Free ACCA Mock Test 78 — 20 Questions + Full Answers
Association of Chartered Certified Accountants · Accountancy students · Exams: Mar, Jun, Sep, Dec
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Applaa ACCA Mock Test 78
applaa-acca-mock-78.pdf · 20 questions
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8 of 20 shownCorrect answers highlighted in green. Full explanations included.
Crest Hotels Ltd completed two projects during the year: 1) Purchased and installed a new warehouse conveyor belt system for £42,000, and 2) Had the exterior of the existing office block repainted for £4,200. How should these expenditures be classified?
- A.Both projects are Capital Expenditure.
- B.Warehouse system: Capital Expenditure (£42,000), Repainting: Revenue Expenditure (£4,200)
- C.Warehouse system: Revenue Expenditure (£42,000), Repainting: Capital Expenditure (£4,200)
- 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 (£42,000): - This is a *new* asset installed to generate future economic benefits. I
Before correcting the year-end errors, the draft profit of Omega Foodstuffs plc was £120,000. An error was discovered: Closing inventory was overstated by £16,500. What is the revised profit after correcting this error?
- A.£136,500
- B.£103,500
- C.£120,000 (no effect on profit)
- D.£87,000
✓ 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
A retail store, Nexus Media plc, 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 Nexus Media plc?
- 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
A grocery distributor, Beacon Logistics LLP, recorded net sales of £144,000 for standard-rate products (20% VAT) and £72,000 for zero-rated food products. What is the total output VAT generated on these sales?
- A.£28,800
- B.£43,200
- C.£14,400
- 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 (£144,000): Output VAT = £144,000 × 20% = £28,800 2. Zero-Rate Sales (£72,000): Output VAT = £72,000 × 0% = £0 3. Total Output VAT = £28,800 + £0 = £28,800 Common Mistakes
The sole trader of Summit Manufacturing Ltd took goods costing £900 from the business for personal use. These goods had a selling price of £1,350. What is the correct double entry to record this transaction?
- A.Debit Drawings £900, Credit Purchases £900
- B.Debit Drawings £1,350, Credit Revenue £1,350
- C.Debit Purchases £900, Credit Drawings £900
- D.Debit Inventory £900, Credit Drawings £900
✓ Worked Explanation
Core Concept: Owner's Drawings of Inventory at Cost When a sole trader takes goods from the business for personal use, this is treated as drawings - a withdrawal of capital by the owner. The key rule is that drawings of goods are always valued at cost price, never at selling price. Step-by-Step Resolution: 1. Identify the Economic Event: The owner has taken goods worth £900 (cost) for personal use. This is a capital withdrawal. 2. Choose the Correct Value: Goods are recorded at cost (£900), not
The trial balance of Genesis Enterprises Ltd balanced perfectly. However, it was later discovered that a purchase of equipment costing £25,000 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
For the year ended 31 December, Beacon Logistics LLP paid rent of £16,200. At the year-end, the company had an outstanding electricity invoice of £1,350 which has not yet been paid. What are the adjusting entries required at the year-end to record this accrual?
- A.Debit Accruals £1,350, Credit Electricity Expense £1,350
- B.Debit Electricity Expense £1,350, Credit Accruals (Liabilities) £1,350
- C.Debit Cash £1,350, Credit Electricity Expense £1,350
- D.Debit Electricity Expense £1,350, Credit Prepayments (Assets) £1,350
✓ 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 £1,350 was incurred during the accounting year but remains unpaid at year-end. 2. Apply the Accruals Concept: The expense belongs to this ye
The Receivables Ledger Control Account of Titan Steel plc is shown in the diagram. Credit sales of £4,200 were recorded, and cash of £3,360 was received from credit customers. What is the correct closing balance (balance c/f) of the account?
- A.£2,940 Debit closing balance
- B.£2,940 Credit closing balance
- C.£6,300 Debit closing balance
- D.£3,360 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 £2,100 - money already owed by customers. 2. Credit Sales (+): New credit sales of £4,200 increase the amount owed, s
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Paper Info
- Exam
- ACCA
- Mock number
- 78 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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