Free ACCA Mock Test 190 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 190
applaa-acca-mock-190.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the year ended 31 December, Nova Tech Solutions Ltd paid rent of £54,000. At the year-end, the company had an outstanding electricity invoice of £4,500 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £4,500, Credit Electricity Expense £4,500
- B.Debit Electricity Expense £4,500, Credit Accruals (Liabilities) £4,500
- C.Debit Cash £4,500, Credit Electricity Expense £4,500
- D.Debit Electricity Expense £4,500, Credit Prepayments (Assets) £4,500
✓ 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 £4,500 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
For the year ended 31 December, Crest Hotels Ltd paid rent of £54,000. At the year-end, the company had an outstanding electricity invoice of £4,500 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £4,500, Credit Electricity Expense £4,500
- B.Debit Electricity Expense £4,500, Credit Accruals (Liabilities) £4,500
- C.Debit Cash £4,500, Credit Electricity Expense £4,500
- D.Debit Electricity Expense £4,500, Credit Prepayments (Assets) £4,500
✓ 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 £4,500 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
Vanguard Retail Ltd disposed of a delivery vehicle for £120,000. The vehicle had originally cost £200,000 and had accumulated depreciation of £100,000 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 £20,000
- B.Loss on disposal of £20,000
- C.Gain on disposal of £-80,000
- D.Loss on disposal of £100,000
✓ 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 = £200,000 £100,000 = £100,000 2. Compare to Disposal Proceeds: £120,000 (r
The sole trader of Beacon Logistics LLP took goods costing £1,800 from the business for personal use. These goods had a selling price of £2,700. What is the correct double entry to record this transaction?
- A.Debit Drawings £1,800, Credit Purchases £1,800
- B.Debit Drawings £2,700, Credit Revenue £2,700
- C.Debit Purchases £1,800, Credit Drawings £1,800
- D.Debit Inventory £1,800, Credit Drawings £1,800
✓ 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 £1,800 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£1,800),
Aura Goods Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £96,000, and 2) Had the exterior of the existing office block repainted for £9,600. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£96,000), Repainting: Revenue Expenditure (£9,600)
- C.Warehouse system: Revenue Expenditure (£96,000), Repainting: Capital Expenditure (£9,600)
- 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 (£96,000): - This is a *new* asset installed to generate future economic benefits. I
For the last quarter, Solar Energy plc 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
A retail store, Zephyr Services LLP, purchased inventories for a gross total of £2,400 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Zephyr Services LLP?
- A.Net Cost: £2,000, VAT Recoverable: £400
- B.Net Cost: £2,400, VAT Recoverable: £480
- C.Net Cost: £1,920, VAT Recoverable: £480
- D.Net Cost: £2,000, 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 £2,400. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £2,40
Before correcting the year-end errors, the draft profit of Titan Steel plc was £120,000. An error was discovered: Closing inventory was overstated by £16,500. What is the revised profit after correcting this error?
- A.£136,500
- B.£103,500
- C.£120,000 (no effect on profit)
- D.£87,000
✓ 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
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Paper Info
- Exam
- ACCA
- Mock number
- 190 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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