Free ACCA Mock Test 170 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 170
applaa-acca-mock-170.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the year ended 31 December, Genesis Enterprises Ltd paid rent of £10,800. At the year-end, the company had an outstanding electricity invoice of £900 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £900, Credit Electricity Expense £900
- B.Debit Electricity Expense £900, Credit Accruals (Liabilities) £900
- C.Debit Cash £900, Credit Electricity Expense £900
- D.Debit Electricity Expense £900, Credit Prepayments (Assets) £900
✓ 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 £900 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this year
A retail store, Crest Hotels 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 Crest Hotels 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,
Crest Hotels Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £12,000, and 2) Had the exterior of the existing office block repainted for £1,200. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£12,000), Repainting: Revenue Expenditure (£1,200)
- C.Warehouse system: Revenue Expenditure (£12,000), Repainting: Capital Expenditure (£1,200)
- 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 (£12,000): - This is a *new* asset installed to generate future economic benefits. I
The Receivables Ledger Control Account of Pinnacle Consulting Ltd is shown in the diagram. Credit sales of £14,000 were recorded, and cash of £11,200 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£9,800 Debit closing balance
- B.£9,800 Credit closing balance
- C.£21,000 Debit closing balance
- D.£11,200 Credit closing balance
✓ Worked Explanation
Core Concept: Receivables Ledger Control Account The Receivables Ledger Control Account is an asset account that tracks money owed to the business by credit customers. As an asset, it follows the fundamental debit rule: increases are recorded on the debit side and decreases on the credit side. Step-by-Step Resolution: 1. Opening Balance: The account opens with a debit balance of £7,000 - money already owed by customers. 2. Credit Sales (+): New credit sales of £14,000 increase the amount owed,
For the last quarter, Zephyr Services LLP had net credit sales of £12,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £7,200. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£1,200 Payable
- B.£1,200 Reclaimable
- C.£2,400 Payable
- D.£960 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): £12,000 × 20% = £2,400 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fraction
Solar Energy plc completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £8,000, and 2) Had the exterior of the existing office block repainted for £800. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£8,000), Repainting: Revenue Expenditure (£800)
- C.Warehouse system: Revenue Expenditure (£8,000), Repainting: Capital Expenditure (£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 (£8,000): - This is a *new* asset installed to generate future economic benefits. It
The Receivables Ledger Control Account of Omega Foodstuffs plc is shown in the diagram. Credit sales of £5,400 were recorded, and cash of £4,320 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£3,780 Debit closing balance
- B.£3,780 Credit closing balance
- C.£8,100 Debit closing balance
- D.£4,320 Credit closing balance
✓ Worked Explanation
Core Concept: Receivables Ledger Control Account The Receivables Ledger Control Account is an asset account that tracks money owed to the business by credit customers. As an asset, it follows the fundamental debit rule: increases are recorded on the debit side and decreases on the credit side. Step-by-Step Resolution: 1. Opening Balance: The account opens with a debit balance of £2,700 - money already owed by customers. 2. Credit Sales (+): New credit sales of £5,400 increase the amount owed, s
A retail store, Crest Hotels Ltd, purchased inventories for a gross total of £1,800 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Crest Hotels Ltd?
- A.Net Cost: £1,500, VAT Recoverable: £300
- B.Net Cost: £1,800, VAT Recoverable: £360
- C.Net Cost: £1,440, VAT Recoverable: £360
- D.Net Cost: £1,500, 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 £1,800. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £1,80
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Paper Info
- Exam
- ACCA
- Mock number
- 170 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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