Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

MAN00012C

BA and BSc Degree Examinations 2022-2023 

Financial Accounting (MOCK EXAM)

Question 1

a. Write a short note on the objective of general purpose financial reporting, as identified by the 2018 IFRS Conceptual Framework. (10 marks) 

b. Discuss any five limitations of ratio analysis, using examples where necessary. (10 marks)

c. Explain the following:

i. The concept of prudence in financial accounting

ii. The matching principle in financial accounting

(2 x 2.5 = 5 marks) 

(TOTAL 25 MARKS)

Question 2

Toby has decided to start a smartphone manufacturing business in the UK. As his accountant, you find the following transactions in the first month of trading:

a. He introduces capital of £400,000, which he puts into the bank account.

b. He buys a plot of land for £200,000 from the local council, paying by cheque.

c. He borrows £120,000 from Zoomba Bank. The loan carries an interest rate of 5% p.a., payable in 12 equal monthly instalments.

d. He purchases smartphone components from D Ltd on credit for £100,000.

e. He buys machinery from Mirando & Co, on credit, for £70,000.

f. He returns faulty components worth £10,000 to D Ltd.

g. He pays the first interest instalment on the loan borrowed from Zoomba Bank.

Required:

Toby has requested you to prepare the following for his first week of trading:

1. Journal entries for the above transactions (7 marks) 

2. Post the above journal entries to “T accounts” and round off the “T accounts” (13 marks) 

3. A trial balance (5 marks) 

(TOTAL 25 MARKS)

Question 3

Red plc provides you with the following trial balance as at 31 March 2019:

Additional information:

a. Bad debts amounting to £25,000 need to be written off.

b. Salaries & Wages outstanding for the year ended 31 March 2019 amounts to £4,000. £2,000 of the office telephone relates to 2019-20. 

c. A dividend of £20,000 was receivable from Zplc for the year ended March 2019. However, the accountant did not record the transaction since no cash had been received.

d. The inventories at the year-end have been valued at £40,000 but are estimated to sell for £60,000.

e. Depreciation is to be provided on the property, plant and equipment using the straight-line method at a rate of 10% per annum. The PPE is used mainly for distribution purposes.

f. On 01 October 2018, new acquisitions of PPE amounted to £100,000 but they had not been recorded in the books as no payment had been made during the year.

g. An old vehicle, acquired on 01 January 2015 for £50,000 was sold for ££33,250 on 30 September 2018. However, as with the acquisition, the disposal had also not been recorded by the accountant since no money had been received during the year.

h. The rate of corporation tax is 25%.

Required

Prepare a Statement of Profit or Loss for the year ended 31 March 2019 and a Statement of Financial Position at 31 March 2019. (25 marks) 

(TOTAL 25 MARKS)

Question 4

The financial statements for Xavier plc are given below:

Required

a) State the formula and calculate the following ratios for Xavier plc for 2018 and 2019

i. Return on capital employed

ii. Gross profit margin

iii. Current ratio

iv. Quick ratio (acid test ratio)

v. Trade receivables days

vi. Gearing ratio (12 marks)

b) Using the above figures and any additional ratios, write a report to the management of Xavier plc discussing the differences in performance between 2018 and 2019 and suggest reasons which may explain the differences. (13 marks)

(TOTAL 25 MARKS)