Free ACCA Mock Test 194 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 194
applaa-acca-mock-194.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
The trial balance of Solar Energy plc balanced perfectly. However, it was later discovered that a purchase of equipment costing £25,000 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
A retail store, Apex Trading Ltd, 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 Apex Trading Ltd?
- 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
The sole trader of Crest Hotels Ltd took goods costing £400 from the business for personal use. These goods had a selling price of £600. What is the correct double entry to record this transaction?
- A.Debit Drawings £400, Credit Purchases £400
- B.Debit Drawings £600, Credit Revenue £600
- C.Debit Purchases £400, Credit Drawings £400
- D.Debit Inventory £400, Credit Drawings £400
✓ 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 £400 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£400), not
A retail store, Beacon Logistics LLP, purchased inventories for a gross total of £4,200 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Beacon Logistics LLP?
- A.Net Cost: £3,500, VAT Recoverable: £700
- B.Net Cost: £4,200, VAT Recoverable: £840
- C.Net Cost: £3,360, VAT Recoverable: £840
- D.Net Cost: £3,500, 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 £4,200. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £4,20
Nova Tech Solutions Ltd disposed of a delivery vehicle for £8,640. The vehicle had originally cost £14,400 and had accumulated depreciation of £7,200 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 £1,440
- B.Loss on disposal of £1,440
- C.Gain on disposal of £-5,760
- D.Loss on disposal of £7,200
✓ 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 = £14,400 £7,200 = £7,200 2. Compare to Disposal Proceeds: £8,640 (received
A grocery distributor, Solar Energy plc, recorded net sales of £132,000 for standard-rate products (20% VAT) and £66,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£26,400
- B.£39,600
- C.£13,200
- 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 (£132,000): Output VAT = £132,000 × 20% = £26,400 2. Zero-Rate Sales (£66,000): Output VAT = £66,000 × 0% = £0 3. Total Output VAT = £26,400 + £0 = £26,400 Common Mistakes
Solar Energy plc purchased a motor car for £48,000 inclusive of VAT, for use by a director. The car is used 60% for business travel and 40% for private travel. What is the input VAT recovery rule regarding this vehicle?
- A.Input VAT can be recovered in full (100%).
- B.Input VAT can be recovered at 60% representing the business use portion.
- C.No input VAT can be recovered because input VAT is generally blocked on passenger motor cars unless used exclusively for business (0% recovery).
- D.Input VAT can be recovered in full if the car is leased rather than purchased.
✓ Worked Explanation
Core Concept: Input VAT Block on Passenger Motor Cars Under HMRC VAT rules, input VAT on the purchase of a passenger motor car is subject to a 100% block - meaning it is entirely irrecoverable - unless the car is used *exclusively* for business purposes with no possibility of private use. Step-by-Step Resolution: 1. Identify the Asset: This is a passenger motor car (not a commercial vehicle like a van or lorry). 2. Apply the VAT Block Rule: If the car is available for any private use, input VAT
Summit Manufacturing Ltd purchased a motor car for £140,000 inclusive of VAT, for use by a director. The car is used 60% for business travel and 40% for private travel. What is the input VAT recovery rule regarding this vehicle?
- A.Input VAT can be recovered in full (100%).
- B.Input VAT can be recovered at 60% representing the business use portion.
- C.No input VAT can be recovered because input VAT is generally blocked on passenger motor cars unless used exclusively for business (0% recovery).
- D.Input VAT can be recovered in full if the car is leased rather than purchased.
✓ Worked Explanation
Core Concept: Input VAT Block on Passenger Motor Cars Under HMRC VAT rules, input VAT on the purchase of a passenger motor car is subject to a 100% block - meaning it is entirely irrecoverable - unless the car is used *exclusively* for business purposes with no possibility of private use. Step-by-Step Resolution: 1. Identify the Asset: This is a passenger motor car (not a commercial vehicle like a van or lorry). 2. Apply the VAT Block Rule: If the car is available for any private use, input VAT
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Paper Info
- Exam
- ACCA
- Mock number
- 194 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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