Free ACCA Mock Test 73 — 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 73
applaa-acca-mock-73.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
For the year ended 31 December, Crown Paper Ltd paid rent of £28,800. At the year-end, the company had an outstanding electricity invoice of £2,400 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £2,400, Credit Electricity Expense £2,400
- B.Debit Electricity Expense £2,400, Credit Accruals (Liabilities) £2,400
- C.Debit Cash £2,400, Credit Electricity Expense £2,400
- D.Debit Electricity Expense £2,400, Credit Prepayments (Assets) £2,400
✓ 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 £2,400 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
An entity purchased a machine on 1 January Year 1 for £82,500. The residual value of the machine is estimated to be £8,250 with an estimated useful life of 12 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.£76,313
- B.£70,126
- C.£61,876
- D.£68,063
✓ 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 = (£82,500 £8,250) ÷ 12 years = £6,187 per year 2. Calculate Accumulated Depreciation at 31 Dec
For the year ended 31 December, Zephyr Services LLP paid rent of £2,400. At the year-end, the company had an outstanding electricity invoice of £200 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £200, Credit Electricity Expense £200
- B.Debit Electricity Expense £200, Credit Accruals (Liabilities) £200
- C.Debit Cash £200, Credit Electricity Expense £200
- D.Debit Electricity Expense £200, Credit Prepayments (Assets) £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 £200 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this year
The trial balance of Meridian Distributors Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £16,500 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
Pinnacle Consulting Ltd disposed of a delivery vehicle for £8,640. The vehicle had originally cost £14,400 and had accumulated depreciation of £7,200 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 £1,440
- B.Loss on disposal of £1,440
- C.Gain on disposal of £-5,760
- D.Loss on disposal of £7,200
✓ 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 = £14,400 £7,200 = £7,200 2. Compare to Disposal Proceeds: £8,640 (received
Swift Logistics Ltd 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
A grocery distributor, Nova Tech Solutions Ltd, recorded net sales of £112,000 for standard-rate products (20% VAT) and £56,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£22,400
- B.£33,600
- C.£11,200
- 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 (£112,000): Output VAT = £112,000 × 20% = £22,400 2. Zero-Rate Sales (£56,000): Output VAT = £56,000 × 0% = £0 3. Total Output VAT = £22,400 + £0 = £22,400 Common Mistakes
Before correcting the year-end errors, the draft profit of Titan Steel plc was £120,000. An error was discovered: Closing inventory was overstated by £11,000. What is the revised profit after correcting this error?
- A.£131,000
- B.£109,000
- C.£120,000 (no effect on profit)
- D.£98,000
✓ 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
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Paper Info
- Exam
- ACCA
- Mock number
- 73 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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