Free ACCA Mock Test 127 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
Sections: Financial Accounting · Applaa proprietary paper — free to download and print
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Applaa ACCA Mock Test 127
applaa-acca-mock-127.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Before correcting the year-end errors, the draft profit of Aura Goods Ltd was £120,000. An error was discovered: Closing inventory was overstated by £22,000. What is the revised profit after correcting this error?
- A.£142,000
- B.£98,000
- C.£120,000 (no effect on profit)
- D.£76,000
✓ Worked Explanation
Core Concept: Impact of Inventory Errors on Profit The relationship between inventory and profit is one of the most important concepts in financial accounting. Closing inventory is deducted from Cost of Sales. If closing inventory is overstated, Cost of Sales is *understated*, which means Gross Profit is *overstated*. Correcting the overstatement increases COGS and reduces profit. Step-by-Step Resolution: 1. Recall the COGS Formula: Cost of Sales = Opening Inventory + Purchases Closing Invent
For the last quarter, Swift Logistics Ltd had net credit sales of £8,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £4,800. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£800 Payable
- B.£800 Reclaimable
- C.£1,600 Payable
- D.£640 Payable
✓ Worked Explanation
Core Concept: VAT Return - Output VAT vs. Input VAT A VAT-registered business acts as a tax collector for HMRC. It charges Output VAT on sales and reclaims Input VAT on purchases. The *net VAT payable* is the difference: Output VAT Input VAT. Step-by-Step Resolution: 1. Calculate Output VAT (tax charged to customers on sales): - Sales are NET (exc. VAT): £8,000 × 20% = £1,600 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fraction
The trial balance of Atlas Transport Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £3,600 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
An entity purchased a machine on 1 January Year 1 for £12,000. The residual value of the machine is estimated to be £1,200 with an estimated useful life of 10 years. The entity uses the straight-line method of depreciation. What is the carrying value (net book value) of the machine on 31 December Year 2?
- A.£10,920
- B.£9,840
- C.£8,640
- D.£9,720
✓ Worked Explanation
Core Concept: Straight-Line Depreciation The straight-line method spreads the depreciable amount (Cost Residual Value) equally over the asset's useful life. The same charge is recognised in *every* period. After 2 complete years, two annual depreciation charges are deducted from the original cost. Step-by-Step Resolution: 1. Calculate Annual Depreciation: (Cost Residual Value) ÷ Useful Life = (£12,000 £1,200) ÷ 10 years = £1,080 per year 2. Calculate Accumulated Depreciation at 31 Dec
For the last quarter, Falcon Engineering Ltd had net credit sales of £42,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £25,200. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£4,200 Payable
- B.£4,200 Reclaimable
- C.£8,400 Payable
- D.£3,360 Payable
✓ Worked Explanation
Core Concept: VAT Return - Output VAT vs. Input VAT A VAT-registered business acts as a tax collector for HMRC. It charges Output VAT on sales and reclaims Input VAT on purchases. The *net VAT payable* is the difference: Output VAT Input VAT. Step-by-Step Resolution: 1. Calculate Output VAT (tax charged to customers on sales): - Sales are NET (exc. VAT): £42,000 × 20% = £8,400 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fraction
For the last quarter, Zephyr Services LLP had net credit sales of £250,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £150,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£25,000 Payable
- B.£25,000 Reclaimable
- C.£50,000 Payable
- D.£20,000 Payable
✓ Worked Explanation
Core Concept: VAT Return - Output VAT vs. Input VAT A VAT-registered business acts as a tax collector for HMRC. It charges Output VAT on sales and reclaims Input VAT on purchases. The *net VAT payable* is the difference: Output VAT Input VAT. Step-by-Step Resolution: 1. Calculate Output VAT (tax charged to customers on sales): - Sales are NET (exc. VAT): £250,000 × 20% = £50,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
Nexus Media plc completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £54,000, and 2) Had the exterior of the existing office block repainted for £5,400. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£54,000), Repainting: Revenue Expenditure (£5,400)
- C.Warehouse system: Revenue Expenditure (£54,000), Repainting: Capital Expenditure (£5,400)
- 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 (£54,000): - This is a *new* asset installed to generate future economic benefits. I
The sole trader of Nova Tech Solutions Ltd took goods costing £3,000 from the business for personal use. These goods had a selling price of £4,500. What is the correct double entry to record this transaction?
- A.Debit Drawings £3,000, Credit Purchases £3,000
- B.Debit Drawings £4,500, Credit Revenue £4,500
- C.Debit Purchases £3,000, Credit Drawings £3,000
- D.Debit Inventory £3,000, Credit Drawings £3,000
✓ Worked Explanation
Core Concept: Owner's Drawings of Inventory at Cost When a sole trader takes goods from the business for personal use, this is treated as drawings - a withdrawal of capital by the owner. The key rule is that drawings of goods are always valued at cost price, never at selling price. Step-by-Step Resolution: 1. Identify the Economic Event: The owner has taken goods worth £3,000 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£3,000),
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Paper Info
- Exam
- ACCA
- Mock number
- 127 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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