 The accruals basis means that sales are recognised in the accounts as they occur and not
when the cash is received
A 2 only
B 1, 2 and 3
C 1 only
D 3 only
(2 marks)
8 Which TWO of the following are important fundamental assumptions for financial statements
according to the IASB's Conceptual framework for financial reporting?
1 Relevance
2 Going concern
3 Faithful representation
4 Accruals
A 1 and 2 only
B 2 and 3 only
C 3 and 4 only
D 1 and 3 only
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

9 Which of the following explains the imprest system of operating petty cash?
A Weekly expenditure cannot exceed a set amount
B The exact amount of expenditure is reimbursed at intervals to maintain a fixed float
C All expenditure out of the petty cash must be properly authorised
D Regular equal amounts of cash are transferred into petty cash at intervals
(2 marks)
10 Petty cash is controlled under an imprest system. The imprest amount is $100. During a period,
payments totalling $53 have been made.
How much needs to be reimbursed at the end of the period to restore petty cash to the imprest
account?
A $100
B $53
C $47
D $50
(2 marks)
11 Which of the following documents should accompany a payment made to a supplier?
A Supplier statement
B Remittance advice
C Purchase invoice
D Purchase order
(2 marks)
12 Which of the following are books of prime entry?
1 Sales day book
2 Cash book
3 Supplier statements
4 Petty cash voucher
A 1 and 2 only
B 1, 2 and 4 only
C 1 only
D All of them
(2 marks)
13 In which book of prime entry will a business record credit notes received in respect of goods
which the business has sent back to its suppliers?
A The sales returns day book
B The cash book
C The purchase returns day book
D The purchase day book
(2 marks)
14 The business entity concept requires that a business is treated as being separate from its
owners.
Is this statement true or false?
A True
B False
(1 mark)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

15 A business sells $100 worth of goods to a customer, the customer pays $50 in cash immediately
and will pay the remaining $50 in 30 days' time.
What is the double entry to record the sale?
A Debit cash $50, credit receivables $50, credit sales $50
B Debit receivables $50, debit cash $50, credit sales $100
C Debit sales $100, credit receivables $50, credit cash $50
D Debit sales $100, credit cash $100
(2 marks)
16 Chalk purchases $500 worth of cheese from Cheddar Co. Chalk agrees to pay Cheddar Co in 30
days' time. What is the double entry to record the purchase in Cheddar Co's books?
A Debit sales $500, credit receivables $500
B Debit purchases $500, credit payables $500
C Debit receivables $500, credit sales $500
D Debit payables $500, credit purchases $500
(2 marks)
17 Which TWO of the following are credit entries?
1 An increase in a liability
2 A decrease in a liability
3 An increase in income
4 A decrease in income
A 1 and 3
B 1 and 4
C 2 and 3
D 2 and 4
(2 marks)
18 If the total debits exceed the total credits in a T-account, does the account have a debit or a
credit balance?
A Credit balance
B Debit balance
(1 mark)
19 Does a debit balance brought down in the Cash T-account represent an asset or a liability?
A An asset
B A liability
(1 mark)
20 A company's motor vehicles at cost account at 30 June 20X6 is as follows.
MOTOR VEHICLES – COST
$ $
Balance b/d 35,800 Disposal 12,000
Additions 12,950 Balance c/d 36,750
48,750 48,750

What opening balance should be included in the following period's trial balance for motor
vehicles – cost at 1 July 20X6?
A $36,750 DR
B $48,750 DR
C $36,750 CR
D $48,750 CR
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

21 A company's trade payables account at 30 September 20X1 is as follows.

TRADE PAYABLES ACCOUNT
$ $
Cash at bank 21,600 Balance b/d 14,000
Balance c/d 11,900 Purchases 19,500
33,500 33,500

What opening balance should be included in the following period's trial balance for payables at
1 October 20X1?
A $33,500 DR
B $11,900 DR
C $11,900 CR
D $33,500 CR
(2 marks)
22 An accountant has inserted all the relevant figures into the trade receivables account, but has not
yet balanced off the account.
TRADE RECEIVABLES ACCOUNT
$ $
Balance b/d 100,750 Cash at bank 250,225
Sales 325,010

Assuming there are no other entries to be made, other than to balance off the account, what is
the closing balance on the trade receivables account?
A $425,760 DR
B $175,535 DR
C $425,760 CR
D $175,535 CR
(2 marks)

23 According to IAS 2 Inventories, which of the following costs

should be included in valuing the inventories of a
manufacturing company?
1 Carriage inwards
2 Carriage outwards
3 Depreciation of factory plant (1 mark)
4 Storage costs of finished goods
A All four items
B 1, 2 and 4 only
C 2 and 3 only
D 1 and 3 only
(2 marks)

24 What is the correct double entry to record the depreciation charge for a period?
A DR Depreciation expense
CR Accumulated depreciation
B DR Accumulated depreciation
CR Depreciation expense

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

25 An organisation's asset register shows a carrying value of $135,600. The non-current asset
account in the nominal ledger shows a carrying value of $125,600.
Which of the following disposals, if not deducted from the asset register, could account for the
difference?
A Asset A with disposal proceeds of $15,000 and a profit on disposal of $5,000
B Asset B with disposal proceeds of $15,000 and a carrying value of $5,000
C Asset C with disposal proceeds of $15,000 and a loss on disposal of $5,000
D Asset D with disposal proceeds of $5,000 and a carrying value of $5,000
(2 marks)
26 In the year to 31 December 20X9, Jason recorded some capital expenditure as revenue
expenditure.
What is the effect on his profit for the year to 31 December 20X9 and his net assets at that
date?
Profit Net assets
A Overstated Overstated
B Overstated Understated
C Understated Overstated
D Understated Understated
(2 marks)
27 Which of the following are capital, as opposed to revenue, expenses?
1 The repair of a machine currently used in the production process that has broken down
2 The cost of an extension to a factory building, which doubles the size of the production
area
3 The cost of installing a new machine in a factory
A 2 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3
(2 marks)
28 The trucks account (at cost) of a business for the year ended 31 December 20X1 was as follows.
TRUCKS – COST
20X1 20X1
$ $
1 Jan balance 240,000 31 Mar disposal account 60,000
30 June cash – purchase of vans 160,000 31 Dec balance 340,000
400,000 400,000
Brought forward accumulated depreciation at 1 January 20X1 was $115,000. The truck
disposed of on 31 March had a carrying value of $20,000.
The company's policy is to charge depreciation at 20% per year on the reducing balance, and
charges a full year's depreciation in the year of acquisition and none in the year of disposal.
What should be the depreciation charge for the year ended 31 December 20X1?
A $68,000
B $57,000
C $53,000
D $21,000
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

29 Ajeet prepared his draft end of year accounts. However, he has now realised that he did not
adjust these for a prepayment of $2,100 and an accrual of $800.
How will Ajeet's profit and net assets be affected by including the prepayment and accrual?
Profit for the year will: Net assets will:
A Increase by $2,900 Reduce by $2,900
B Increase by $1,300 Increase by $1,300
C Reduce by $1,300 Increase by $1,300
D Reduce by $2,900 Reduce by $2,900
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

30 Gamma Co prepares its financial statements for the year to 30 September each year. The
company pays rent for its premises quarterly in advance on 1 February, 1 May, 1 August and
1 November each year. The annual rent was $120,000 per year until 30 April 20X8. It was
increased from that date to $144,000 per year.
What balances were included in the statement of profit or loss and the statement of financial
position for the year ended 30 September 20X8?
Statement of profit or loss Statement of financial position
Expense Accrual Prepayment
A $130,000 nil $12,000
B $130,000 $24,000 nil
C $132,000 nil $12,000
D $132,000 $24,000 nil
(2 marks)
31 A company receives rent from a large number of properties. The total received in the year ended
30 June 20X2 was $1,203,000.
The following were the amounts of rent in advance and in arrears at 30 June 20X1 and 20X2.
30 June 20X1 30 June 20X2
$ $
Rent received in advance 71,750 78,000
Rent in arrears (all subsequently received) 53,000 46,000
What amount of rental income should appear in the company's statement of profit or loss for
the year ended 30 June 20X2?
A $1,152,250
B $1,189,750
C $1,216,250
D $1,253,750
(2 marks)
32 Which of the following statements is/are true?
1 Accrued expenses are expenses which relate to the current accounting period but have not
been paid for. They are shown in the statement of profit or loss for the current period in
accordance with the accruals concept.
2 Prepaid expenses are expenses which have already been paid in the current period but
relate to a future accounting period. They are shown in the statement of profit or loss for
the current period in accordance with the timeliness concept.
A 1 only
B 2 only
C Both 1 and 2
D Neither statement is true
(2 marks)
33 At 30 June 20X5 a company's allowance for receivables was $39,000. At 30 June 20X6 trade
receivables totalled $517,000. It was decided to write off debts totalling $37,000 and the
allowance for receivables was to be adjusted to the equivalent of 5% of the outstanding trade
receivables.
What figure should appear in the statement of profit or loss for the year ended 30 June 20X6
for these items?
A $61,000
B $22,000
C $24,000
D $23,850
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

34 Which of the following statements is/are true?

1 An aged receivables analysis is a report used to help the business pay its suppliers on time.
2 A credit limit is the minimum amount a customer must spend when purchasing goods on
credit from a supplier.
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 and 2
(2 marks)
The following information relates to questions 35 and 36.

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

North Co has a receivables balance at 31 October 20X7 of $456,330. The accountant at North is
preparing the financial statements for the year ended 31 October 20X7 and must account for the
following.
1 A balance owed by South Co of $780 is deemed irrecoverable and must be written off.
2 The brought forward receivables allowance is $15,255. The allowance for receivables
should be adjusted to the equivalent of 5% of the outstanding receivables balances.
3 A payment of $450 from East Co has been received on 30 October. The payment relates
to a balance that had previously been written off as irrecoverable by North Co.
35 What value for receivables should appear in the statement of financial position of North Co at
31 October 20X7?
A $432,733.50
B $432,772.50
C $433,222.50
D $433,513.50
(2 marks)
36 What is the total amount that should appear in the statement of profit or loss for irrecoverable
debts expense at 31 October 20X7?
A $7,522.50
B $7,852.50
C $7,891.50
D $8,302.50
(2 marks)

37 A company has a brought forward payables balance of $308,600 Cr. The following control
account has been prepared by a trainee accountant.
PAYABLES LEDGER CONTROL ACCOUNT
$ $
Opening balance 308,600 Credit purchases 337,200
Interest payable on overdue 3,600 Cash purchases 55,670
amounts
Contras against credit balance in 1,400 Goods returned by customers 2,400
receivable ledger
Cash paid 222,340 Discounts received 4,900
Closing balance 135,770
535,940 535,940
What should the closing balance be when all the errors made in preparing the payables ledger
control account have been corrected?
A $202,440
B $420,760
C $470,430
D $472,830
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

38 Claire is trying to reconcile the list of receivables balances with the balance on the receivables
control account.
Which of the following would cause a difference between the total of the list of receivables
balances and the balance on the receivables control account?
1 An invoice for $456 was entered as $546 in error in the sales day book
2 A credit note for $150 was omitted from the sales day book, but was credited to the
customer's personal account in the receivables ledger
A 1 only
B 2 only
C Both 1 and 2
D Neither 1 or 2
(2 marks)
39 Roger has discounts allowed of $600 in his trial balance.
How should this amount be reported in his financial statements?
A $600 Cr to purchases
B $600 Dr to purchases
C $600 Dr to expenses
D $600 Dr to other income
(2 marks)
40 Angus received a statement of account from a supplier, Aberdeen, showing a balance to be paid
of $14,560 at 31 August 20X1. Angus's payables ledger account for Aberdeen shows a balance
due to Aberdeen of $12,160.
Investigation reveals the following.
1 A credit note received by Angus for goods returned to Aberdeen has been incorrectly
recorded in Angus's books as $4,200 instead of $2,400. The credit note is correctly
recorded on the statement from Aberdeen.
2 Aberdeen has allowed Angus a cash discount of $150 which has not yet been recorded in
Angus's ledger account.
What discrepancy remains between Angus's and Aberdeen's records after allowing for these
items?
A $nil
B $150
C $750
D $4,350
(2 marks)
41 Mountain sells goods on credit to Hill. Hill receives a 10% trade discount from Mountain and a
further 5% settlement discount if goods are paid for within 14 days. Hill bought goods with a list
price of $200,000 from Mountain.
What amount should be included in Mountain's receivables ledger for this transaction?
A $180,000
B $190,000
C $171,500
D $171,000
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

42 The following bank reconciliation statement has been prepared by a trainee accountant.
$
Overdraft per bank statement 3,860
Less unpresented cheques 9,160
5,300
Add deposits credited after date (outstanding lodgements) 16,690
Cash at bank as calculated above 21,990

What should be the correct balance per the cash book?

A $21,990 balance at bank as stated
B $3,670 balance at bank
C $11,390 balance at bank
D $3,670 overdrawn
(2 marks)
43 In preparing a company's bank reconciliation statement at 31 March 20X6, the following items
are causing the difference between the cash book balance and the bank statement balance:
1 Bank charges $380
2 Error by bank $1,000 (cheque incorrectly debited to the account)
3 Lodgements not credited $4,580
4 Unpresented cheques $1,475
5 Direct debit $350
6 Cheque paid in by the company and dishonoured $400
Which of these items will require an entry in the cash book?
A 2, 4 and 6
B 1, 5 and 6
C 3, 4 and 5
D 1, 2 and 3
(2 marks)
44 Which of the following items reconciling the balance on the bank ledger account to the balance
shown on the bank statement are referred to as timing differences?
1 Bank charges not recorded in the cash book
2 Interest charged not recorded in the cash book
3 Outstanding lodgements
4 Unpresented cheques
A 1 and 2
B 3 and 4
C 2 and 3
D 1 and 4
(2 marks)
45 Mauritz Co is preparing a bank reconciliation. The bank balance in the general ledger is $540
credit. There are two items that have not yet been dealt with.
1 A cheque for $620 was sent to a supplier but is not yet showing on the bank statement.
2 A bank charge of $28 was charged by the bank, but was not recorded by Mauritz Co.
What is the closing balance on Mauritz Co's bank statement?
A $1,132 overdrawn
B $1,188 overdrawn
C $52 cash at bank
D $108 cash at bank
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

46 The debit side of a company's trial balance totals $800 more than the credit side.
Which one of the following errors would fully account for the difference?
A $400 paid for plant maintenance has been correctly entered in the cash book and
credited to the plant asset account
B Discount received $400 has been debited to discount allowed account
C A receipt of $800 for commission receivable has been omitted from the records
D The petty cash balance of $800 has been omitted from the trial balance
(2 marks)

47 Which of the following calculates a sole trader's closing net assets?

A Opening net assets – drawings + capital introduced + profit
B Opening net assets + drawings + capital introduced + profit
C Opening net assets + drawings – capital introduced – profit
D Opening net assets – drawings – capital introduced + profit
(2 marks)
48 A fire on 30 September destroyed some of a company's inventory and its inventory records. The
following information is available.
$
Inventory at 1 September 318,000
Sales for September 612,000
Purchases for September 412,000
Inventory in good condition at 30 September 214,000
Standard gross profit percentage on sales is 25%.
Based on this information, what is the value of the inventory lost?
A $96,000
B $271,000
C $26,400
D $57,000
(2 marks)

49 Ossie does not keep full accounting records. The last accounts drawn up show that his capital
balance was $51,980. At the year end he calculated that his assets and liabilities at 30 June
20X0 were:
$
Non-current assets 51,300
Inventory 7,770
Receivables 5,565
Payables 3,994
Bank overdraft 3,537
On reviewing his calculations, you note that there were no entries made in relation to rent for
June 20X0 because the rent for June 20X0 was paid on 1 July 20X0. Rent is $500 per month.
What is the value of Ossie's closing capital?
A $51,980
B $56,604
C $57,604
D $63,678
(2 marks)

From the desk of Ghulam Mustafa (FCMA)

PRACTICE QUESTION BANK FFA Fundamental Level

50 Patience is trying to work out her cost of sales for the year ended 31 December 20X9.
She has the following details for supplier and inventory balances.
At 1 January 20X9 At 31 December 20X9
Suppliers $15,264 $16,812
Inventory $6,359 $4,919
In the year to 31 December 20X9, Patience's payments to suppliers totalled $141,324.
What was Patience's cost of sales for the year to 31 December 20X9?
A $149,231
B $144,312
C $142,872
D $141,432

(2 marks)

From the desk of Ghulam Mustafa (FCMA)