Free ACCA Mock Test 225 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
Sections: Financial Accounting · Applaa proprietary paper — free to download and print
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Applaa ACCA Mock Test 225
applaa-acca-mock-225.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the year ended 31 December, Summit Manufacturing 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
Crown Paper 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
Atlas Transport Ltd disposed of a delivery vehicle for £20,160. The vehicle had originally cost £33,600 and had accumulated depreciation of £16,800 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 £3,360
- B.Loss on disposal of £3,360
- C.Gain on disposal of £-13,440
- D.Loss on disposal of £16,800
✓ 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 = £33,600 £16,800 = £16,800 2. Compare to Disposal Proceeds: £20,160 (recei
Before correcting the year-end errors, the draft profit of Aura Goods Ltd was £120,000. An error was discovered: Closing inventory was overstated by £1,200. What is the revised profit after correcting this error?
- A.£121,200
- B.£118,800
- C.£120,000 (no effect on profit)
- D.£117,600
✓ 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
Genesis Enterprises Ltd disposed of a delivery vehicle for £46,080. The vehicle had originally cost £76,800 and had accumulated depreciation of £38,400 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 £7,680
- B.Loss on disposal of £7,680
- C.Gain on disposal of £-30,720
- D.Loss on disposal of £38,400
✓ 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 = £76,800 £38,400 = £38,400 2. Compare to Disposal Proceeds: £46,080 (recei
The Receivables Ledger Control Account of Nova Tech Solutions Ltd is shown in the diagram. Credit sales of £25,000 were recorded, and cash of £20,000 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£17,500 Debit closing balance
- B.£17,500 Credit closing balance
- C.£37,500 Debit closing balance
- D.£20,000 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 £12,500 - money already owed by customers. 2. Credit Sales (+): New credit sales of £25,000 increase the amount owed,
At 31 March, the bank statement of Crest Hotels Ltd shows a credit balance of £19,200. Unpresented checks total £4,800, and outstanding uncleared lodgements total £2,400. What is the reconciled balance that should appear in Crest Hotels Ltd's cash book?
- A.£16,800
- B.£21,600
- C.£26,400
- D.£12,000
✓ 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: £19,200 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Crest Hotel
An entity purchased a machine on 1 January Year 1 for £62,500. The residual value of the machine is estimated to be £6,250 with an estimated useful life of 6 years. The entity uses the straight-line method of depreciation. What is the carrying value (net book value) of the machine on 31 December Year 2?
- A.£53,125
- B.£43,750
- C.£37,500
- D.£46,875
✓ Worked Explanation
Core Concept: Straight-Line Depreciation The straight-line method spreads the depreciable amount (Cost Residual Value) equally over the asset's useful life. The same charge is recognised in *every* period. After 2 complete years, two annual depreciation charges are deducted from the original cost. Step-by-Step Resolution: 1. Calculate Annual Depreciation: (Cost Residual Value) ÷ Useful Life = (£62,500 £6,250) ÷ 6 years = £9,375 per year 2. Calculate Accumulated Depreciation at 31 Dec Y
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Paper Info
- Exam
- ACCA
- Mock number
- 225 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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