ACCA paper BA3 CIMA exam pracitce kit

BA3 FUNDAMENTALS OF FINANCIAL ACCOUNTING CIMA EXAM PRACTICE KIT S UB J ECT B A3 : F UNDA MEN TA LS OF F INAN C IA L A CCO UN TING British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by: Kaplan Publishing UK Unit The Business Centre Molly Millar’s Lane Wokingham Berkshire RG41 2QZ ISBN: 978-1-78740-179-2 © Kaplan Financial Limited, 2018 The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties Please consult your appropriate professional adviser as necessary Kaplan Publishing Limited, all other Kaplan group companies, the International Accounting Standards Board, and the IFRS Foundation expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials Printed and bound in Great Britain Acknowledgements This Product includes propriety content of the International Accounting Standards Board which is overseen by the IFRS Foundation, and is used with the express permission of the IFRS Foundation under licence All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of Kaplan Publishing and the IFRS Foundation The IFRS Foundation logo, the IASB logo, the IFRS for SMEs logo, the “Hexagon Device”, “IFRS Foundation”, “eIFRS”, “IAS”, “IASB”, “IFRS for SMEs”, “IFRS”, “IASs”, “IFRSs”, “International Accounting Standards” and “International Financial Reporting Standards”, “IFRIC” and “IFRS Taxonomy” are Trade Marks of the IFRS Foundation Trade Marks The IFRS Foundation logo, the IASB logo, the IFRS for SMEs logo, the “Hexagon Device”, “IFRS Foundation”, “eIFRS”, “IAS”, “IASB”, “IFRS for SMEs”, “NIIF” IASs” “IFRS”, “IFRSs”, “International Accounting Standards”, “International Financial Reporting Standards”, “IFRIC”, “SIC” and “IFRS Taxonomy” Further details of the Trade Marks including details of countries where the Trade Marks are registered or applied for are available from the Foundation on request P.2 CONTENTS Page Syllabus Guidance, Learning Objectives and Verbs P.5 Objective tests P.9 Syllabus outline – BA3 P.11 Learning outcomes and indicative syllabus content P.12 Section Objective test questions Answers to objective test questions 51 Practice Assessment questions 87 Answers to Practice Assessment questions 101 References 113 This document references IFRS® Standards and IAS® Standards, which are authored by the International Accounting Standards Board (the Board), and published in the 2016 IFRS Standards Red Book Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to mykaplanreporting@kaplan.com with full details Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions P.3 INDEX TO QUESTIONS AND ANSWERS OBJECTIVE TEST QUESTIONS PAGE NUMBER ACCOUNTING PRINCIPES, CONCEPTS AND REGULATIONS: EXPLAIN THE PRINCIPLES AND CONCEPTS OF FINANCIAL ACCOUNTING 51 EXPLAIN THE IMPACT OF THE REGULATORY FRAMEWORK ON FINANCIAL ACCOUNTING 53 54 PREPARE ACCOUNTING RECONCILIATIONS 22 65 PREPARE ACCOUNTING ENTRIES FOR SPECIFIC TRANSACTIONS 25 67 PREPARE ACCOUNTING ADJUSTMENTS 31 71 PREPARE MANUFACTURING ACCOUNTS 39 78 PREPARE FINANCIAL STATEMENTS FOR A SINGLE ENTITY 40 79 IDENTIFY INFORMATION PROVIDED BY ACCOUNTING RATIOS 45 82 CALCULATE BASIC ACCOUNTING RATIOS 46 83 RECORDING ACCOUNTING TRANSACTIONS: PREPARE ACCOUNTING RECORDS PREPARATION OF ACCOUNTS FOR SINGLE ENTITIES: ANALYSIS OF FINANCIAL STATEMENTS: P.4 Section OBJECTIVE TEST QUESTIONS ACCOUNTING PRINCIPLES, CONCEPTS AND REGULATIONS EXPLAIN THE PRINCIPLES AND CONCEPTS OF FINANCIAL ACCOUNTING Which THREE of the following are accounting conventions? A Prudence B Consistency C Depreciation D Accruals Capital maintenance is important for: A the sources of finance B the measurement of profit C the relationship of debt to equity D the purchase of non-current assets If, at the end of the financial year, a an entity makes a charge against the profit for stationery consumed but not yet invoiced, this adjustment is in accordance with the convention of: A materiality B accruals C consistency D objectivity Drag the correct wording from the following list to complete the sentence regarding the historical cost convention The historic cost convention • fails to take account of changing price levels over time • records only past transactions • values all assets at their cost to the business, without any adjustment for depreciation • has been replaced in accounting records by a system of current cost accounting S UB J ECT B A3: F UNDAMEN TA LS OF F INAN C IA L A CCO UN TING Drag and drop the following options to complete the statement below In times of rising prices, the historical cost convention has the effect of _ profits and the statement of financial position asset values Drag and drop options: overstating, understating (the options can be used more than once) Sales revenue should be recognised only when goods and services have been supplied The accounting convention that governs the above is the: 10 A accruals convention B materiality convention C realisation convention D dual aspect convention The term capital maintenance implies that: A the capital of a business should be kept intact by not paying our dividends B a business should invest its profits in the purchase of capital assets C non-current assets should be properly maintained D profit is earned only if the value of an organisation’s net assets or its operating capability has increased during the accounting period The accounting convention that requires non-current assets to be valued at cost less accumulated depreciation, rather than their enforced saleable value, is the A net realisable value convention B prudence convention C realisation convention D going concern convention Which THREE of the following are necessary elements of the stewardship function? A To maximise profits B To safeguard assets C To ensure adequate controls exist to prevent or detect fraud D To prepare the financial accounts E To attend meetings with the bank F To prepare management accounts Which one of the following provides the most appropriate definition of bookkeeping? A To calculate the amount of dividend to pay to shareholders B To record, categorise and summarise financial transactions C To provide useful information to users D To calculate the taxation due to the government OBJE CTIVE TEST QUESTIONS : S EC T I O N 11 Drag and drop the options below into the table provided to identify whether each of the items below would change the capital of a sole proprietor • A payable being paid his account by cheque • Raw materials being purchased on credit • Non-current assets being purchased on credit • Wages being paid in cash Change 12 13 14 No change In accordance with the IASB® Conceptual Framework for Financial Reporting what is the main aim of financial reporting? A To record every financial transaction individually B To maintain ledger accounts for every transaction C To prepare a trial balance D To provide financial information to users of such information The profit of a business may be calculated by using which one of the following formula? A Opening capital – Drawings + Capital introduced – Closing capital B Opening capital + Drawings – Capital introduced – Closing capital C Closing capital + Drawings – Capital introduced – Opening capital D Closing capital – Drawings + Capital introduced – Opening capital Do the comments below relate to management or financial accounting? Drag each comment under the correct heading Management accounting Financial accounting Uses historical data Is a legal requirement Uses both financial and non-financial information Is normally prepared annually 15 Which THREE of the following are qualitative characteristics of financial statements as per the Conceptual Framework for Financial Reporting? A Relevance B Profitability C Comparability D Completeness S UB J ECT B A3: F UNDAMEN TA LS OF F INAN C IA L A CCO UN TING 16 17 18 Select the correct wording to complete each of the following sentences relating to management and financial accounting A Recording all transactions in the books of accounts is an aim of financial/ management accounting B Providing management with detailed analyses of costs is an aim of financial/ management accounting C Presenting the financial results of the organisation by means of recognised statements is an aim of financial/management accounting D Calculating profit is an aim of financial/management accounting Financial accounts differ from management accounts in that they: A are prepared monthly for internal control purposes B contain details of costs incurred in manufacturing C are summarised and prepared mainly for external users of accounting information D provide information to enable the trial balance to be prepared Which of the following statements gives the best definition of the objective of accounting? A To provide useful information to users B To record, categorise and summarise financial transactions C To calculate the taxation due to the government D To calculate the amount of dividend to pay to the shareholders EXPLAIN THE IMPACT OF THE REGULATORY FRAMEWORK ON FINANCIAL ACCOUNTING 19 20 Who issues IFRS® Standards? A The International Auditing and Assurance Standards Board (IAASB® ) B The Stock Exchange C The International Accounting Standards Board (The Board) D The Government Which one of the following is not an information requirement of government departments? A Tax on company profits B Health and safety C Number of employees D Payment of dividends ... Page Syllabus Guidance, Learning Objectives and Verbs P.5 Objective tests P.9 Syllabus outline – BA3 P.11 Learning outcomes and indicative syllabus content P.12 Section Objective test questions