Free ACCA Mock Test 163 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 163
applaa-acca-mock-163.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
A retail store, Falcon Engineering Ltd, purchased inventories for a gross total of £11,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Falcon Engineering Ltd?
- A.Net Cost: £9,166, VAT Recoverable: £1,834
- B.Net Cost: £11,000, VAT Recoverable: £2,200
- C.Net Cost: £8,800, VAT Recoverable: £2,200
- D.Net Cost: £9,166, 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 £11,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £11,
A retail store, Nexus Media plc, purchased inventories for a gross total of £16,500 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Nexus Media plc?
- A.Net Cost: £13,750, VAT Recoverable: £2,750
- B.Net Cost: £16,500, VAT Recoverable: £3,300
- C.Net Cost: £13,200, VAT Recoverable: £3,300
- D.Net Cost: £13,750, 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 £16,500. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £16,
A grocery distributor, Titan Steel plc, recorded net sales of £19,200 for standard-rate products (20% VAT) and £9,600 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£3,840
- B.£5,760
- C.£1,920
- D.£0 (all food products are exempt from output VAT)
✓ Worked Explanation
Core Concept: Zero-Rated vs. Standard-Rated VAT Supplies In UK VAT, there are multiple categories of supply: standard-rated (20%), zero-rated (0%), reduced-rated (5%), and exempt. Both standard-rated and zero-rated are *taxable* supplies, but zero-rated generates £0 output VAT. Step-by-Step Resolution: 1. Standard-Rate Sales (£19,200): Output VAT = £19,200 × 20% = £3,840 2. Zero-Rate Sales (£9,600): Output VAT = £9,600 × 0% = £0 3. Total Output VAT = £3,840 + £0 = £3,840 Common Mistakes to Avo
The trial balance of Omega Foodstuffs plc balanced perfectly. However, it was later discovered that a purchase of equipment costing £4,800 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
The trial balance of Falcon Engineering Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £14,000 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
The sole trader of Genesis Enterprises Ltd took goods costing £4,200 from the business for personal use. These goods had a selling price of £6,300. What is the correct double entry to record this transaction?
- A.Debit Drawings £4,200, Credit Purchases £4,200
- B.Debit Drawings £6,300, Credit Revenue £6,300
- C.Debit Purchases £4,200, Credit Drawings £4,200
- D.Debit Inventory £4,200, Credit Drawings £4,200
✓ 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 £4,200 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£4,200),
The sole trader of Falcon Engineering Ltd took goods costing £4,200 from the business for personal use. These goods had a selling price of £6,300. What is the correct double entry to record this transaction?
- A.Debit Drawings £4,200, Credit Purchases £4,200
- B.Debit Drawings £6,300, Credit Revenue £6,300
- C.Debit Purchases £4,200, Credit Drawings £4,200
- D.Debit Inventory £4,200, Credit Drawings £4,200
✓ 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 £4,200 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£4,200),
A bookkeeper at Omega Foodstuffs plc prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £900. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £450 was completely omitted from the books.
- B.A cash payment of £450 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £450 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £450 was debited to the Purchase Returns account and credited to Receivables Control.
✓ Worked Explanation
Core Concept: Trial Balance Errors and the Suspense Account A trial balance fails to agree when a transaction is posted with unequal debits and credits. The difference is placed in a suspense account until the error is found and corrected. Errors that cause the trial balance to fail include: single-sided entries, casting errors, and transposition errors on one side only. Step-by-Step Resolution: 1. Analyse the Symptom: Credits exceed debits by £900. This means the debit side is £900 *too small*
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Paper Info
- Exam
- ACCA
- Mock number
- 163 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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