Free ACCA Mock Test 116 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 116
applaa-acca-mock-116.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
A retail store, Genesis Enterprises Ltd, purchased inventories for a gross total of £12,500 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Genesis Enterprises Ltd?
- A.Net Cost: £10,416, VAT Recoverable: £2,084
- B.Net Cost: £12,500, VAT Recoverable: £2,500
- C.Net Cost: £10,000, VAT Recoverable: £2,500
- D.Net Cost: £10,416, VAT Recoverable: £0 (VAT is non-recoverable on inventories)
✓ Worked Explanation
Core Concept: Extracting VAT from a VAT-Inclusive (Gross) Price When a price is VAT-inclusive, you must use the VAT fraction to extract the tax element. You cannot simply multiply the gross price by 20% - that would over-calculate the VAT because you would be applying the rate to an amount that already contains VAT. Step-by-Step Resolution: 1. Identify the Problem: The gross (VAT-inclusive) price is £12,500. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £12,
For the year ended 31 December, Falcon Engineering Ltd paid rent of £3,600. At the year-end, the company had an outstanding electricity invoice of £300 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £300, Credit Electricity Expense £300
- B.Debit Electricity Expense £300, Credit Accruals (Liabilities) £300
- C.Debit Cash £300, Credit Electricity Expense £300
- D.Debit Electricity Expense £300, Credit Prepayments (Assets) £300
✓ Worked Explanation
Core Concept: Accruals (Expenses Incurred but Not Yet Paid) Under the accruals concept (IAS 1), expenses must be recognised in the period they are *incurred*, not when they are *paid*. An accrual is a current liability - the business owes this amount but hasn't yet paid the invoice. Step-by-Step Resolution: 1. Identify the Issue: The electricity expense of £300 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this year
Crest Hotels Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £48,000, and 2) Had the exterior of the existing office block repainted for £4,800. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£48,000), Repainting: Revenue Expenditure (£4,800)
- C.Warehouse system: Revenue Expenditure (£48,000), Repainting: Capital Expenditure (£4,800)
- D.Both projects are Revenue Expenditure.
✓ Worked Explanation
Core Concept: Capital Expenditure vs. Revenue Expenditure Capital Expenditure (CapEx) creates or enhances a long-term non-current asset and is capitalised on the balance sheet, then depreciated over its useful life. Revenue Expenditure (RevEx) relates to day-to-day operations, maintenance, or restoration and is expensed immediately in profit or loss. Step-by-Step Resolution: 1. Warehouse Conveyor Belt System (£48,000): - This is a *new* asset installed to generate future economic benefits. I
For the year ended 31 December, Zephyr Services LLP paid rent of £14,400. At the year-end, the company had an outstanding electricity invoice of £1,200 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,200, Credit Electricity Expense £1,200
- B.Debit Electricity Expense £1,200, Credit Accruals (Liabilities) £1,200
- C.Debit Cash £1,200, Credit Electricity Expense £1,200
- D.Debit Electricity Expense £1,200, Credit Prepayments (Assets) £1,200
✓ Worked Explanation
Core Concept: Accruals (Expenses Incurred but Not Yet Paid) Under the accruals concept (IAS 1), expenses must be recognised in the period they are *incurred*, not when they are *paid*. An accrual is a current liability - the business owes this amount but hasn't yet paid the invoice. Step-by-Step Resolution: 1. Identify the Issue: The electricity expense of £1,200 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
A retail store, Meridian Distributors Ltd, purchased inventories for a gross total of £25,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Meridian Distributors Ltd?
- A.Net Cost: £20,833, VAT Recoverable: £4,167
- B.Net Cost: £25,000, VAT Recoverable: £5,000
- C.Net Cost: £20,000, VAT Recoverable: £5,000
- D.Net Cost: £20,833, VAT Recoverable: £0 (VAT is non-recoverable on inventories)
✓ Worked Explanation
Core Concept: Extracting VAT from a VAT-Inclusive (Gross) Price When a price is VAT-inclusive, you must use the VAT fraction to extract the tax element. You cannot simply multiply the gross price by 20% - that would over-calculate the VAT because you would be applying the rate to an amount that already contains VAT. Step-by-Step Resolution: 1. Identify the Problem: The gross (VAT-inclusive) price is £25,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £25,
The trial balance of Atlas Transport Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £11,000 was entered into the repairs and maintenance account. What type of error has occurred?
- A.Error of Omission
- B.Error of Commission
- C.Error of Principle
- D.Error of Reversal
✓ Worked Explanation
Core Concept: The Six Types of Accounting Errors There are six classic types of bookkeeping errors. Some cause the trial balance to disagree; others do not. This question tests recognition of errors that *hide* behind a balanced trial balance - meaning both sides are still equal, but the accounting treatment is fundamentally wrong. Step-by-Step Resolution: 1. Analyse the Error: Equipment (a non-current asset / capital expenditure) was posted to Repairs & Maintenance (a revenue expense accou
A retail store, Aura Goods Ltd, purchased inventories for a gross total of £4,800 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Aura Goods Ltd?
- A.Net Cost: £4,000, VAT Recoverable: £800
- B.Net Cost: £4,800, VAT Recoverable: £960
- C.Net Cost: £3,840, VAT Recoverable: £960
- D.Net Cost: £4,000, VAT Recoverable: £0 (VAT is non-recoverable on inventories)
✓ Worked Explanation
Core Concept: Extracting VAT from a VAT-Inclusive (Gross) Price When a price is VAT-inclusive, you must use the VAT fraction to extract the tax element. You cannot simply multiply the gross price by 20% - that would over-calculate the VAT because you would be applying the rate to an amount that already contains VAT. Step-by-Step Resolution: 1. Identify the Problem: The gross (VAT-inclusive) price is £4,800. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £4,80
Alpha Properties Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £140,000, and 2) Had the exterior of the existing office block repainted for £14,000. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£140,000), Repainting: Revenue Expenditure (£14,000)
- C.Warehouse system: Revenue Expenditure (£140,000), Repainting: Capital Expenditure (£14,000)
- D.Both projects are Revenue Expenditure.
✓ Worked Explanation
Core Concept: Capital Expenditure vs. Revenue Expenditure Capital Expenditure (CapEx) creates or enhances a long-term non-current asset and is capitalised on the balance sheet, then depreciated over its useful life. Revenue Expenditure (RevEx) relates to day-to-day operations, maintenance, or restoration and is expensed immediately in profit or loss. Step-by-Step Resolution: 1. Warehouse Conveyor Belt System (£140,000): - This is a *new* asset installed to generate future economic benefits.
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Paper Info
- Exam
- ACCA
- Mock number
- 116 of 250
- Questions
- 20
- Format
- Multiple Choice (MCQ)
- Sections
- 1
- Audience
- Accountancy students
- Timing
- Exams: Mar, Jun, Sep, Dec
- Copyright
- Applaa Proprietary
Sections Covered
- Financial Accounting
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