© GTG Mock Exam: 1

ALL FIFTY questions are compulsory and MUST be attempted

1. A bank reconciliation statement is prepared to know the causes for the difference between the:

A Balances as per cash column of cash book and the bank statement
B Balance as per bank column of cash book and the bank statement
C Balance as per bank column of cash book and balances as per cash column of cash book
D None of the above

2. While preparing the financial statements for the year ended 31 December 20X9, the accountant of Hedra
Ltd found out that there was an error in the valuation of closing inventory of the previous year. In the
previous year, closing inventory was valued more by $30,000.

As a result of this error:

A Previous year’s profit is overstated and current year’s profit is also overstated
B Previous year’s profit is understated and current year’s profit is overstated
C Previous year’s profit is understated and current year’s profit is also understated
D Previous year’s profit is overstated and current year’s profit is understated

3. Which ONE of the following items can be classified as a capital expenditure?

A Purchase of a goods
B Cost of repair
C Wages paid for installation of machinery
D Rent of a factory

4. Which of the following explain the dual effect when inventory which cost $2,000 is sold for $2,500 (the
customer paying immediately with a cheque )

A Assets (cash at bank) increases by $500; assets (inventory) decreases by $2,000; Capital (profit
earned for the proprietor) increases by $1,500.
B Assets (cash at bank) increases by $500; assets (inventory) decreases by $2,000; Capital (profit
earned for the proprietor) increases by $500.
C Assets (cash at bank) increases by $500; assets (inventory) decreases by $2,000; Capital (profit
earned for the proprietor) increases by $2,500.
D Assets (cash at bank) increases by $2,500; assets (inventory) decreases by $2,000; Capital (profit
earned for the proprietor) increases by $500.

5. The allowance for receivables in the ledger of Crown Ltd at 31 October 20X8 was $11,000. During the year
ended 31 October 20X9 bad debts of $7,000 were written off. Receivable balances at 31 October 20X9
were $140,000 and the company policy is to have an allowance for receivables of 5%.

What is the charge for bad debts and change in the allowance for receivables in the income
statement for the year ended 31 October 20X9?

A $4,000
B $3,000
C $7,000
D None of the above

6. On 30 June 20X8, electricity ledger account had an accrual of $400. During the financial year electricity
invoices totaling $5,000 were paid, including an invoice for $900 for the quarter ended 31 May 20X9.

What is the charge to the income statement for electricity expenses for the year ended 30 June
20X9?

A $5,300
B $5,100
C $5,000
D $5,500
2: Mock Exam © GTG

7. On 1 June 20X9 Chamberlain Ltd sold a machine for $11,000. The machine was purchased on 1 June 20X5
at a cost of $40,000. The company depreciates the machine at 20% per annum on a straight line basis, with
a full year being charged in the year of acquisition and none in the year of disposal.

What is the profit or loss on disposal for the year ended 31 December 20X9?

A Profit $1,668
B Loss $1,668
C Profit $3,000
D Loss $3,000

8. Cargo Ltd uses the weighted average cost formula for valuing inventories. On 1 April 20X9 there were 80
units in inventory valued at $17 each. On 6 April 20X9, 30 units were purchased for $19 each; and on 20
April 20X9, 45 units were purchased for $20 each. On 25 April 20X9, 100 units were sold for $3,000.

Calculate the value of the closing inventories as on at 30 April.

A $1,004
B $1,826
C $1,360
D $2,830

9. If the owner of a business takes goods from inventory for his own personal use, the accounting
concept to be applied for this transaction is:

A Prudence concept
B Capitalisation concept
C Money measurement concept
D Separate entity concept

10. During the year $10,000 rent was received. At the beginning of the year, the tenant owed $2,000, at the end
of the year, the tenant owed $1,000.

Calculate the amount of rent received to be included in the current year’s income statement.

A $8,000
B $9,000
C $10,000
D $11,000

11. Which of the following is not an accounting concept?

A Prudence
B Consistency
C Depreciation
D Accruals

12. A sole trader has net assets of $47,500 at 30 April 20X9. During the year to 30 April 20X9, he introduced
$24,500 additional capital into the business. Profits for the year were $20,000, of which he withdrew
$10,500.

Calculate the balance in the capital account as at 1 May 20X8.

A $7,500
B $13,500
C $32,500
D $41,500
© GTG Mock Exam: 5

13. The cash book of Cairo Ltd shows a balance of $7,470 at 30 April 20X8. Comparison with the bank
statement at the same date reveals the following differences:

$
Unpresented cheques 2,520
Bank charges not in cash book 150
Receipts not yet credited by the bank 1,410
Cheque received and dishonoured which 420
are not recorded in cash book

Calculate the correct balance on the cash book as at 30 April 20X8.

A $4,380
B $6,900
C $7,740
D $9,420

14. The net profit of Carbon Ltd was calculated as being $25,500. It was later discovered that capital
expenditure of $7,500 had been treated as revenue expenditure, and revenue receipts of $3,500 had been
treated as capital receipts.

The correct net profit should have been:

A $14,500
B $21,600
C $29,500
D $36,500

15. When a trial balance was prepared, two ledger accounts were omitted:
 Carriage outward $3,075
 Carriage inward $3,750

In order to ensure that the trial balance agrees, a suspense account was opened.

What was the balance on the suspense account?

A Debit $675
B Credit $675
C Debit $6,825
D Credit $6,825

16. A business achieves a margin of 25% on sales. Opening inventory was $9,000, closing inventory was
$14,000 and purchases for the period totaled $150,000.

Calculate the sales for the period.

A $193,333
B $181,250
C $206,615
D $200,000

17. Which of the following methods of valuing inventory are allowed under IAS 2?

(i) LIFO
(ii) Average cost
(iii) FIFO
(iv) Replacement cost

A (i), (ii), (iii), (iv)

B (i), (ii), (iv)
C (iii) and (iv)
D (ii) and (iii)
6: Mock Exam © GTG

18. An invoice from a supplier of machinery purchased has been debited to the repairs account.

This error is known as:

A An error of commission
B An error of prime entry
C A transposition error
D An error of principle

19. The receivable ledger control account of trader showed following wrong details for the year ended 20X8.

Receivable ledger control account

Dr Cr
Date Particulars $ Date Particulars $
01/01/20X8 Balance b/d 142,500 31/12/20X8 Cash received from 90,000
credit customers
31/12/20X8 Credit sales 37,540 Contras against 750
payables
Discounts allowed 2,337
Bad debts written off 1,305
Sales returns 2,805 Balance c/d 95,737
Total 186,487 Total 186,487

Calculate the correct closing balance in the receivable account after rectification of errors (if any).

A $85,197
B $86,397
C $81,255
D $82,842

20. At the beginning of the year, allowance for receivables was $2,000. At the end of the year when receivables
were $37,000, a specific allowance was made for the whole of Derby’s debt of $1,000 and for 80% of
Craig’s debt of $2,000. It was decided to make a general allowance of 2% of remaining debts.

What was the closing balance on the allowance for receivables account?

A $1,280
B $3,280
C $3,288
D $5,280

21. When a trial balance was prepared, land of $100,000 was omitted. To make the trial balance agree, a
suspense account was opened.

What was the balance on the suspense account?

A Nil
B Debit $100,000
C Credit $100,000
D Debit $200,000

22. Julie has bank balance of $11,000, trade payables of $5,000, short-term loan of $10,000 and land of
$50,000.

What is the capital balance of Julie?

A $46,000
B $56,000
C $66,000
D $6,000
© GTG Mock Exam: 7

23. Kate acquired a machine for use in her business. The invoice analyses the total amount due as follows:

$
Cost of machinery 3,000
Installation charges 250
Maintenance for first year 500
Total 3,750

Compute Kate’s capital expenditure

A $3,750
B $3,250
C $3,500
D $3,000

24. The total of the balances on the individual supplier’s accounts in Charlie’s purchase ledger is $247,947. The
balance on the payables control account is $230,883. At the time of reconciliation, Charlie discovered that
an invoice for $14,064 has been posted twice to the correct supplier’s account and also a payment of
$4,818 which he had made by standing order has been omitted to be recorded.

What amount should be reported in Charlie’s SOFP for trade payables?

A $216,819
B $226,065
C $230,883
D $244,947

25. Craig bought a new car for $19,125. He paid for the new car by taking out a loan of $12,000 and trading in
his old car. The old car originally cost $12,750 and had been depreciated by $6,222 at the time of the trade
in.

What is the profit on disposal of the old car?

A $153
B $597
C $903
D $750

26. Which one of the following is a reason for preparing sales ledger reconciliation?

A To calculate the discounts received

B To identify old pending debts
C To calculate the discounts allowed
D To confirm the accuracy of postings

27. On 1 March 20X7 Mark took out a loan for $100,000. The loan is to be repaid in ten equal annual
installments, with the first repayment falling due on 1 March 20X9.

The loan should be reported on Mark’s statement of financial position as at 30 April 20X7 as:

A $100,000 as a current liability

B $100,000 as a long term liability
C $10,000 as a current liability and $90,000 as a long term liability
D $20,000 as a current liability and $80,000 as a long term liability

28. An imprest system:

A Helps in maintaining the cash book

B Helps in preparing a bank reconciliation statement
C Helps to control petty cash
D Is part of computerised accounting
8: Mock Exam © GTG

29. John, an accountant is completing the extended trial balance of his company. He is not sure where to
include balances for depreciation expense and accumulated depreciation.

Into which columns should these balances be extended?

Depreciation expense Accumulated depreciation

A Income Statement debit Income Statement credit
B SOFP credit SOFP debit
C SOFP debit Income Statement credit
D Income Statement debit SOFP credit

30. The business receives an invoice from a supplier for $2,800, which is mislaid before any entry is made,
resulting in the transaction being left out of the books entirely
This is an:

A Error of transposition
B Error of omission
C Error of principle
D Error of commission

31. When entering invoices in the purchase day book, John recorded an invoice for $126 for machinery
expenses as $162.

The day book has been posted to the nominal ledger.

What entry will correct the error?

A Dr Machinery expenses $36

Cr Payables control $36

B Dr Payables control $36

Cr Machinery expenses $36

C Dr Machinery expenses $288

Cr Payables control $288

D Dr Payables control $288

Cr Machinery expenses $288

32. Kieron is an antiques dealer. His inventory includes a clock which was purchase at a cost of $15,800. He
expects to spend $700 on repairing the clock, which will mean that he will be able to sell it for $26,000.

At what value should the clock be included in Kieron’s inventory?

A $15,100
B $15,800
C $25,300

D $8,000
© GTG Mock Exam: 9

33. Financial statements present a "true and fair view" when:

A They are presented in accordance with the formats prescribed

B Assets and liabilities are recorded at fair values
C They have been reviewed by the chief accountant
D They are prepared in accordance with generally accepted accounting practice

34. The balance on Cook’s payables ledger control account is $63,108. Cook has discovered certain
transactions which were not recorded in his books of accounts:

(i) a settlement discount of $106 received from a supplier; and

(ii) a supplier’s invoice for $1,244.

What amount should be reported for payables on Cook’s statement of financial position?

A $61,758
B $61,970
C $64,458
D $64,246

35. Barry is a sole trader, he has calculated a cost of sales figure for the year which is $342,000. Barry paid
$8030 into the business bank account for goods withdrawn for private use and this amount has been
included within sales. The figure of $8,030 was calculated by adding a mark-up of 10% to the cost of the
goods. His gross profit margin on all other goods sold was 20%.

What is the total figure of sales for the year?

A $401,640
B $402,370
C $418,375
D $426,405

36. Kate is preparing an extended trial balance for the year ended 31 March 20X9. After extending and
completing the extended trial balance, the totals are:

Income Statement Columns SOFP Columns

Dr Cr Dr Cr
$ $ $ $
10,000 15,000 25,000 40,000

What is Kate’s profit or loss for the year to 31 March 20X9?

A Profit of $5,000
B Loss of $5,000
C Profit of $15,000
D Loss of $15,000

37. Henry’s trial balance at 30 September 20X9 includes the following balances:

Trade receivables $75,500

Receivables allowance $4,500

How these balances should be reported in Henry’s statement of financial position for the year ended
30 September 20X9?

A An asset of $71,000 (net)

B An asset of $75,500 and a liability of $4,500 (separately)
C A liability of $71,500 (net)
D A liability of $75,500 and an asset of $4,500 (separately)
10: Mock Exam © GTG

38. Robert’s draft accounts reported a profit of $23,710. However, an accrual of $796 was treated as a
prepayment, and a prepayment of $960 was incorrectly recorded as $1,044.

What is the correct profit?

A $22,034
B $22,830
C $22,998
D $25,386

39. The bank column of a cash book showed a closing balance of $1,100 (credit). Unpresented cheques
amount to $3,000 and receipts not deposited at the bank amounted to $1,000. The bank statement balance
was?

A $3,100
B $900
C $2,900
D $5,100 (overdrawn)

40. A trial balance contains the following:

$
Opening inventory 2,000
Closing inventory 4,000
Purchases 20,000
Purchases returned 400
Carriage inwards 3,000
Prompt payment discounts received 1,600

Calculate the cost of sales.

A $17,600
B $19,000
C $20,600
D $24,600

41. Airtech sells goods to Frontech at a selling price of $1,500 before discounts and sales tax. Frontech is given
a trade discount of 15% and offered an additional discount of 5% if the payment is made within 7 days.
Frontech makes the payment within 10 days. The rate of sales tax is 18%

Calculate the amount of the invoice raised by Airtech.

A $1,500
B $1,204
C $1,046
D $1,505

42. Mr.Smith, a sole trader is running a retail business of fashion garments. During the year ended 31
December 2009, he made the following payments for insurance:

1 January 2009 $1,200 for a period of 6 months to 30 June 2009

1 July 2009 $3,500 for a period of 12 months to 30 June 2010

What is the charge for the insurance payments to be shown in income statement for the year ended
31 December 2009?

A $2,950
B $4,700
C $3,500
D $6,450
© GTG Mock Exam: 11

43. The accountant of Cera Ltd has prepared the following bank reconciliation statement as at 30 April 20X9.
However he is unable to reconcile the cash book balance.

$
Overdraft in bank statement 59,100
Add: Deposits not credited 65,400
125,400
Less: Outstanding cheques (5,850)
Overdraft in cash book 119,550

Assuming the bank statement balance of $59,100 to be correct, what should the cash book balance
be?

A $118,650 overdrawn, as stated

B $130,350 overdrawn
C $450 overdrawn
D $12,150 cash at bank

44. Which ONE of the following would not be included in the cost of inventory?

A Sales force salaries

B Transport costs
C Import duties
D Purchase price

45. Andy purchased a machine for $180,000 on 1 July 20X9. The estimated useful life is eight years with a
residual value of $20,000. Andy uses the straight line method for depreciation and charges depreciation on
a monthly basis.

What is the charge for depreciation for the year ended 31 December 20X9?

A $10,000
B $20,000
C $22,500
D $11,250

46. Nancy does not keep a full set of business records, but the following information is available for the month
of June 20X9:

$
Trade receivables, 1 June 20X9 1,600
Trade receivables, 30 June 20X9 1,150
Credit sales 13,600
Cash received from customers 13,460
Bad debt written off 80
General allowance for doubtful debts set 200
up at 30 June 20X9

Assuming no other transactions, how much discount was allowed to customers during the month?

A $480
B $560
C $680
D $760
12: Mock Exam © GTG

47. Wallace has been notified that a customer has been declared bankrupt. Wallace Ltd had previously made
an allowance for this receivable.

What is the correct double entry to record the above?

Debit Credit
A Receivable account Bad debts
B Bad debts Receivable account
C Allowance for receivables Receivable account
D The receivable account Allowance for receivables

48. On 1 January 2005 Delta Ltd purchased a plant.

The purchase invoice showed

$
Cost of plant 48,000
Delivery to factory 400
One year warranty covering breakdown during 2005 800
49,200

Modifications to the factory building costing $2,200 were necessary to enable the plant to be installed.

What amount should be capitalised for the plant in the company’s records?

A $51,400
B $48,000
C $50,600
D $48,400

49. Which of the following statement applies to the qualitative characteristic of 'understandability' in
relation to information presented in financial statements?

A Users should be willing to study the information with reasonable diligence

B Users are expected to have significant business knowledge
C Financial statements should not complex matters
D Financial statements should be not contain any material misstatement

50. Parker, a lawyer, keeps her accounting records on a cash basis. During 2010, Parker collected $200,000 in
fees from clients. At 31 December 2009, Parker had accounts receivable of $40,000. At 31 December
2010, Parker had accounts receivable of $60,000, and unearned fees of $5,000.

On an accrual basis, what was Parker’s service revenue for 2010?

A $175,000
B $180,000
C $215,000
D $225,000