ACCA Applied Knowledge (BT, MA, FA) · Financial Accounting (FA)

Preparing financial statements

16 practice questions, each with the answer and an explanation.

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Random questions from this topic, one at a time. You see the answer and the explanation straight after each one.

All 16 questions

  1. After the end of the reporting period but before the financial statements are authorised for issue, a major customer is declared insolvent. The customer owed £35,000 at the year end, and the insolvenc…
  2. A company declares an ordinary dividend of £40,000 after the year end but before the financial statements are authorised. How is this treated under IAS 10?
  3. A company with 400,000 ordinary shares of £1 each makes a rights issue of 1 new share for every 4 held, at £1.50 per share. All rights are taken up. What amount is credited to the share premium accoun…
  4. A company makes a bonus issue of 1 share for every 5 held out of its share premium account. It has 500,000 £1 ordinary shares and share premium of £180,000. What is the share premium account balance a…
  5. A company issued a £200,000 8% loan note on 1 September. The year end is 31 December and no interest has yet been paid. What finance cost is recorded for the year and what is the year-end accrual?
  6. A company's retained earnings at the start of the year were £120,000. Its profit for the year was £45,000, it paid dividends of £12,000 during the year and it transferred £8,000 to a revaluation surpl…
  7. A company's tax charge for the year is estimated at £15,000. The previous year's tax provision was £12,000, and the tax finally agreed and paid was £12,800. What is the income tax expense shown in the…
  8. A sole trader began the year with capital of £40,000. During the year the trader made a profit of £25,000, withdrew £9,000 for personal use and paid a further £5,000 of private funds into the business…
  9. A retailer sells goods at a mark-up of 25% on cost. Cost of sales for the year was £120,000. What are sales and the gross profit margin?
  10. A sole trader with incomplete records has these figures: opening trade receivables £5,000; closing trade receivables £7,200; cash received from customers £61,800. All sales are on credit and there wer…
  11. A fire destroyed a trader's inventory. Opening inventory was £18,000, purchases to the date of the fire were £72,000 and sales were £100,000. The trader earns a constant gross profit margin of 25% on…
  12. A customer owes £4,000 and pays £3,880 by cheque in full settlement under an early payment discount. What is the double entry?
  13. A company has revenue £500,000; opening inventory £40,000; purchases £280,000; closing inventory £55,000; wages £60,000; depreciation £20,000; irrecoverable debts £5,000; and loan interest £8,000. Wha…
  14. A sales ledger control account has an opening balance of £38,400. During the month: credit sales £212,600; cash received £198,300; discounts allowed £2,900; sales returns £5,100; irrecoverable debts w…
  15. A trial balance was made to agree by opening a suspense account. Later two errors were found: (i) rent paid of £900 was credited to the bank correctly but debited to the rent account as £90; (ii) cash…
  16. A sole trader with incomplete records had net assets of £52,000 at the start of the year and £68,000 at the end. During the year the trader took drawings of £14,000 and introduced £6,000 of new capita…

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