Free ACCA Mock Test 204 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 204
applaa-acca-mock-204.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Before correcting the year-end errors, the draft profit of Omega Foodstuffs plc was £120,000. An error was discovered: Closing inventory was overstated by £7,200. What is the revised profit after correcting this error?
- A.£127,200
- B.£112,800
- C.£120,000 (no effect on profit)
- D.£105,600
✓ 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
A bookkeeper at Atlas Transport Ltd prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £250. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £125 was completely omitted from the books.
- B.A cash payment of £125 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £125 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £125 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 £250. This means the debit side is £250 *too small*
For the year ended 31 December, Alpha Properties Ltd paid rent of £25,200. At the year-end, the company had an outstanding electricity invoice of £2,100 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £2,100, Credit Electricity Expense £2,100
- B.Debit Electricity Expense £2,100, Credit Accruals (Liabilities) £2,100
- C.Debit Cash £2,100, Credit Electricity Expense £2,100
- D.Debit Electricity Expense £2,100, Credit Prepayments (Assets) £2,100
✓ 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 £2,100 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
A bookkeeper at Zephyr Services LLP prepared a trial balance which failed to agree, with the credit side exceeding the debit side by £450. A suspense account was opened. Which of the following errors, when corrected, could explain this difference?
- A.A purchase invoice for £225 was completely omitted from the books.
- B.A cash payment of £225 to a supplier was debited to the purchases account but not credited to the cash account.
- C.Sales of £225 were recorded by debiting Receivables Control and debiting Sales Account.
- D.A purchase return of £225 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 £450. This means the debit side is £450 *too small*
For the last quarter, Omega Foodstuffs plc had net credit sales of £24,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £14,400. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£2,400 Payable
- B.£2,400 Reclaimable
- C.£4,800 Payable
- D.£1,920 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): £24,000 × 20% = £4,800 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fraction
A retail store, Falcon Engineering 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 Falcon Engineering 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
Omega Foodstuffs plc purchased a motor car for £165,000 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
The Receivables Ledger Control Account of Titan Steel plc is shown in the diagram. Credit sales of £11,000 were recorded, and cash of £8,800 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£7,700 Debit closing balance
- B.£7,700 Credit closing balance
- C.£16,500 Debit closing balance
- D.£8,800 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 £5,500 - money already owed by customers. 2. Credit Sales (+): New credit sales of £11,000 increase the amount owed,
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Paper Info
- Exam
- ACCA
- Mock number
- 204 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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