Free ACCA Mock Test 237 — 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 237
applaa-acca-mock-237.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the last quarter, Titan Steel plc had net credit sales of £140,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £84,000. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£14,000 Payable
- B.£14,000 Reclaimable
- C.£28,000 Payable
- D.£11,200 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): £140,000 × 20% = £28,000 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fracti
Before correcting the year-end errors, the draft profit of Apex Trading Ltd was £120,000. An error was discovered: Closing inventory was overstated by £25,000. What is the revised profit after correcting this error?
- A.£145,000
- B.£95,000
- C.£120,000 (no effect on profit)
- D.£70,000
✓ 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
The trial balance of Titan Steel plc balanced perfectly. However, it was later discovered that a purchase of equipment costing £1,800 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, Titan Steel plc, purchased inventories for a gross total of £3,600 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Titan Steel plc?
- A.Net Cost: £3,000, VAT Recoverable: £600
- B.Net Cost: £3,600, VAT Recoverable: £720
- C.Net Cost: £2,880, VAT Recoverable: £720
- D.Net Cost: £3,000, 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 £3,600. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £3,60
The trial balance of Falcon Engineering Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £9,600 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
At 31 March, the bank statement of Zephyr Services LLP shows a credit balance of £28,800. Unpresented checks total £7,200, and outstanding uncleared lodgements total £3,600. What is the reconciled balance that should appear in Zephyr Services LLP's cash book?
- A.£25,200
- B.£32,400
- C.£39,600
- D.£18,000
✓ 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: £28,800 (credit balance, meaning the bank shows this as a positive balance for the company). 2. Add Uncleared Lodgements: Deposits sent by Zephyr Serv
Apex Trading Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £60,000, and 2) Had the exterior of the existing office block repainted for £6,000. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£60,000), Repainting: Revenue Expenditure (£6,000)
- C.Warehouse system: Revenue Expenditure (£60,000), Repainting: Capital Expenditure (£6,000)
- 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 (£60,000): - This is a *new* asset installed to generate future economic benefits. I
A grocery distributor, Atlas Transport Ltd, recorded net sales of £120,000 for standard-rate products (20% VAT) and £60,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£24,000
- B.£36,000
- C.£12,000
- 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 (£120,000): Output VAT = £120,000 × 20% = £24,000 2. Zero-Rate Sales (£60,000): Output VAT = £60,000 × 0% = £0 3. Total Output VAT = £24,000 + £0 = £24,000 Common Mistakes
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Paper Info
- Exam
- ACCA
- Mock number
- 237 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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