Free ACCA Mock Test 206 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 206
applaa-acca-mock-206.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
A grocery distributor, Genesis Enterprises Ltd, recorded net sales of £176,000 for standard-rate products (20% VAT) and £88,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£35,200
- B.£52,800
- C.£17,600
- 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 (£176,000): Output VAT = £176,000 × 20% = £35,200 2. Zero-Rate Sales (£88,000): Output VAT = £88,000 × 0% = £0 3. Total Output VAT = £35,200 + £0 = £35,200 Common Mistakes
Genesis Enterprises Ltd disposed of a delivery vehicle for £25,920. The vehicle had originally cost £43,200 and had accumulated depreciation of £21,600 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 £4,320
- B.Loss on disposal of £4,320
- C.Gain on disposal of £-17,280
- D.Loss on disposal of £21,600
✓ 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 = £43,200 £21,600 = £21,600 2. Compare to Disposal Proceeds: £25,920 (recei
For the last quarter, Atlas Transport Ltd had net credit sales of £125,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £75,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£12,500 Payable
- B.£12,500 Reclaimable
- C.£25,000 Payable
- D.£10,000 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): £125,000 × 20% = £25,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
The trial balance of Titan Steel plc balanced perfectly. However, it was later discovered that a purchase of equipment costing £15,000 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
Zephyr Services LLP purchased a motor car for £150,000 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
For the year ended 31 December, Crown Paper Ltd paid rent of £14,400. At the year-end, the company had an outstanding electricity invoice of £1,200 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,200, Credit Electricity Expense £1,200
- B.Debit Electricity Expense £1,200, Credit Accruals (Liabilities) £1,200
- C.Debit Cash £1,200, Credit Electricity Expense £1,200
- D.Debit Electricity Expense £1,200, Credit Prepayments (Assets) £1,200
✓ 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 £1,200 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
Meridian Distributors Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £24,000, and 2) Had the exterior of the existing office block repainted for £2,400. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£24,000), Repainting: Revenue Expenditure (£2,400)
- C.Warehouse system: Revenue Expenditure (£24,000), Repainting: Capital Expenditure (£2,400)
- 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 (£24,000): - This is a *new* asset installed to generate future economic benefits. I
At 31 March, the bank statement of Meridian Distributors Ltd shows a credit balance of £24,000. Unpresented checks total £6,000, and outstanding uncleared lodgements total £3,000. What is the reconciled balance that should appear in Meridian Distributors Ltd's cash book?
- A.£21,000
- B.£27,000
- C.£33,000
- D.£15,000
✓ Worked Explanation
Core Concept: Bank Reconciliation Statement A bank reconciliation explains the difference between the *cash book balance* (company's records) and the *bank statement balance* (bank's records). Timing differences - unpresented cheques and uncleared lodgements - cause these differences. Step-by-Step Resolution: 1. Start with Bank Statement Balance: £24,000 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Meridian Di
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Paper Info
- Exam
- ACCA
- Mock number
- 206 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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