Free ACCA Mock Test 181 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 181
applaa-acca-mock-181.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the year ended 31 December, Meridian Distributors Ltd paid rent of £75,000. At the year-end, the company had an outstanding electricity invoice of £6,250 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £6,250, Credit Electricity Expense £6,250
- B.Debit Electricity Expense £6,250, Credit Accruals (Liabilities) £6,250
- C.Debit Cash £6,250, Credit Electricity Expense £6,250
- D.Debit Electricity Expense £6,250, Credit Prepayments (Assets) £6,250
✓ 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 £6,250 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, Atlas Transport Ltd, purchased inventories for a gross total of £15,000 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Atlas Transport Ltd?
- A.Net Cost: £12,500, VAT Recoverable: £2,500
- B.Net Cost: £15,000, VAT Recoverable: £3,000
- C.Net Cost: £12,000, VAT Recoverable: £3,000
- D.Net Cost: £12,500, 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 £15,000. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £15,
Atlas Transport Ltd disposed of a delivery vehicle for £105,600. The vehicle had originally cost £176,000 and had accumulated depreciation of £88,000 at the date of disposal. What is the gain or loss on disposal to be recorded in profit or loss?
- A.Gain on disposal of £17,600
- B.Loss on disposal of £17,600
- C.Gain on disposal of £-70,400
- D.Loss on disposal of £88,000
✓ Worked Explanation
Core Concept: Profit or Loss on Disposal of a Non-Current Asset When a non-current asset is sold, the gain or loss is measured as Disposal Proceeds minus the Carrying Value (Net Book Value). It is *not* compared to the original cost. Only the written-down value at the disposal date is relevant. Step-by-Step Resolution: 1. Find the Carrying Value (NBV) at disposal date: NBV = Original Cost Accumulated Depreciation = £176,000 £88,000 = £88,000 2. Compare to Disposal Proceeds: £105,600 (rec
The sole trader of Alpha Properties Ltd took goods costing £600 from the business for personal use. These goods had a selling price of £900. What is the correct double entry to record this transaction?
- A.Debit Drawings £600, Credit Purchases £600
- B.Debit Drawings £900, Credit Revenue £900
- C.Debit Purchases £600, Credit Drawings £600
- D.Debit Inventory £600, Credit Drawings £600
✓ 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 £600 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£600), not
A grocery distributor, Beacon Logistics LLP, recorded net sales of £67,200 for standard-rate products (20% VAT) and £33,600 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£13,440
- B.£20,160
- C.£6,720
- 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 (£67,200): Output VAT = £67,200 × 20% = £13,440 2. Zero-Rate Sales (£33,600): Output VAT = £33,600 × 0% = £0 3. Total Output VAT = £13,440 + £0 = £13,440 Common Mistakes t
Pinnacle Consulting Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £84,000, and 2) Had the exterior of the existing office block repainted for £8,400. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£84,000), Repainting: Revenue Expenditure (£8,400)
- C.Warehouse system: Revenue Expenditure (£84,000), Repainting: Capital Expenditure (£8,400)
- 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 (£84,000): - This is a *new* asset installed to generate future economic benefits. I
A grocery distributor, Swift Logistics Ltd, recorded net sales of £100,000 for standard-rate products (20% VAT) and £50,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£20,000
- B.£30,000
- C.£10,000
- 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 (£100,000): Output VAT = £100,000 × 20% = £20,000 2. Zero-Rate Sales (£50,000): Output VAT = £50,000 × 0% = £0 3. Total Output VAT = £20,000 + £0 = £20,000 Common Mistakes
A bookkeeper at Zephyr Services LLP prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £1,800. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £900 was completely omitted from the books.
- B.A cash payment of £900 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £900 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £900 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 £1,800. This means the debit side is £1,800 *too sm
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Paper Info
- Exam
- ACCA
- Mock number
- 181 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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