Free ACCA Mock Test 39 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 39
applaa-acca-mock-39.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
A retail store, Crown Paper Ltd, purchased inventories for a gross total of £9,600 inclusive of standard-rate VAT at 20%. What are the net purchase cost and the input VAT amount recoverable by Crown Paper Ltd?
- A.Net Cost: £8,000, VAT Recoverable: £1,600
- B.Net Cost: £9,600, VAT Recoverable: £1,920
- C.Net Cost: £7,680, VAT Recoverable: £1,920
- D.Net Cost: £8,000, 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 £9,600. Standard rate VAT = 20%. 2. Apply the VAT Fraction: Net = Gross ÷ (1 + VAT rate) = £9,60
Before correcting the year-end errors, the draft profit of Crown Paper Ltd was £120,000. An error was discovered: Closing inventory was overstated by £9,600. What is the revised profit after correcting this error?
- A.£129,600
- B.£110,400
- C.£120,000 (no effect on profit)
- D.£100,800
✓ 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
For the year ended 31 December, Beacon Logistics LLP paid rent of £33,000. At the year-end, the company had an outstanding electricity invoice of £2,750 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £2,750, Credit Electricity Expense £2,750
- B.Debit Electricity Expense £2,750, Credit Accruals (Liabilities) £2,750
- C.Debit Cash £2,750, Credit Electricity Expense £2,750
- D.Debit Electricity Expense £2,750, Credit Prepayments (Assets) £2,750
✓ 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 £2,750 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
A grocery distributor, Pinnacle Consulting Ltd, recorded net sales of £28,800 for standard-rate products (20% VAT) and £14,400 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£5,760
- B.£8,640
- C.£2,880
- 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 (£28,800): Output VAT = £28,800 × 20% = £5,760 2. Zero-Rate Sales (£14,400): Output VAT = £14,400 × 0% = £0 3. Total Output VAT = £5,760 + £0 = £5,760 Common Mistakes to A
Summit Manufacturing Ltd purchased a motor car for £54,000 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, Genesis Enterprises Ltd paid rent of £18,000. At the year-end, the company had an outstanding electricity invoice of £1,500 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,500, Credit Electricity Expense £1,500
- B.Debit Electricity Expense £1,500, Credit Accruals (Liabilities) £1,500
- C.Debit Cash £1,500, Credit Electricity Expense £1,500
- D.Debit Electricity Expense £1,500, Credit Prepayments (Assets) £1,500
✓ 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 £1,500 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
For the last quarter, Aura Goods Ltd had net credit sales of £36,000 (excluding VAT). Gross purchases inclusive of 20% VAT were £21,600. What is the net VAT amount payable to (or reclaimable from) the tax authority?
- A.£3,600 Payable
- B.£3,600 Reclaimable
- C.£7,200 Payable
- D.£2,880 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): £36,000 × 20% = £7,200 2. Calculate Input VAT (tax paid to suppliers on purchases): - Purchases are GROSS (inc. VAT): use VAT fraction
The trial balance of Summit Manufacturing Ltd 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
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Paper Info
- Exam
- ACCA
- Mock number
- 39 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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