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    15582383 cima-financial-accounting-fundamentals-past-papers 15582383 cima-financial-accounting-fundamentals-past-papers Document Transcript

    • Foundation Level Financial Accounting Fundamentals1 FAFN 23 May 2001 Day 3 – morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsYou are allowed three hours to answer this question paper.Answer the ONE question in section A (this has 25 sub-questions).Answer the TWO questions in section B.Answer ONE question ONLY from section C.Write your examination number in the boxes provided on the front of the answer book.Write FAFN on the line marked "Subject" on the front of the answer book.Write your examination number on the special answer sheet for section A which is on page 3 ofthis question paper booklet.Detach the sheet from the booklet and insert it into your answer book before you hand this in.Do NOT write your name or your student registration number anywhere on your answer book.Tick the appropriate boxes on the front of the answer book to indicate which questions you haveanswered. TURN OVER© The Chartered Institute of Management Accountants 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer.Question One1.1 The fundamental objective of an external audit of a limited company is toA give advice to shareholders.B detect fraud and errors.C measure the performance and financial position of a company.D provide an opinion on the financial statements.1.2 A receives goods from B on credit terms and A subsequently pays by cheque. A then discovers that the goods are faulty and cancels the cheque before it is cashed by B.How should A record the cancellation of the cheque in his books?A Debit creditors Credit returns outwardsB Credit bank Debit creditorsC Debit bank Credit creditorsD Credit creditors Debit returns outwards1.3 The profit of a business may be calculated by using which one of the following formulae?A Opening capital - drawings + capital introduced - closing capitalB Closing capital + drawings - capital introduced - opening capitalC Opening capital + drawings - capital introduced - closing capitalD Closing capital - drawings + capital introduced - opening capital1.4 The turnover in a company was £2 million and its debtors were 5% of turnover. The company wishes to have a provision for doubtful debts of 4% of debtors, which would make the provision 33% higher than the current provision.What figure would appear in the profit and loss account in respect of doubtful debts?A debit £1,000. B credit £1,000. C debit £1,333. D credit £1,333.FAFN 2 May 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.5 Which one of the following should be accounted for as capital expenditure?A The cost of painting a building.B The replacement of windows in a building.C The purchase of a car by a garage for re-sale.D Legal fees incurred on the purchase of a building.1.6 A business purchases a machine on credit terms for £15,000 plus value added tax (VAT) at 15%. The business is registered for VAT. How should this transaction be recorded in the books? Dr CrA Machinery 15,000 Creditors 15,000B Machinery 17,250 Creditors 17,250C Machinery 15,000 VAT 2,250 Creditors 17,250D Machinery 17,250 VAT 2,250 Creditors 15,0001.7 Which one of the following statements most closely expresses the meaning of “true and fair”?A There is only one true and fair view of a company’s financial statements.B True and fair is determined by compliance with accounting standards.C True and fair is determined by compliance with company law.D True and fair is largely determined by reference to generally accepted accounting practice.1.8 On 1 May 2000, A Ltd pays a rent bill of £1,800 for the period to 30 April 2001. What are the charge to the profit and loss account and the entry in the balance sheet for the year ended 30 November 2000?A £1,050 charge to profit and loss account and prepayment of £750 in the balance sheet.B £1,050 charge to profit and loss account and accrual of £750 in the balance sheet.C £1,800 charge to profit and loss account and no entry in the balance sheet.D £750 charge to profit and loss account and prepayment of £1,050 in the balance sheet.May 2001 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.9 S Ltd exchanged stock for a delivery vehicle with T Ltd. The stock had cost S Ltd £10,000 and the normal selling price was £12,000; the delivery vehicle had cost T Ltd £9,000 and the normal selling price was £13,000.How should S Ltd value the vehicle in its balance sheet?A £9,000. B £10,000. C £12,000. D £13,000.1.10 Z’s bank statement shows a balance of £825 overdrawn. The bank statement includes bank charges of £50, which have not been entered in the cash book. There are unpresented cheques totalling £475 and deposits not yet credited of £600. The bank statement incorrectly shows a direct debit payment of £160, which belongs to another customer.The figure for the bank balance in the balance sheet should beA £590 overdrawn.B £540 overdrawn.C £790 overdrawn.D £840 overdrawn.1.11 There is £100 in the cash till at the year end at F Ltd, but the accountant has discovered that some cash has been stolen. At the beginning of the year there was £50 in the cash till and debtors were £2,000. Total sales in the year were £230,000. Debtors at the end of the year were £3,000. Cheques banked from credit sales were £160,000 and cash sales of £50,000 have been banked.How much cash was stolen during the year?A £18,950. B £19,000. C £19,050. D £20,950.1.12 A car was purchased for £12,000 on 1 April 1997 and has been depreciated at 20% each year straight line, assuming no residual value. The company policy is to charge a full year’s depreciation in the year of purchase and no depreciation in the year of sale. The car was traded in for a replacement vehicle on 1 August 2000 for an agreed figure of £5,000.What was the profit or loss on the disposal of the vehicle for the year ended 31 December 2000?A Loss £2,200. B Loss £1,400. C Loss £200. D Profit £200.FAFN 4 May 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.13 A company includes in stock goods received before the year end, but for which invoices are not received until after the year end. This is in accordance withA the historical cost convention.B the accruals concept.C the consistency concept.D the materiality concept.1.14 I Ltd operates the imprest system for petty cash. At 1 July there was a float of £150, but it was decided to increase this to £200 from 1 August onwards. During July, the petty cashier received £25 from staff for using the photocopier and a cheque for £90 was cashed for an employee. In July, cheques were drawn for £500 for petty cash.How much cash was paid out as cash expenses by the petty cashier in July?A £385. B £435. C £515. D £615.1.15 Which one of the following sentences does NOT explain the distinction between financial accounts and management accounts?A Financial accounts are primarily for external users and management accounts are primarily for internal users.B Financial accounts are normally produced annually and management accounts are normally produced monthly.C Financial accounts are more accurate than management accounts.D Financial accounts are audited by an external auditor and management accounts do not normally have an external audit.1.16 The movement on the plant and machinery account for X Ltd is shown below: £ Cost b/fwd 10,000 Additions 2,000 Disposals (3,000) Cost c/fwd 9,000 Depreciation b/fwd 2,000 Charge for the year 1,000 Disposals (1,500) Depreciation c/fwd 1,500 Net book value b/fwd 8,000 Net book value c/fwd 7,500The profit on the sale of the machine was £500. What figures would appear in the cash flowstatement of X Ltd?May 2001 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • A Movement on plant account £500 and profit on disposal of £500.B Movement on plant account £500 and proceeds on sale of plant £2,000.C Purchase of plant £2,000 and profit on disposal of £500.D Purchase of plant £2,000 and proceeds on sale of plant £2,000.1.17 When there is inflation, the historical cost convention has the effect ofA overstating profits and understating balance sheet values.B understating profits and overstating balance sheet values.C understating cash flow and overstating cash in the balance sheet.D overstating cash flow and understating cash in the balance sheet.1.18 When reconciling the creditors’ ledger control account with the list of creditors’ ledger balances of M, the following errors were found: • the purchase day book had been overstated by £500 and • the personal ledger of a supplier had been understated by £400.What adjustment must be made to correct these errors? Control account List of creditor balancesA Cr £500 decrease by £400B Dr £500 increase by £400C Dr £400 increase by £500D Cr £400 decrease by £5001.19 Extracts from the financial statements of CFS Ltd are set out below: Profit and loss account for the year ended 31 December 2000 £000 £000 Turnover 300 Cost of sales 150 Gross profit 150 Profit on sale of fixed asset 75 225 Expenses 15 Depreciation 30 45 Net profit 180 Balances at 31 December 1999 2000 £000 £000 Stock, debtors, current liabilities (net) 40 50What figure would appear in the cash flow statement of CFS Ltd for the year ended 31December 2000 in respect of net cash flow from operating activities?FAFN 6 May 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • A £125. B £145. C £215. D £235.1.20 B is a builder with a staff of ten employees. In April 2001, he paid the following amounts: • net salaries after tax and national insurance £14,000 • tax and employees’ national insurance for March 2001 £5,000 • employer’s national insurance for March 2001 £1,400 He owes the following amounts in respect of tax and national insurance for April 2001: • tax and employees’ national insurance £6,000 • employer’s national insurance £1,500The correct expense for employee costs to be shown in the profit and loss account for April 2001isA £19,000. B £20,000. C £20,400. D £21,500.1.21 The following information relates to M Ltd: At 30 September 2000 1999 £000 £000 Stock of raw materials 75 45 Work-in-progress stock 60 70 Stock of finished goods 100 90 For the year ended 30 September 2000 Purchases of raw materials £150,000 Manufacturing wages £50,000 Factory overheads £40,000The prime cost of production in the manufacturing account for the year ended 30 September2000 isA £165,000. B £170,000. C £210,000. D £270,000.1.22 When valuing stock at cost, which of the following shows the correct method of arriving at cost? Include inward Include transport costs production overheadsA Yes NoB No YesC Yes YesD No NoMay 2001 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.23 A fixed asset register isA an alternative name for the fixed asset ledger account.B a list of the physical fixed assets rather than their financial cost.C a schedule of planned maintenance of fixed assets for use by the plant engineer.D a schedule of the cost and other information about each individual fixed asset.1.24 The difference between a profit and loss account (which may also be referred to as an “income statement”) and an income and expenditure account is thatA an income and expenditure account is an international term for a profit and loss account.B a profit and loss account is prepared for a business and an income and expenditure account is prepared for a not-for-profit making organisation.C a profit and loss account is prepared on an accruals basis and an income and expenditure account is prepared on a cash flow basis.D a profit and loss account is prepared for a manufacturing business and an income and expenditure account is prepared for a non-manufacturing business.1.25 In a debtors’ report, which one of the following would you NOT expect to see?A Total debtor balances outstanding for current and previous months.B Debtor balances excluding VAT.C Credit limit.D Sales to date. Total = 50 marksFAFN 8 May 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 30 MARKSANSWER BOTH QUESTIONSQuestion TwoThe trial balance of FRS, a sole proprietor, at 31 July 2000 was as follows: £ £ Capital 100,000 Plant and machinery: Cost 155,000 Provision for depreciation to 1 August 1999 50,000 Trade debtors 15,000 Trade creditors 3,000 Stock at 1 August 1999 10,000 Cash at bank 3,400 Sales 150,000 Drawings 35,000 Provision for doubtful debts at 1 August 1999 2,000 Bank loan – repayable 2006 20,000 Purchases 40,000 Selling and distribution expenses 50,000 Administration expenses 15,000 Interest 1,600 325,000 325,000The following final adjustments are required: (i) Stock at 31 July 2000 was valued at £12,000. (ii) Selling and distribution expenses of £4,000 are to be accrued. (iii) Administration expenses of £6,000 were prepaid. (iv) The provision for doubtful debts is to be adjusted to 5% of debtors. (v) Depreciation on the plant and machinery is £15,000 for the year to 31 July 2000.Required:(a) Prepare a trading, profit and loss account for the year ended 31 July 2000 and a balance sheet at that date. (14 marks)(b) Calculate the following, as at 31 July 2000: • current ratio; • gearing; • debtor days. (6 marks) (Total = 20 marks)FAFN 10 M2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question ThreeThe trial balance of E Ltd did not balance and the following errors have been discovered: (i) A cheque for £1,000 received from a debtor had been credited to the sales account and debited to the bank account. (ii) The cash book had been undercast by £250. (iii) A machine costing £5,000 had been debited to the machinery repairs account. Machinery is depreciated at 10% on cost and no residual value is assumed.Required:(a) Correct the above errors by showing which ledger accounts should be debited or credited. (4 marks)(b) Explain why financial controls are necessary and give TWO examples. (6 marks) (Total = 10 marks)M2001 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION C – 20 MARKSANSWER ONE QUESTION ONLYQuestion Four(a) Define depreciation. (2 marks)(b) State the purpose of depreciation. (4 marks)(c) A transport company started business on 1 January 1998 and purchased truck (A) for£80,000. Truck (A) was destroyed in a road accident on 1 March 1999 and the insurancecompany paid out £60,000 to the transport company.On 1 April 1999, truck (B) was purchased for £90,000.On 1 July 1999, car (C) was purchased for £20,000.On 1 August 2000, car (C) was traded in for car (D) which cost £25,000, less a part-exchangeallowance on car (C) of £15,000.The depreciation policy of the company is:• depreciate trucks at 40% each year on the reducing balance;• depreciate cars at 25% each year using a straight-line basis;• assume a residual value for cars of 10% of the original cost;• if a vehicle is owned for part of a year, calculate depreciation according to the number of months for which the vehicle is owned.The year end of the company is 31 December.Required:Write up the following ledger accounts: • motor vehicles at cost account; (4 marks) • provision for depreciation on motor vehicles account; (6 marks) • disposal of motor vehicles account. (4 marks)You should include entries for each relevant year, and work to the nearest £. (Total = 20 marks)FAFN 12 M2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Five(a) State the rule for valuing stock. (2 marks)(b) Explain the purposes of the rule for valuing stock. (8 marks)(c) The trading account of T Ltd is set out below:T Ltd trading account for the year ended 30 April 2001 £000 £000 Turnover 1,000 Opening stock 200 Purchases 700 900 Closing stock 300 Cost of goods sold 600 Gross profit 400The opening and closing stock was valued on a FIFO basis. On a LIFO basis, the opening andclosing stock would have been valued at £180,000 and £270,000 respectively.Required:(i) Calculate gross profit if the trading account was prepared using a stock valuation basis of LIFO. (2 marks)(ii) Calculate "stock days", using the average method, on the assumption that stock is valued: • on the FIFO basis; • on the LIFO basis. (3 marks)(iii) Identify and explain any change in the gross profit and in "stock days" as a consequence of using LIFO rather than FIFO to value stock. (5 marks) (Total = 20 marks) End of paperM2001 13 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Foundation Level Financial Accounting Fundamentals1 FAFN 21 November 2001 Day 3 – morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsYou are allowed three hours to answer this question paper.Answer the ONE question in section A (this has 25 sub-questions and is on pages 2 – 8).Answer the TWO questions in section B (these are on pages 9 and 10).Answer ONE question ONLY from section C (these questions are on page 12).Write your examination number in the boxes provided on the front of the answer book.Write FAFN on the line marked "Subject" on the front of the answer book.Write your examination number on the special answer sheet for section A. Detach the sheetfrom the booklet and insert it into your answer book before you hand this in.Do NOT write your name or your student registration number anywhere on your answer book.Tick the appropriate boxes on the front of the answer book to indicate which questions you haveanswered.© The Chartered Institute of Management Accountants 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer.Question One1.1 At 30 June 2000, an electricity ledger account had an accrual of $300 and a credit balance was brought down at 1 July 2000. During the financial year, electricity invoices totalling $4,000 were paid, including an invoice for $600 for the quarter ended 31 May 2001.What is the profit and loss account charge for electricity payable for the year ended 30 June2001?A $3,700 B $3,900 C $4,000 D $4,1001.2 The principal duty of an external auditor isA to check that a company’s accounts agree with the accounting records.B to ensure that a company’s systems and controls are adequate to ensure the reliability of the accounting records.C to prevent fraud and errors.D to provide a report to the shareholders.1.3 On 1 June 2000, H paid an insurance invoice of $2,400 for the year to 31 May 2001. What is the charge to the profit and loss account and the entry in the balance sheet for the year ended 31 December 2000?A $1,000 profit and loss account and prepayment of $1,400.B $1,400 profit and loss account and accrual of $1,000.C $1,400 profit and loss account and prepayment of $1,000.D $2,400 profit and loss account and no entry in the balance sheet.1.4 An imprest systemA records the use of a company’s seal.B helps to reconcile the cash book with the bank statement.C helps to control petty cash.D is part of computerised accounting.FAFN 2 November 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.5 The provision for doubtful debts in the ledger of B Ltd at 31 October 2000 was $9,000. During the year ended 31 October 2001, bad debts of $5,000 were written off. Debtor balances at 31 October 2001 were $120,000 and the company policy is to have a general provision of 5%.What is the charge for bad and doubtful debts in the profit and loss account for the year ended31 October 2001?A $2,000 B $3,000 C $5,000 D $8,0001.6 A "true and fair view" occurs whenA financial statements are presented in accordance with prescribed formats.B assets and liabilities are recorded at current values.C financial statements have been audited.D financial statements are prepared in accordance with generally accepted accounting practice.1.7 A company bought a machine on 1 October 1996 for $52,000. The machine had an expected life of eight years and an estimated residual value of $4,000. On 31 March 2001, the machine was sold for $35,000. The company’s year end is 31 December. The company uses the straight-line method for depreciation and it charges a full year’s depreciation in the year of purchase and none in the year of sale.What is the profit or loss on disposal of the machine?A Loss $13,000B Profit $7,000C Profit $10,000D Profit $13,000November 2001 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.8 S Ltd, which is registered for purposes of value added tax, bought furniture on credit terms at a cost of $8,000, plus value added tax of $1,200.What is the correct account entry? DR CR $ $A Furniture 9,200 Supplier 9,200B Furniture 8,000 VAT 1,200 Supplier 6,800C Furniture 8,000 VAT 1,200 Supplier 9,200D Furniture 8,000 Supplier 8,0001.9 SOR Ltd’s stock was valued at $13,000 and excludes goods supplied to a customer on a sale or return basis. The customer still has 30 days within which to return the stock. The goods on sale or return were purchased by SOR Ltd for $6,000 and were invoiced at a mark-up of 25%.The value of SOR Ltd’s stock should beA $13,000. B $19,000. C $20,500. D $21,000.1.10 A Ltd’s trial balance does not balance. Which ONE of the following errors may be the cause of this failure to balance?A The purchase of a machine had been debited to the machine repairs account.B A cheque from a customer had been credited to the purchase ledger account of the customer.C Goods returned inwards had been debited to the sales ledger account of the customer.D The depreciation charge on machinery had been credited to the cost of machinery account.FAFN 4 November 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.11 The current liabilities of CFS Ltd include the following: 2001 2000 Dividends payable $30,000 $25,000 The cash flow statement for the year ended in 2001 shows dividends paid of $27,000.What were the dividends in the profit and loss account for the year ended 2001?A $22,000 B $27,000 C $28,000 D $32,0001.12 S is employed by T Ltd. His pay details for January and February are as follows: January: Gross salary $2,000 Tax $500 National insurance $100 Net pay $1,400 February: Gross salary $2,200 Tax $550 National insurance $110 Net pay $1,540 Tax and national insurance are payable to the government one month after they are deducted from employees’ salaries.How much cash did T Ltd pay out in February in connection with S’s wages?A $2,000 B $2,060 C $2,140 D $2,2001.13 The following is an extract from the balance sheets of FRC plc for the years ended 31 July 2001 and 31 July 2000: 2001 2000 $000 $000 Stock 50 80 Debtors 60 50 Creditors 35 30 Accruals 5 20What figure would appear in the cash flow statement of FRC plc for the year ended 31 July 2001as part of the cash flow from operations?A $25,000 outflowB $10,000 outflowC $10,000 inflowD $25,000 inflow1.14 Which ONE of the following provides the best definition of an "audit trail"?A The marks left by an auditor when a document has been inspected.B The working papers of an auditor.C The pursuit of a fraud by an auditor.D The trail of a transaction from source document to financial statement.November 2001 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.15 N plc purchased a machine for $15,000. The transportation costs were $1,500 and installation costs were $750. The machine broke down at the end of the first month in use and cost $400 to repair. N plc depreciates machinery at 10% each year on cost, assuming no residual value.What is the net book value of the machine after one year, to the nearest dollar?A $13,500 B $14,850 C $15,525 D $15,8851.16 Which ONE of the following might explain the debit balance on a purchase ledger account?A The company took a cash discount to which it was not entitled and paid less than the amount due.B The company mistakenly paid too much.C The book-keeper failed to enter a contra with the sales ledger.D The book-keeper failed to post a cheque paid to the account.1.17 In a period of inflation, which ONE of the following methods of charging stock issues to production will give the lowest profit figure?A Average costB LIFOC FIFOD Replacement cost1.18 Which ONE of the following provides the best explanation of the objective of an internal audit?A The objective is to assist directors of a company in the effective discharge of their financial responsibilities towards the members.B The objective is to provide support to the external auditor.C The objective is to detect fraud and error.D The objective is to audit the financial statements.FAFN 6 November 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.19 The following information at 5 January 2001 relates to a club, which has a year end of 31 December 2000: $ Subscriptions for 1999 unpaid at January 2000 300 Subscriptions for 1999 paid during the year ended 31 December 2000 250 Subscriptions for 2000 paid during the year ended 31 December 2000 6,000 Subscriptions for 2001 paid during the year ended 31 December 2000 1,000 Subscriptions for 2000 unpaid at 31 December 2000 750 It is the club’s policy to write off overdue subscriptions after one year.What amount should be credited to the income and expenditure account for the year ended31 December 2000?A $6,250 B $6,750 C $7,050 D $7,2501.20 Who has the responsibility for ensuring that a company maintains proper accounting records?A The shareholders.B The auditors.C The directors.D The company secretary.1.21 Which ONE of the following formulae correctly expresses the relationship between the return on capital employed (ROCE), net profit margin (NPM) and asset turnover (AT)?A ROCE = NPM ÷ ATB ROCE = NPM + ATC ROCE = NPM x ATD ROCE = NPM - AT1.22 The correct ledger entries to record the issue of 150,000 $1 ordinary shares at a premium of 20% and paid by cheque is: DR CR $ $A Bank 180,000 Share capital 150,000 Share premium 30,000B Bank 180,000 Share premium 180,000C Bank 180,000 Share capital 180,000D Bank 150,000 Share premium 30,000 Share capital 120,000November 2001 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.23 A fixed asset register had a balance of $125,000. A fixed asset, which had cost $12,000, was sold for $9,000 at a profit of $2,000.What is the revised balance on the fixed asset register?A $113,000 B $118,000 C $125,000 D $127,0001.24 M plc’s trial balance did not balance at 31 May 2001. The following errors were discovered: • Insurance of $500 prepaid at 31 May 2000 had not been brought down as an opening balance on the insurance account; • Wages of $5,000 had been incorrectly debited to the purchases account; • The book-keeper had failed to accrue $300 for the telephone invoice owing at 31 May 2001.What was the difference on the trial balance?A $500 B $800 C $5,500 D $5,8001.25 S is a builder who has numerous small items of equipment. He calculates his depreciation using the revaluation method. At the beginning of his financial year he valued his equipment at $10,250; he bought equipment costing $3,450 and he sold equipment valued at $2,175. At the end of his financial year he valued his equipment at $8,000.What is his depreciation charge on equipment for the year?A $2,250 B $3,525 C $5,700 D $11,525 (Total = 50 marks)FAFN 8 November 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 30 MARKSANSWER BOTH QUESTIONSQuestion TwoThe balances extracted from the nominal ledger of RHG Ltd for the year ended 31 July 2001were as follows: $Stock of raw materials at 1 August 2000 4,000Work-in-progress at 1 August 2000 2,000Stock of finished goods at 1 August 2000 8,000Direct factory wages 60,000Office salaries 50,000Directors salaries 40,000Purchases of raw materials 90,000Depreciation charge on factory machinery 35,000Depreciation charge on office machinery 15,000Factory overheads 35,000Advertising 18,000Sales 450,000Factory machinery 400,000Office machinery 200,000Provision for depreciation on factory machinery at 31 July 2001 90,000Provision for depreciation on office machinery at 31 July 2001 30,000Debtors 40,000Creditors 7,000Bank overdraft 3,00010% debenture 80,000Issued share capital: ordinary shares of $1 250,000Share premium account 25,000Profit and loss account reserve 62,000The valuation of stock at 31 July 2001 was as follows: • raw materials $3,000 • work-in-progress $1,500 • finished goods $6,000Required:(a) prepare a manufacturing, trading and profit and loss account for the year ended 31 July 2001 and a balance sheet at that date. (14 marks)November 2001 9 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • (b) Calculate: • the gearing ratio; (2 marks) • debtor days; (2 marks) • finished goods stock days. (2 marks) (Total = 20 marks)Question ThreeThe following information relates to C Ltds cash book and bank statement on 30 June 2001. $ Balance in the cash book (Cr) 2,250 Bankings in the cash book, not on the bank statement 5,300 Bank charges on the bank statement, not in the cash book 450 Unpresented cheques less than six months old 7,500 Unpresented cheque more than six months old, to be cancelled 800 Standing order from a customer on the bank statement, not in the cash 3,600 bookRequired:(a) Calculate the balance on the bank statement at 30 June 2001. (5 marks)The following information relates to D Ltd for the month of July 2001. $ Sales ledger balances at 1 July 18,300 Sales day book 150,500 Bad debts written off 12,100 Cheques received from debtors 130,400 Set off against purchase ledger 6,500 Cheques dishonoured 2,700Required:(b) Prepare a sales ledger control account for July 2001, carrying down the balance at 31 July 2001. (5 marks) (Total = 10 marks)FAFN 10 November 2001 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION C – 20 MARKSANSWER ONE QUESTION ONLYQuestion Four(a) Identify four potential user groups of financial statements. (4 marks)(b) Explain why user groups in general need accounting information, and state the information they require. Choose two examples of user groups and give the specific information they require and the purpose for which they would require it. (8 marks)(c) Identify and explain three characteristics of useful financial information. (8 marks) (Total = 20 marks)Question FiveExplain each of the following four accounting concepts, and give an example of its application:(a) Going concern. (5 marks)(b) Accruals. (5 marks)(c) Consistency. (5 marks)(d) Prudence (or conservatism). (5 marks) (Total = 20 marks) End of paperNovember 2001 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • ExaminationQuestion andAnswer Book Write here your full examination number Centre Code: Hall Code: Desk Number:Foundation Level Financial Accounting Fundamentals1 FAFN 22 May 2002 Day 3 – morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsTHIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.Sufficient space has been provided for you to write your answers, and also for workings where questionsrequire them. For section B questions, you must write your answers in the shaded space provided.Additional blank pages (20-23) are included towards the back of this booklet if you require more space fornotes or workings. Please note that you will NOT receive marks for your workings. Do NOT remove anysheets from this booklet: cross through neatly any work that is not to be marked. Avoid the use ofcorrection fluid.You are allowed three hours to answer this question paper. All questions are compulsory.Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-11)Answer the THREE questions in section B (these are on pages 12-19)You are advised to spend 10 minutes reading through the paper before starting to answer the questions.You should spend no more than 85 minutes in total answering the ONE question in section A, which has25 sub-questions.You should spend no more than 85 minutes in total answering the THREE questions in section B.Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leavethe examination hall with this booklet.Do NOT write your name or your student registration number anywhere on this booklet. TURN OVERFor office use only Total One Two Three FourMarks awarded (First marker) for each questionMarks awarded (Second marker) for each question© The Chartered Institute of Management Accountants 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer. REQUIRED: Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question. If you wish to change your mind about an answer, block out your first answer completely and then circle another letter. You will NOT receive marks if more than one letter is circled. Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space has been provided for you to do your workings where these sub-questions require them.Question One1.1 An imprest system isA accounting computer software.B an audit process.C automatic agreement of the cash book and bank statement.D a method of controlling petty cash.1.2 Which ONE of the following is correct?A All limited companies are required by law to have an external audit.B Only public limited companies are required by law to have an external audit.C Only limited companies above a certain size are required by law to have an external audit.D An external audit for a limited company is voluntary.For office use only Total 1.1 1.2Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionFAFN 2 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.3 At 31 March 2001, accrued rent payable was $300. During the year ended 31 March 2002, rent paid was $4,000, including an invoice for $1,200 for the quarter ended 30 April 2002. What is the profit and loss account charge for rent payable for the year ended 31 March 2002?A $3,300 B $3,900 C $4,100 D $4,700 Space for workings to 1.31.4 The responsibility for internal control rests withA the internal auditors.B the external auditors.C the shareholders.D the directors.1.5 The annual insurance premium for S Ltd for the period 1 July 2001 to 30 June 2002 is $13,200, which is 10% more than the previous year. Insurance premiums are paid on 1 July. What is the profit and loss account charge for insurance for the year ended 31 December 2001?A $11,800 B $12,540 C $12,600 D $13,200 Space for workings to 1.5 TURN OVERFor office use only Total 1.3 1.4 1.5Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionMay 2002 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.6 A bank reconciliation showed the following differences between the bank statement and the cash book: Unpresented cheques of $750 Outstanding deposits of $500 Bank charges of $100 If the balance on the bank statement is $1,000 overdrawn, what is the balance in the cash book before any adjustments?A Debit $250 B Credit $1,150 C Credit $1,250 D Credit $1,500 Space for workings to 1.61.7 Which ONE of the following expenses should be included in prime cost in a manufacturing account?A Repairs to factory machinery.B Direct production wages.C Office salaries.D Factory insurance.For office use only Total 1.6 1.7Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionFAFN 4 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.8 The entries in a sales ledger control account are: Sales $250,000 Bank $225,000 Returns $2,500 Bad debts $3,000 Returned unpaid cheque $3,500 Contra purchase ledger account $4,000 What is the balance on the sales ledger control account?A $12,000 B $19,000 C $25,000 D $27,000 Space for workings to 1.81.9 A Ltd has an item in stock which cost $1,000 and can be sold for $1,200. However, before it can be sold, it will require to be modified at a cost of $150. The expected selling costs of the item are an additional $100. How should this item be valued in stock?A $950 B $1,000 C $1,050 D $1,100 Space for workings to 1.9 TURN OVERFor office use only Total 1.8 1.9Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionMay 2002 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.10 A “value for money audit” isA an external audit with limited scope.B a review of expenditure to ensure effectiveness, efficiency and economy.C a voluntary audit by an unregistered auditor.D none of these.1.11 Which ONE of the following statements regarding a fixed assets register is NOT correct?A A fixed assets register enables reconciliations to be made with the nominal ledger.B A fixed assets register enables depreciation charges to be posted to the nominal ledger.C A fixed assets register agrees with the fixed asset nominal ledger account.D A fixed assets register records the physical location of an asset.1.12 B Ltd purchased a machine for $120,000 on 1 October 2001. The estimated useful life is 4 years with a residual value of $4,000. B Ltd uses the straight-line method for depreciation and charges depreciation on a monthly basis. What is the charge for depreciation for the year ended 31 December 2001?A $7,250 B $7,500 C $29,000 D $30,000 Space for workings to 1.12For office use only Total 1.10 1.11 1.12Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionFAFN 6 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.13 In the quarter ended 31 March 2002, C Ltd had VAT taxable outputs, net of VAT, of $90,000 and taxable inputs, net of VAT, of $72,000. If the rate of VAT is 10%, how much VAT is due?A $1,800 receivable B $2,000 receivable C $1,800 payable D $2,000 payable Space for workings to 1.131.14 Which of the following statements concerning a "true and fair" view is correct?A True and fair has a precise definition which is universally accepted.B There can only be one true and fair view of a companys financial statements.C True and fair means the financial statements are accurate.D True and fair is mainly determined by compliance with generally accepted accounting practice.1.15 The M Club discloses the following note to its Income and Expenditure Account: "Subscriptions in arrears are accounted for when received; subscriptions in advance are accounted for on a matching basis." At 31 March 2001, there were subscriptions owing of $1,000 and subscriptions in advance of $500. During the year ended 31 March 2002, subscriptions of $10,000 were received, including subscriptions relating to the previous year of $800 and subscriptions in advance of $600. What amount should be included for subscriptions in the year ended 31 March 2002?A $8,100 B $8,900 C $9,100 D $9,900 Space for workings to 1.15 TURN OVERFor office use only Total 1.13 1.14 1.15Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionMay 2002 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.16 The total cost of salaries charged to the profit and loss account isA the total gross salaries plus employers national insurance contributions.B the total gross salaries.C the total net salaries.D the total net salaries plus employers national insurance contributions.1.17 The segregation of duties isA delegation of duties by a manager.B two staff sharing one job.C a feature of internal control.D all of the above.1.18 The net profit percentage in a company is 12% and the asset turnover ratio is 2. What is the return on capital employed?A 6% B 10% C 14% D 24% Space for workings to 1.181.19 Which of the following are used in a coding system for accounting transactions?A Department code.B Nominal ledger code.C Product code.D All of the above.For office use only Total 1.16 1.17 1.18 1.19Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionFAFN 8 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.20 APM Ltd provides the following note to fixed assets in its balance sheet. Plant and machinery Cost Depreciation Net book value $000 $000 $000 Opening balance 25 12 13 Additions/charge 15 4 11 Disposals (10) (8) (2) Closing balance 30 8 22 The additional machinery was purchased for cash. A machine was sold at a profit of $2,000. What is the net cash outflow for plant and machinery?A $9,000 B $11,000 C $13,000 D $15,000 Space for workings to 1.201.21 Which of the following errors will cause the trial balance totals to be unequal?A Errors of transposition.B Errors of omission.C Errors of principle.D All of the above. TURN OVERFor office use only Total 1.20 1.21Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionMay 2002 9 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.22 Which ONE of the following is a record of prime entry?A The nominal ledger.B The sales ledger.C The trial balance.D The sales day book.1.23 P is a sole proprietor whose accounting records are incomplete. All the sales are cash sales and during the year $50,000 was banked, including $5,000 from the sale of a business car. He paid $12,000 wages in cash from the till and withdrew $2,000 per month as drawings. The cash in the till at the beginning and end of the year was $300 and $400 respectively. What were the sales for the year?A $80,900 B $81,000 C $81,100 D $86,100 Space for workings to 1.231.24 Which of the following is NOT helpful in detecting an error?A A bank reconciliation.B A sales ledger control account.C An imprest system.D A suspense account.For office use only Total 1.22 1.23 1.24Marks awarded (First marker) for each sub-questionMarks awarded (Second marker) for each sub-questionFAFN 10 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.25 Which ONE of the following is an appropriation by a limited company?A Directors salaries.B Dividends.C Donation to a charity.D Loan interest. (Total = 50 Marks) End of Section A Section B begins on page 12 TURN OVERFor office use only Total 1.25Marks awarded (First marker) for the sub-questionMarks awarded (Second marker) for the sub-questionMay 2002 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 50 MARKSANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR CORRECTLY COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS INDICATED, BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.Question TwoThe bookkeeper at QME plc has prepared the trial balance set out below from the nominal ledger. Theaccountant has prepared a schedule of adjustments which need to be made before the financial statementscan be prepared.The trial balance of QME plc at 31 December 2001 was as follows: $000 $000Buildings – at cost 250Provision for depreciation on buildings 70Equipment at cost 200Provision for depreciation on equipment 50Patent – at valuation 150Stock at 1 January 2001 60Debtors/creditors 100 25Provision for doubtful debts at 1 January 2001 5Bank 30Sales 800Purchases 25010% Debentures 100Debenture interest paid 5Interim dividend 10Directors remuneration 40Administration expenses 130Selling and distribution expenses 160Ordinary shares of 50 cents each 200Profit and loss account reserve 50General reserve 25 1,355 1,355FAFN 12 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Schedule of adjustments:(i) Stock at 31 December 2001 was valued at $70,000.(ii) Accruals: Administration expenses $30,000.(iii) Prepayments: Selling and distribution expenses $20,000.(iv) The 10% Debenture was issued in 1999, redeemable 2006.(v) The provision for doubtful debts is to be increased to 8% of debtors.(vi) The buildings are revalued at $300,000 and this revised value is to be included in the accounts.(vii) Depreciation: Buildings: 2% of revised value Equipment: 20% of net book value at the year end.(viii) In September 2001, $30,000 taxation was paid. The tax advisers estimate that the taxation for the year ended 31 December 2001 will be $10,000, but accounts have not yet been submitted to the tax authorities.(ix) The directors declare a final dividend of 5 cents per share.(x) The directors decide to transfer $15,000 to the general reserve.Required: Do not write in these(a) Complete the missing figures and words (in the shaded boxes) of the columns below financial statements set out below. For use For use by the by the Marks second first QME plc available marker marker Trading, Profit and Loss and Appropriation Account Year ended 31 December 2001 $000 $000SalesCost of salesGross profit 1Administration expensesSelling and distribution expensesDoubtful debts 1Depreciation charge 1Directors’ remunerationOperating profit 1Debenture interest 1Profit before taxTaxationProfit after taxDividend 1Transfer to general reserveRetained profit 1 The Balance Sheet is overleaf TURN OVERMay 2002 13 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Space for workings and/or notes for Question Two For use For use by the by the QME plc – Balance Sheet at 31 December 2001 second first Marks available marker marker $000 $000 $000 Cost orFixed assets Depreciation valuation 1Current assets 1Current liabilities 1Capital and Reserves 2 Sub-total: 12FAFN 14 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • (b) The accountant at QME plc is preparing a report to the directors on the financial statements. The report will include key ratios. Do not write in theseRequired: columns belowComplete the missing words below (in the shaded boxes): For use For use by the by the Marks second first available marker marker Stock days = / x 365 1 Debtor days = / x 365 1 Sub- total: 2(c) How would the financial statements of QME plc change if: (i) the accruals concept was not applied? (Use no more than 30 For use For use words, in the shaded area below) by the by the Marks second first available marker marker 3 (ii) the going concern concept was not applied? (Use no more than For use For use 30 words, in the shaded area below) by the by the Marks second first available marker marker 3 Question Two Total = 20 Marks Section B continues overleaf TURN OVERMay 2002 15 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question ThreeThe accountant and the sales ledger clerk at ILT Ltd met to discuss the debtors on 28 February 2001. Thesales ledger clerk reported that:• the debtors in the ledger were: $25,000• in his opinion the following debts were bad: A Ltd $1,000 B Ltd $1,500• he considered the following debts doubtful: X Ltd $1,250 Y Ltd $1,750 Z Ltd $2,200The accountant decided to write off the bad debts, make a specific provision for all the doubtful debts, andmake a general provision of 5% at 28 February 2001.The accountant and the sales ledger clerk met again on 28 February 2002. The sales ledger clerk reportedthat:• the debtors in the ledger were $30,000• in his opinion the following debts were bad: X Ltd $1,250 L Ltd $1,200• he considered the following debts doubtful: Y Ltd $1,750 P Ltd $900• the following had paid their debts in full: A Ltd $1,000 Z Ltd $2,200The accountant decided to write off the bad debts, make a specific provision for all the doubtful debts, andmake a general provision of 5% at 28 February 2002.Required: Please do not write in(a) Complete the missing information (in the shaded boxes) from the these columns below schedule set out below which was prepared by the accountant. For use For use by the by the Marks second first Schedule of bad and doubtful debts available marker marker 28/2/ 28/2/ 2001 2002 $ $ $ $ Debtors 25,000 30,000 Bad debts written off 1 Specific provision for doubtful debts Debtors after bad debts and 1 specific provision General provision for 1 doubtful debts Total doubtful debts 1 Sub- Total: 4 The bookkeeper will enter the information from the accountant’s schedule into the ledger accounts.FAFN 16 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • (b) Complete the missing information for the period 1 March 2001 to 28 February 2002 in the two ledger accounts set out below, by Please do not write in completing the relevant shaded boxes. these columns below For use For use by the by the Marks second first Bad debts account available marker marker $ $ 3 For use For use by the by the Provision for doubtful debts account Marks second first available marker marker $ $ 3 Sub- total: 6 Question Three Total = 10 Marks Space for workings and/or notes for Question Three Section B continues overleaf TURN OVERMay 2002 17 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question FourQ is a sole trader who has been trading for one year. He informs you that at the beginning of the year he had$10,000 in his bank account and that at the end of the year he had $12,000. He also informs you that hisrevenue was $40,000 and his expenditure $38,000. He therefore believes that his profit must be $2,000 andasks for your advice.You reply that in order to calculate his profit you need to know whether he had any other assets and liabilitiesat the beginning and end of the year and whether the revenue and expenditure included any capital items.Q is confused by these terms and asks you to explain them to him. Please do not write inRequired these columns below(a) Define the four terms in no more than 30 words each using the For use For shaded areas below. by the use by Marks second the first available marker marker (i) Asset 2 (ii) Liability 2 (iii) Capital receipt 2 (iv) Capital expenditure 2 Sub- total: 8 Part (b) of Question Four is on page 19FAFN 18 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below Required For use For by the use by Marks second the first available marker marker(b) Give an example of each of the four terms you have defined above and explain why it conforms to your definition in no more than 30 words each in the shaded areas below. (i) Asset 3 (ii) Liability 3 (iii) Capital receipt 3 (iv) Capital expenditure 3 Sub-total: 12 Question Four Total = 20 Marks End of Question Paper TURN OVER FOR ADDITIONAL SPACE FOR WORKINGS AND NOTESMay 2002 19 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • You may use this sheet for workings(no marks are awarded for workings)FAFN 20 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • You may use this sheet for workings(no marks are awarded for workings)May 2002 21 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • You may use this sheet for workings(no marks are awarded for workings)FAFN 22 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • DO NOT WRITE ON THIS SHEETMay 2002 23 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1 FAFN Financial Accounting Fundamentals Day 3 – morningFAFN 24 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • ExaminationQuestion andAnswer Book Write here your full examination number Centre Code: Hall Code: Desk Number:Foundation Level Financial Accounting Fundamentals1 FAFN 20 November 2002 Day 3 – morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsTHIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.Sufficient space has been provided for you to write your answers, and also for workings where questionsrequire them. For section B questions, you must write your answers in the shaded space provided. Do notexceed the stated number of words. Please note that you will NOT receive marks for your workings.You are allowed three hours to answer this question paper. All questions are compulsory.Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-13)Answer the THREE questions in section B (these are on pages 14-21)You are advised to spend 10 minutes reading through the paper before starting to answer the questions.You should spend no more than 85 minutes in total answering the ONE question in section A, which has25 sub-questions.You should spend no more than 85 minutes in total answering the THREE questions in section B.Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leavethe examination hall with this booklet.Do NOT write your name or your student registration number anywhere on this booklet. The Chartered Institute of Management Accountants 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer. REQUIRED: Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question. If you wish to change your mind about an answer, block out your first answer completely and then circle another letter. You will NOT receive marks if more than one letter is circled. Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space has been provided for you to do your workings where these sub-questions require them.Question One1.1 Which ONE of the following best describes the stewardship function?A Ensuring high profits.B Managing cash.C Ensuring the recording, controlling and safeguarding of assets.D Ensuring high dividends to shareholders.1.2 External auditors are primarily responsible forA writing a report to the shareholders expressing an opinion on the financial statements.B preparing the financial statements.C detecting errors and fraud.D ensuring that the accounts show a true and fair view.FAFN 2 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.3 At the year end of SED Ltd in December 2000, a journal entry was raised to accrue for utility expenses of $3,600. This journal entry was reversed in January 2001. During the year ended December 2001, $30,000 was paid for utility expenses, of which $4,000 was prepaid at the year end. The charge to the profit and loss account for utility expenses for the year ended December 2001 wasA $22,400B $29,600C $30,400D $37,600 Space for workings to 1.31.4 Z Limited’s cash book shows a credit balance of $2,200. A comparison with the bank statement showed the following: • unpresented cheques totalling $600; • receipts of $1,200 not yet cleared by the bank; • bank charges of $300 not entered in the cash book; • a cheque from a customer for $400, which had been entered in the cash book when received, has now been returned by the bank as "dishonoured". The balance on Z Limited’s bank statement isA overdrawn $2,100B overdrawn $2,300C overdrawn $2,900D overdrawn $3,500 Space for workings to 1.4November 2002 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.5 The role of the internal auditors is best described asA auditing the financial accounts.B supporting the work of the external auditors.C reporting to management on the accounting systems.D ensuring value for money.1.6 On the first day of Month 1, a business had prepaid insurance of $10,000. On the first day of Month 8, it paid, in full, the annual insurance invoice of $36,000, to cover the following year. The amount charged in the profit and loss account and the amount shown in the balance sheet at the year end is: Profit and loss account Balance carried forward $ $A 5,000 24,000B 22,000 23,000C 25,000 21,000D 36,000 15,000 Space for workings to 1.61.7 In a manual accounting system, the most important reason for extracting a trial balance prior to preparing financial statements is thatA it proves the arithmetical accuracy of the ledgers.B it provides a summary of the financial statements.C it proves the individual ledger accounts are correct.D it reveals how errors have been made.FAFN 4 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.8 JSL Ltd operates the imprest system for its petty cash with a float of $750. At the end of July, the cashier prepared a spreadsheet for the petty cash expenses with a total column and analysis columns. A cash voucher for petrol for $50 was incorrectly entered as $5 in the total column and also in one of the analysis columns in the spreadsheet. The total column was posted to the cash account, the analysis columns were posted to the relevant nominal ledger accounts and cash was drawn from the bank for the total of the cash expenditure on the spreadsheet. The effect of this error would beA a petty cash balance of $705.B petrol expenses overstated by $45.C an imbalance on the trial balance.D a petty cash balance of $750. Space for workings to 1.81.9 Financial statements are required to show a true and fair view. Which ONE of the following statements is the most appropriate explanation of a true and fair view?A The accounts are approved by the shareholders.B The accounts are set out in the correct format.C The accounts conform to accounting concepts and conventions.D The accounts comply with generally accepted accounting practice.November 2002 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.10 SSG Ltd bought a machine for $40,000 in January 1998. The machine had an expected useful life of six years and an expected residual value of $10,000. The machine was depreciated on the straight-line basis. In December 2001, the machine was sold for $15,000. The company has a policy in its internal accounts of combining the depreciation charge with the profit or loss on disposal of assets. The total amount of depreciation and profit/loss charged to the internal profit and loss account over the life of the machine wasA $15,000B $20,000C $25,000D $30,000 Space for workings to 1.101.11 DEF plc has a supplier, M Ltd, and the balance on M Ltd’s purchase ledger account at 31 July 2002 was a credit balance of $2,000. On 5 August 2002, DEF plc received the July statement from M Ltd showing a balance due of $3,000. The purchase ledger supervisor investigates the difference and discovers that: • an invoice for $2,000 from M Ltd dated 31 July was not entered in the purchase ledger account until 3 August 2002, but appears on M Ltd’s July statement. • a cheque for $600 sent from DEF plc to M Ltd on 25 July 2002 in payment of a July invoice does not appear on M Ltd’s July statement. This cheque was presented by M Ltd on 31 July 2002. The purchase ledger supervisor at DEF plc contacts the sales ledger supervisor at M Ltd and correctly says that there is a difference between the ledger accounts ofA $400B $1,000C $1,400D $1,600 Space for workings to 1.11FAFN 6 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.12 On 1 October 2002, the debtors’ balance at G Ltd was $80,000. A summary of the transactions in the month of October is set out below. $ Cheques received 100,000 Contra creditors 6,000 Sales 90,000 Returns inwards 4,000 Discounts allowed 10,000 The debtors’ balance at 31 October wasA $50,000B $58,000C $62,000D $70,000 Space for workings to 1.121.13 Financial controls are primarily needed toA minimise the risk of fraud and error.B comply with legal requirements.C improve the efficiency of the business.D reduce the expense of the external auditors.November 2002 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.14 The internal auditor at ILT plc has noticed that cheques from customers are being paid into the bank account approximately one month after the date on the cheque. Should the internal auditorA instruct the cashier to pay cheques in more promptly?B disregard, because all cheques have been accounted for?C ask customers to pay more promptly?D inform senior management there may be a fraud?1.15 SAD plc paid £240,000 in net wages to its employees in August 2002. Employees’ tax was £24,000, employees’ national insurance was £12,000 and employer’s national insurance was £14,000. Employees had contributed £6,000 to a pension scheme and had voluntarily asked for £3,000 to be deducted for charitable giving. The amount to be charged to the profit and loss account in August 2002 for wages isA £285,000B £293,000C £296,000D £299,000 Space for workings to 1.151.16 Which ONE of the following attributes is the most important for any code to possess in order to be of use in an accounting system?A Easy to change the code number.B Each code is a unique number.C A combination of letters and digits to ensure input accuracy.D Linked to assets, liabilities, income, expenditure and capital.FAFN 8 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.17 Which of the following functions would most benefit from segregated duties of staff?A Separate staff to maintain the sales and purchase ledgers.B Separate staff to maintain the personal and nominal ledger accounts.C Separate staff to deal with the bank reconciliation and the cash book.D Separate staff to deal with the trial balance and the preparation of accounts.1.18 At the beginning of Period 6, XYZ Ltd had opening stock of 20 units of product X valued at $4·00 each. During Period 6, the following stock movements occurred: Day 5 Sold 15 items for $5·00 each Day 10 Bought 8 items for $6·00 each Day 14 Sold 12 items for $7·00 each Using the FIFO method of stock valuation, the closing stock at the end of Period 6 wasA $5·00B $5⋅50C $6·00D $7·00 Space for workings to 1.18November 2002 9 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • The following information is required for sub-questions 1.19 to 1.21 The accounts for SPA plc are set out below. Profit and loss account for the year ended 30 November 2002 $000 $000 Turnover 5,000 Opening stock 200 Purchases 3,100 Closing stock (300) Cost of sales (3,000) Gross profit 2,000 Operating expenses (500) Operating profit 1,500 Balance sheet at 30 November 2002 $000 $000 Fixed assets 3,000 Current assets Stock 300 Debtors 900 Bank 50 1,250 Current liabilities Trade creditors (250) 1,000 4,000 Share capital 2,000 Profit and loss account 2,000 4,000 Space for workings for 1.19 to 1.21 Questions 1.19 to 1.21 are on the next pageFAFN 10 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.19 The return on capital employed in SPA plc isA 75·0%B 37·5%C 50·0%D 100·0%1.20 The fixed asset turnover ratio in SPA plc isA 1 : 1·67B 1·25 : 1C 2·5 : 1D 1·67 : 11.21 The quick ratio (acid test ratio) in SPA plc isA 2·4 : 1B 3·8 : 1C 4·8 : 1D 5·1 : 1November 2002 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.22 The year end for ABC Ltd is July 2002 and in that month a company car was stolen. The net book value of the company car was $8,000, but the company expects the insurance company to pay only $6,000. The correct journal entry to record this information was entered in the books in July 2002. In August 2002 the insurance company sent a cheque for $6,500. The journal entry to record this is: Dr Cr $ $A Bank 6,500 Sundry debtor 6,500B Bank 6,500 Sundry debtor 6,000 Disposal of fixed assets account 500C Bank 500 Disposal of fixed assets account 500D Bank 500 Sundry debtor 500 Space for workings to 1.221.23 The trial balance of EHL plc does not balance and the debits exceed the credits by $2,300. The following errors are discovered: • the single column manual cash book receipts column was undercast by $600; • discount received of $400 had been debited to the interest payable account; • the proceeds of $1,000 on the sale of a fixed asset had been credited to sales. Following the correction of these errors, the balance on the suspense account would beA Cr $900B Cr $2,100C Cr $3,700D Dr $2,100 Space for workings to 1.23FAFN 12 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.24 At the beginning of the year in GHI Ltd, the opening work-in-progress was $240,000. During the year, the following expenditure was incurred: $ Prime cost 720,000 Factory overheads 72,000 The closing work-in-progress was 350,000 The factory cost of goods completed during the year wasA $538,000B $610,000C $682,000D $902,000 Space for workings to 1.241.25 In July 2002, a company sold goods at standard value added tax (VAT) rate with a net value of £200,000, goods exempt from VAT with a value of £50,000 and goods at zero VAT rate with a net value of £25,000. The purchases in July 2002, which were all subject to VAT, were £161,000, including VAT. Assume that the rate of VAT is 15%. The difference between VAT input tax and VAT output tax isA Dr £9,000B Cr £5,850C Cr £9,000D none of these. Space for workings to 1.25 (Total = 50 Marks)November 2002 13 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 50 MARKSANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS INDICATED, BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS. DO NOT EXCEED THE STATED NUMBER OF 30 WORDS IN THE SHADED BOXES. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.Question TwoS owns a small business and keeps all the accounting records himself on a computer using basic accountingsoftware. He does not understand financial statements and therefore never uses this part of the software. Hedoes, however, regularly print out the analysis of the receipts and payments in and out of his bank account.Unfortunately, his computer was stolen and his accountant now wants to prepare his accounts.The accountant has the balance sheet at 31 July 2001, the previous year end, and this is set out below. Balance sheet at 31 July 2001 $ $ $ Fixed assets (net book value) Vehicles 50,000 Machinery 25,000 75,000 Current assets Stock 12,000 Debtors 19,000 Provision (1,000) 18,000 Prepayment advertising 3,000 Bank 1,000 34,000 Current liabilities Trade creditors (16,000) Accrual – vehicle expenses (1,000) (17,000) Net current assets 17,000 92,000 Long-term liabilities Loan 10% (10,000) 82,000 Capital 82,000FAFN 14 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • The accountant has asked S for some additional information and S has prepared the following schedule.1. The following payments appeared on the bank statement in the year ended 31 July 2002: $ Payments to suppliers 135,000 (S takes a cash discount of 10% on invoice amount on all payments to suppliers.) Wages 15,000 Vehicle expenses 9,000 New vehicle 12,000 General expenses 8,000 Advertising 3,000 (this includes a prepayment of $1,000) Loan interest 500 ($500 was paid on 1 August 2002) Drawings 20,000 (S also took goods from the business worth $2,000) 202,5002. The following receipts appeared on the bank statement in the year ended 31 July 2002: $ Receipts from sales 215,000 Sale of old vehicle 2,000 217,0003. The following amounts relate to cheques dated before 31 July 2002, but not presented by that date: $ General expenses 600 Vehicle expenses 3004. At 31 July 2002: $ debtors were 21,000 after excluding bad debts of $2,000 creditors were 18,000 stock was 10,000The accountant has the following information on his file: (i) The net book value of the old vehicle which was sold was $3,000. (ii) Depreciation is charged on the net book value at the year end: Vehicles 25% Machinery 20% (iii) A general provision is made for doubtful debtors of 5% of debtors, after bad debts have been written off.Space for workings to Question Two The requirements for question two are on the next pageNovember 2002 15 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Two continued Do not write in these columns belowRequired: For use For use by the by the Marks first second available marker marker (a) Prepare the profit and loss account for the year ended 31 July 2002 and the balance sheet at that date by completing the shaded areas in the financial statements below and on the next page. S Profit and Loss account for the year ended 31 July 2002 $ $ Sales 2 Opening stock 12,000 Purchases 2 Closing stock 10,000 Cost of goods sold Gross profit Discount received 1 Less: Expenses Wages 15,000 Vehicle expenses 1 /2 General expenses 1 /2 Advertising 1 /2 Loan interest 1 /2 Depreciation 1 1 /2 Charge for doubtful debts 1 Bad debt 1 /2 Loss on sale of vehicle 1 /2 Profit for the year Sub-total: 1 10 /2Space for workings to Question TwoFAFN 16 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • S Balance sheet at 31 July 2002 For use For use by the by the $ $ $ Marks first second available marker marker Fixed assets (net book value) Vehicles 1 Machinery 1 /2 Current assets Stock 10,000 Debtors 21,000 Provision 1 Prepayment 1 /2 Bank 1 Current liabilities Trade creditors 18,000 Accrual 1 /2 Net current assets Long-term liabilities Loan 10% (10,000) Capital Capital at 1 August 2001 82,000 Profit for the year ended 1 31 July 2002 Drawings 1 Capital at 31 July 2002 Sub-total: 61/2 (b) After S’s financial statements had been prepared, S attended a meeting with his accountant to discuss them. S is surprised that the $2,000 he received when he sold his old vehicle does not appear in the financial statements. Explain to S, (in the shaded area below), why the $2,000 does not appear in the financial statements. 3 (Maximum of 30 words) Total Marks for Question Two = 20 Question Two Total = 20 MarksNovember 2002 17 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question ThreeThe Directors of M plc employ a book-keeper who prepares draft accounts for them using accountingsoftware. They are pleased that they have made a profit for the year ended 30 June 2002, but do notunderstand why the cash balances have decreased. They have asked you, as an independent accountant,to prepare a cash flow statement.The draft financial statements for M plc are set out below. Profit and loss account for the year ended 30 June 2002 $000 Turnover 1,670 Cost of sales (870) Gross profit 800 Operating expenses (415) Depreciation (250) Loss on sale of fixed asset (5) Operating profit 130 Interest (15) Dividends (70) Retained profit for year 45 Balance sheets at 30 June 2002 2001 $000 $000 $000 $000 Fixed assets (see note) 980 700 Current assets Stock 70 65 Debtors 175 215 Bank and cash 50 65 295 345 Current liabilities Trade creditors (100) (85) Fixed asset creditor (20) 0 Accrued interest (5) (10) Dividends (65) (60) (190) (155) Net current assets 105 190 1,085 890 Long-term liability Loan (200) (250) 885 640 Share capital 700 600 Share premium account 100 0 Profit and loss account 85 40 885 640Note: M plc purchased fixed assets for $550,000 during the year ended 30 June 2002.FAFN 18 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Please do not write in these columns below Required: For use For use by the by the Marks first second available marker marker(a) Prepare a cash flow statement for M plc for the year ended 30 June 2002 by completing the shaded areas as necessary in the cash flow statement below. Cash flow statement M plc year ended 30 June 2002 $000 1 Operating profit /2 Adjustments for non-cash items 1 /2 1 /2 Adjustments for working capital 1 /2 1 /2 1 /2 Cash from operations 1 Interest /2 Purchase of fixed assets 1 Sale of fixed assets 1 1 Dividends /2 1 Share capital /2 1 Loan /2 Movement in cash Sub- total: 7(b) What do you, as the independent accountant, consider is the main reason for the decrease in the cash balance? (Maximum of 30 words) 3 Total Marks for Question Three = 10 Question Three Total = 10 MarksNovember 2002 19 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question FourD has been an accountant for many years. He had always understood thatthe historical cost convention was important in the preparation of thefinancial statements. However, he has recently been attending a series oflectures on accounting and many of the speakers have referred to a move to Please do not write incurrent cost accounting. He is keen to update his knowledge and has asked these columns belowyou to explain some terms to him. For use For use Required: by the by the (Maximum of 30 words for each explanation) Marks first second available marker marker(i) Define "historical cost accounting" 3(ii) Give an example to illustrate the use of historical cost accounting 2(iii) Define "net realisable value" 2(iv) Give an example to illustrate the use of net realisable value 2(v) Define "current cost accounting" 2FAFN 20 November 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Four continued Do not write in these columns below For use For use Required: by the by the (Maximum of 30 words for each explanation) Marks first second available marker marker(vi) Define "economic value" 3(vii) Explain the effect on historical cost profit and asset values if current cost accounting is used rather than historical cost accounting, assuming rising prices. 3(viii) Define "capital maintenance" 3 Total Marks for Question Four = 20 Question Four Total = 20 Marks End of Question PaperNovember 2002 21 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • ExaminationQuestion andAnswer Book Write here your full examination number Centre Code: Hall Code: Desk Number:Foundation Level Financial Accounting Fundamentals1 FAFN 21 May 2003 Wednesday morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsTHIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.Sufficient space has been provided for you to write your answers, and also for workings where questionsrequire them. For section B questions, you must write your answers in the shaded space provided. Pleasenote that you will NOT receive marks for your workings. Do not exceed the stated number of words. DoNOT remove any sheets from this booklet: cross through neatly any work that is not to be marked. Avoidthe use of correction fluid.You are allowed three hours to answer this question paper. All questions are compulsory.Answer the ONE question in section A (this has 25 sub-questions and is on pages 2-12)Answer the THREE questions in section B (these are on pages 13-19)You are advised to spend 10 minutes reading through the paper before starting to answer the questions.You should spend no more than 85 minutes in total answering the ONE question in section A, which has25 sub-questions.You should spend no more than 85 minutes in total answering the THREE questions in section B.Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leavethe examination hall with this booklet.Do NOT write your name or your student registration number anywhere on this booklet. The Chartered Institute of Management Accountants 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer. REQUIRED: Place a circle “O” around the letter A, B, C or D that gives the correct answer to each sub-question. If you wish to change your mind about an answer, block out your first answer completely and then circle another letter. You will NOT receive marks if more than one letter is circled. Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space has been provided for you to do your workings where these sub-questions require them.Question One Do not write in these columns below1.1 After the profit and loss account for Z Ltd had been prepared, it was found that For use For use accrued expenses of $1,500 had been omitted and that closing stock had been by the by the overvalued by $500. first second marker marker The effect of these errors is anA overstatement of net profit of $1,000B overstatement of net profit of $2,000C understatement of net profit of $1,000D understatement of net profit of $2,000FAFN 2 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.2 The cashier is reconciling his company’s cash book with the bank statement at For use For use 31 March 2003. by the by the first second marker marker $ The firm’s cash book shows a debit balance of 12,350 The following information is available: Bank charges not entered in the cash book 170 Unpresented cheques 4,600 Direct debit payment on the bank statement not entered in the 230 cash book Sales receipts banked, but not credited by the bank 9,400 A cheque from a customer which had previously been entered in 110 the cash book when received, has been returned by the bank as “dishonoured”, and this has not been recorded in the cash book What should be stated as the bank balance in the company’s balance sheet at 31 March 2003?A $11,840B $12,060C $12,860D $16,640 For use For use by the by the first second marker marker1.3 Which ONE of the following is true?A External auditors normally check all purchase invoices.B External auditors should prepare the accounts.C External auditors must follow the audit procedures prepared by the internal auditors.D External auditors check the internal control system.May 2003 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.4 D is preparing the accounts for A Ltd for the year ended 31 March 2003. The For use For use most recent gas bill received by A Ltd was dated 6 February 2003 and related by the by the to the quarter 1 November 2002 to 31 January 2003, and the amount of the bill first second was $2,100. marker marker Which ONE of the following ledger entries should be made in A Ltd’s books at 31 March 2003? Debit CreditA Accruals NIL Gas expense NILB Gas expense $1,400 Accruals $1,400C Accruals $1,400 Gas expense $1,400D Gas expense $2,100 Accruals $2,1001.5 The following information related to Q plc for the year ended 28 February 2003: For use For use by the by the first second marker marker $ Prime cost 122,000 Factory overheads 185,000 Opening work-in-progress at 1 March 2002 40,000 Factory cost of goods completed 300,000 The closing work-in-progress at 28 February 2003 wasA $33,000B $40,000C $47,000D $54,0001.6 N Ltd, which is registered for VAT, received an invoice from an advertising For use For use agency for $4,000 plus VAT. The rate of VAT on the goods was 17⋅5%. The by the by the correct ledger entries are: first second marker marker Debit $ Credit $A Advertising expense 4,000 Creditors 4,000B Advertising expense 4,700 Creditors 4,700C Advertising expense 4,700 Creditors 4,000 VAT account 700D Advertising expense 4,000 Creditors 4,700 VAT account 700FAFN 4 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.7 E Ltd received an invoice for the purchase of fixed asset equipment which was For use For use credited to the correct supplier’s ledger account, but debited to the equipment by the by the repairs account, instead of the equipment account. first second marker marker The effect of not correcting this error on the financial statements would be:A Profit would be overstated and fixed assets would be understated.B Profit would be overstated and fixed assets would be overstated.C Profit would be understated and capital would be overstated.D Profit would be understated and fixed assets would be understated.1.8 H Ltd began trading on 1 July 2001. The company is now preparing its For use For use accounts for the accounting year ended 30 June 2002. Rates are charged for a by the by the tax year, which runs from 1 April to 31 March, and were $1,800 for the year first second ended 31 March 2002 and $2,000 for the year ended 31 March 2003. Rates marker marker are payable quarterly in advance, plus any arrears, on 1 March, 1 June, 1 September and 1 December. The charge to H Ltd’s profit and loss account for rates for the year ended 30 June 2002 isA $1,650B $1,700C $1,850D $1,9001.9 The return on capital employed for S plc is 24% and the net asset turnover ratio For use For use is 3 times. by the by the first second marker marker What is the net profit margin?A 8%B 28%C 72%D It cannot be calculated.May 2003 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.10 Which ONE of the following would NOT help detect errors in a computerised For use For use accounting system? by the by the first second marker markerA The use of coding systems.B The use of batch processing.C The use of passwords.D The use of control accounts.1.11 The total cost of salaries charged to a limited company’s profit and loss account For use For use is by the by the first second marker markerA cash paid to employees.B net pay earned by employees.C gross pay earned by employees.D gross pay earned by employees, plus employer’s national insurance contributions.1.12 Which ONE of the following statements is TRUE? For use For use by the by the first second marker markerA Internal auditors report to the directors.B External auditors report to the directors.C Internal auditors are employed by the shareholders.D External auditors are employees of a company.FAFN 6 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.13 The following is the aged debtors analysis for J Ltd at 30 April 2003: For use For use by the by the first second marker marker Age of debt Less than 1 1-2 months 2-3 months Over 3 month months Amount ($) 12,000 24,000 8,000 6,000 The company provides for doubtful debts as follows: Provision 0% 1% 10% 30% The doubtful debt provision at 1 May 2002 brought forward was $2,880. The entry for doubtful debts in the profit and loss account for the year ended 30 April 2003 and the net debtors figure in the balance sheet at that date should be: Profit and loss account Balance sheetA $40 credit $47,160B $40 debit $47,160C $2,840 debit $50,000D $2,840 credit $47,1601.14 The following information relates to companies Q plc and R plc, who are For use For use competitors selling widgets: by the by the first second marker marker Q plc R plc Gross profit percentage 30% 25% Fixed asset turnover ratio 4 5 A director at Q plc believes that these ratios indicate that: (i) Q plc has a higher selling price. (ii) Q has lower purchasing costs. (iii) R plc has lower sales volume. (iv) R plc has fewer fixed assets. Which of the above are possibly true based on the information provided?A (i) only.B (i) and (ii) only.C (i), (ii) and (iii) only.D (i), (ii), (iii) and (iv).May 2003 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.15 The prime cost of goods manufactured is the total of For use For use by the by the first second marker markerA raw materials consumed.B raw materials consumed and direct wages.C raw materials consumed, direct wages and direct expenses.D raw materials consumed, direct wages, direct expenses and production overheads.1.16 On 1 May 2003, E Ltd owed a supplier $1,200. During the month of May, E Ltd: For use For use by the by the first second marker marker • purchased goods for $1,700 and the supplier offered a 5% discount for payment within the month. • returned goods valued at $100 which had been purchased in April 2003. • sent a cheque to the supplier for payment of the goods delivered in May. The balance on the supplier’s account at the end of May 2003 isA $1,015B $1,100C $1,185D $1,3001.17 The main advantage of using a sales ledger control account is that For use For use by the by the first second marker markerA double entry book-keeping is not necessary.B it helps in detecting errors.C it helps with credit control.D it ensures that the trial balance will always balance.FAFN 8 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.18 The following information relates to J Ltd for the year ended 30 April 2003: For use For use by the by the first second marker marker $000 Retained profit for the year 28,000 Net cash inflow from operating activities 26,000 Dividend paid 3,000 Profit on sale of fixed assets 1,000 Proceeds on sale of fixed assets 5,000 Taxation paid 2,000 Interest paid 4,000 Payments for fixed assets 8,000 Issue of debentures 6,000 The cash flow statement will showA a decrease in cash of $13,000.B an increase in cash of $14,000.C an increase in cash of $20,000.D an increase in cash of $22,000.1.19 Which of the following is an “appropriation of profit” in a limited company? For use For use by the by the first second marker markerA Interest paid.B Dividend paid.C Directors’ remuneration.D Retained profit.May 2003 9 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.20 N operates an imprest system for petty cash. On 1 February 2003, the float For use For use was $300. It was decided that this should be increased to $375 at the end of by the by the February 2003. first second marker marker During February, the cashier paid $20 for window cleaning, $100 for stationery and $145 for coffee and biscuits. The cashier received $20 from staff for the private use of the photocopier and $60 for a miscellaneous cash sale. What amount was drawn from the bank account for petty cash at the end of February 2003?A $185B $260C $315D $3751.21 An audit trail in a computerised accounting system is For use For use by the by the first second marker markerA information regarding all transactions in a period.B a history of all transactions on a ledger account.C a list of all transactions checked by the internal auditor.D a list of all transactions automatically posted from day books to ledgers.1.22 The following are extracts from the financial statements for the year ended 31 For use For use January 2003 of M plc: by the by the first second marker marker $000 Issued Ordinary shares of $1 200 Share premium account 50 Profit and loss account 25 Debenture 80 Profit before interest for the year ended 31 January 2003 60 What is the return on total capital employed?A 17%B 22%C 24%D 30%FAFN 10 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.23 The following information was extracted from the balance sheets of Z Ltd at For use For use 31 December 2002 and at 31 December 2001: by the by the first second marker marker 2002 2001 $000 $000 Stock 100 140 Debtors 150 130 Trade creditors 125 115 Other creditors 60 75 What figure should appear as part of the cash flow statement for the year ended 31 December 2002?A $25,000 outflowB $15,000 outflowC $15,000 inflowD $25,000 inflow1.24 In order to confirm that financial statements show a true and fair view, the For use For use external auditor should ensure that the financial statements comply with by the by the first second marker markerA company law.B accounting standards.C generally accepted accounting principles.D all of the above.May 2003 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • 1.25 S Ltd purchased equipment for $80,000 on 1 July 2002. The company’s For use For use accounting year end is 31 December. It is S Ltd’s policy to charge a full year’s by the by the depreciation in the year of purchase. S Ltd depreciates its equipment on the first second reducing balance basis at 25% per annum. marker marker The net book value of the equipment at 31 December 2005 should beA NilB $25,312C $29,531D $33,750 For Marking Purposes Only – Total Marks for Question One (Total = 50 Marks) End of Section AFAFN 12 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 50 MARKSANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.Question TwoThe treasurer at the WV Golf Club has presented a receipts and payments account at the annual generalmeeting for many years. However, at the annual general meeting this year a member proposed that anincome and expenditure account be prepared in its place. After a discussion, the members agreed with thisproposal. The treasurer does not know how to prepare an income and expenditure account and has givenyou, an accountant, his most recent receipts and payments account, which is set out below. WV Golf Club – Receipts and payments account year ended 31 March 2003 $ $ Receipts Annual subscriptions 42,400 Shop sales 10,000 Deposits for golfing holiday 600 53,000 Payments Wages 35,000 Shop supplies 7,500 Ground maintenance 6,000 Rent 1,400 Lawnmower 900 Repairs 1,200 52,000 Receipts less payments 1,000 Balance at bank 1 April 2002 4,300 Balance at bank 31 March 2003 5,300The treasurer has provided you with the following additional information:(i) The subscriptions are as follows: $ Annual subscriptions received 38,500 Joining fees 1,500 Subscriptions received in advance for year ended 31 March 2004 2,400 Total 42,400 Joining fees are to be apportioned over 5 years. Subscriptions owing for the year ended 31 March 2003 amount to $1,400. The members whose subscriptions are owing have left the club and the treasurer has said that it is unlikely that these members will pay their subscriptions.(ii) The club has decided to organise its first golfing holiday in June 2003. Some members have paid deposits for the holiday, which amount to $600, but the treasurer has said that, unless more members agree to go, he will cancel the holiday and return the deposits.May 2003 13 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • (iii) Other assets and liabilities of the club were estimated as follows: 31 March 31 March 2002 2003 $ $ Employee’s tax owing 500 400 Creditor for shop supplies 750 1,000 Rent paid in advance 200 300 Stock of shop supplies 1,800 1,500 Equipment – at valuation 9,000 8,000 Do not write in these columns belowRequired:(a) Prepare the shop trading account and the income and expenditure For use For useaccount for the year ended 31 March 2003 and the balance sheet by the by the(opposite) at that date by completing the blanks in the financial statements Marks first secondbelow. available marker marker WV Golf Club Shop Trading Account year ended 31 March 2003 $ $Shop gross profit 2 WV Golf Club Income and expenditure account year ended 31 March 2003 $ $IncomeShop trading account – gross profit 3Expenditure 3Surplus/Deficit for the year Sub-total: 8FAFN 14 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Two continued Do not write in these columns below WV Golf Club Balance Sheet year at 31 March 2003 For use For use by the by the Marks first second available marker marker $ $Fixed assetsEquipment 1 /2Current assets 11/2Current liabilitiesNet current assets 2Accumulated funds 4 Sub-total: 8(b) (i) State TWO advantages (in the shaded area below) of a receipts and payments account. (Maximum of 30 words) 2 (ii) Explain ONE advantage (in the shaded area below) of an income and expenditure account compared to a receipts and payments account. (Maximum of 30 words) 2 Sub-total: 4 Question Two Total Marks = 20May 2003 15 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question ThreeThe book-keeper at D Ltd has prepared a trial balance at 31 December 2002, but is unable to complete theaccounts as there were certain transactions during the year which he did not know how to record and,therefore, omitted from the books. He has asked you, the accountant, to prepare the journal entries for thesetransactions.The transactions are as follows:(i) The company bought a new delivery vehicle. The invoice details were as follows: $ Cost of delivery vehicle 10,780 Annual road tax 1,000 11,780 The company paid the invoice by trading in an old van, which had a net book value of $2,500, for an agreed figure of $3,290 and the balance of the money was borrowed from a bank.(ii) In January 2002, the company decided to issue $200,000 ordinary $1 shares at an issue price of $1⋅40. The terms of the issue were: • 70 cents on application, payable February 2002 (which included the premium); • 50 cents on allotment, payable March 2002; • 20 cents on call, payable in September 2002. The book-keeper had recorded all the cash received during the year in the bank account and had recorded the issue of shares in a mispostings account, which he used for transactions for which he did not know the correct ledger accounts for the debit and credit entries.(iii) The stock at the previous year-end was valued at $13,000. However, the store keeper has told the book-keeper during this current year that this figure was not correct and it should have been $11,000, as he counted one item twice.(iv) At the previous year-end, M, a customer who owed $1,600, was considered to be a doubtful debtor. The book-keeper thought there was a fifty per cent chance he might pay and, therefore, made a doubtful debt provision of $800. During the current year, the book-keeper learnt that M is now bankrupt and cannot pay any of his debts.(v) The trial balance shows the cost of land and buildings at $100,000 and the accumulated depreciation at $15,000. The land and buildings have been revalued at $150,000 and the directors wish to record this revaluation in the balance sheet.FAFN 16 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Required: Do not write in these columns belowPrepare the journal entries for the transactions opposite by completing theshaded areas of the schedule below.You are NOT required to write a narrative for each journal. For use For use Dr Cr by the by the Marks first second $ $ available marker markerJournal (i) 2Journal (ii) 2Journal (iii) 2Journal (iv) 2Journal (v) 2 Total: 10 Question Three Total = 10 MarksMay 2003 17 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question FourYou are the senior accountant in a company and in charge of the accounts department.One of your junior staff is very good at book-keeping and you have identified her as a person with potentialfor promotion. You have therefore agreed to pay for her tuition on a financial accounting course. She hasasked you what she will learn apart from book-keeping.Required: For use For use by the by the Marks first second available marker marker(a) State briefly (in the shaded area below) the purpose and contents of EITHER the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements” OR the Accounting Standards Board’s “Statement of Principles for Financial Reporting”. 3(b) Explain (in the shaded area below) the objective of financial statements. 3(c) Describe (in the shaded area below) the characteristics of useful information. 3 Sub-total: 9FAFN 18 May 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Four continuedRequired: For use For use by the by the Marks first second available marker marker(d) Explain (in the shaded areas below) the following accounting concepts: (i) business entity 3(ii) money measurement 3(iii) cost 3(iv) realisation 2 sub-total: 11 Total: 20 Question Four Total = 20 Marks End of Question PaperMay 2003 19 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • ExaminationQuestion andAnswer Book Write your full examination number, your contact ID and your name on a double-sided card, which must be attached to this booklet here.Foundation Level Financial Accounting Fundamentals1 FAFN 19 November 2003 Wednesday morningINSTRUCTIONS TO CANDIDATESRead this page before you look at the questionsTHIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.Sufficient space has been provided for you to write your answers, and also for workings where questionsrequire them. For section B questions, you must write your answers in the shaded space provided. Pleasenote that you will NOT receive marks for your workings. Do not exceed the stated number of words. DoNOT remove any sheets from this booklet: cross through neatly any work that is not to be marked. Avoidthe use of correction fluid.You are allowed three hours to answer this question paper. All questions are compulsory.Answer the ONE question in section A (this has 25 sub-questions)Answer the THREE questions in section BYou are advised to spend 10 minutes reading through the paper before starting to answer the questions.You should spend no more than 85 minutes in total answering the ONE question in section A, which has25 sub-questions.You should spend no more than 85 minutes in total answering the THREE questions in section B.Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leavethe examination hall with this booklet.Do NOT write your name or your contact ID anywhere on this booklet. The Chartered Institute of Management Accountants 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION A — 50 MARKSANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct answer. REQUIRED: Place a circle "O" around the letter A, B, C or D that gives the correct answer to each sub-question. If you wish to change your mind about an answer, block out your first answer completely and then circle another letter. You will NOT receive marks if more than one letter is circled. Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space has been provided for you to do your workings where these sub-questions require them.Question One Do not write in these columns below1.1 A business is normally said to have earned revenue when For use For use by the by the first second marker markerA cash has been received.B a customer is legally obliged to pay for goods delivered or services rendered.C an order has been placed.D goods have been manufactured and placed in stock.FAFN 2 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.2 The following information relates to C Limited at 30 June 2003: For use For use by the by the first second marker marker $ Balance per cash book – credit balance 4,300 Unpresented cheques 1,500 Bank charges not entered in the cash book 300 Receipts not yet credited by the bank 2,600 Dishonoured cheques not yet recorded in the cash book 500What would be the balance shown on the bank statement at 30 June 2003?A Overdraft $6,200B Overdraft $5,100C Overdraft $4,000D Favourable $2,4001.3 The following information relates to NBV Limited for the year ended For use For use 31 July 2003. by the by the first second marker marker $000 Direct materials 160 Direct labour 200 Prime cost 360 Carriage outwards 80 Depreciation of delivery vehicles 30 Factory indirect overheads 450 Increase in work-in-progress stock 75 Decrease in stock of finished goods 55What should be the factory cost of goods completed for the year ended 31 July 2003?A $735,000B $845,000C $885,000D $1,095,000November 2003 3 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.4 Which of the following tests carried out by an external auditor is a compliance For use For use test? by the by the first second marker markerA Confirming authorisation of a reconciliation of the sales ledger control account.B Checking unpresented cheques in a bank reconciliation.C Checking a purchase invoice with the purchase day book.D Inspecting physical existence of fixed assets.1.5 The following information relates to CFS plc: For use For use by the by the first second marker marker Machinery $000 Cost at 1 January 2002 80 Additions 20 Disposal (10) Cost at 31 December 2002 90 Provision for depreciation at 1 January 2002 15 Depreciation charge 8 Disposal (6) Provision for depreciation at 31 December 2002 17 The proceeds on disposal of the machine were $1,000.CFS plc is preparing the cash flow statement for the year ended 31 December 2002.In relation to the items above, what should be the net adjustment to operating profit inorder to determine the net cash flow from operating activities?A Deduct $11,000B Add back $3,000C Add back $5,000D Add back $11,000FAFN 4 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.6 The accountant at S Limited is preparing quarterly accounts for Quarter 3. In For use For use Quarter 2, he had accrued $1,600 for gas and this balance was carried forward by the by the to Quarter 3. In Quarter 3, a gas bill of $2,700 was paid. The accountant has first second accrued $2,400 for gas in Quarter 3. marker markerWhat should be the charge for gas in the profit and loss account for Quarter 3?A $1,900B $2,400C $2,700D $3,5001.7 D plc has a policy that all items of equipment which cost less than $1,000 are For use For use charged to an expense account, rather than a fixed asset account. This is an by the by the example of the application of the concept of first second marker markerA going concern.B materiality.C money measurement.D prudence.1.8 Internal auditors report to For use For use by the by the first second marker markerA the management.B the shareholders.C the external auditors.D the government.November 2003 5 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.9 A Limited is preparing financial statements for the year ended 30 June 2003. For use For use Rent is payable quarterly in advance on 1 February, 1 May, 1 August and by the by the 1 November. The annual charge for rent was $1,800 and $2,400 for the years first second ended 31 January 2003 and 2004 respectively. marker markerWhich of the following ledger entries should be made in A Limited’s accounts?A Rent expense $2,000 Prepayment $400B Rent expense $2,050 Prepayment $200C Rent expense $2,050 Accrual $200D Rent expense $2,100 Prepayment/accrual Nil1.10 T Limited purchased a machine costing $14,000 on 1 August 1999. The For use For use company estimated that the asset had a useful life of 4 years and an expected by the by the residual value of $2,000. The company uses the straight-line method of first second depreciation. The company’s financial year end is 30 November. marker marker It is the company’s policy to charge a full year’s depreciation in the year of purchase and none in the year of disposal. On 1 November 2002, the asset was sold for $4,500.What should be the profit or loss on disposal in the year ended 30 November 2002?A Loss $500B Loss $3,500C Loss $9,500D Profit $500FAFN 6 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.11 The following information is an extract from the balance sheets of DCF plc: For use For use by the by the first second marker marker 31 August 2003 31 August 2002 $000 $000 Stock 20 14 Trade debtors 16 18 Bank 12 10 48 42 Trade creditors (14) (17) 34 25DCF plc is preparing the cash flow statement for the year ended 31 August 2003. Inrelation to the items above, what should be the net adjustment to operating profit inorder to determine the net cash flow from operating activities?A Deduct $1,000B Deduct $2,000C Deduct $7,000D Add back $1,0001.12 Which of the following entries would NOT affect the agreement of the totals in For use For use the trial balance? by the by the first second marker marker (i) An invoice for $300 for rent has been omitted from the ledgers. (ii) A cash sale has been recorded as debit cash sales, credit cash. (iii) An invoice for vehicle expenses has been charged to the vehicle fixed asset account. (iv) A credit note for $500 for goods returned by a customer had been recorded in the correct ledgers, but as $5,000.A (i) onlyB (i) and (ii) onlyC (i), (ii) and (iii) onlyD All of them.November 2003 7 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.13 Which ONE of the following is NOT an intangible fixed asset? For use For use by the by the first second marker markerA GoodwillB TrademarkC InvestmentD Patent1.14 E Ltd bought computer equipment on 1 January 2000 for $24,000 and For use For use estimated that it would have a useful life of five years and a residual value of by the by the $2,000. E Ltd uses the straight-line method of depreciation. On 31 December first second 2001, it now considers that the remaining life is only two years and that the marker marker residual value will be nil.What should be the annual depreciation charge for the years ended 31 December2002 and 2003?A $4,800B $5,500C $6,600D $7,6001.15 A company has a quick (acid test) ratio of 2 : 1. Current assets include stock of For use For use $10,000 and debtors of $6,000. Current liabilities are $4,000. by the by the first second marker markerWhat is the bank balance?A Credit $4,000B Credit $2,000C Debit $2,000D Debit $4,000FAFN 8 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.16 Which of the following does NOT prevent fraud and errors? For use For use by the by the first second marker markerA Authorisation proceduresB Organisation of staffC Suspense accountsD Reconciliations1.17 The BMX cycling club started in January 2001. The following fees were For use For use received in the years ended 31 December 2001 and 2002. There were no fees by the by the received in advance, or fees in arrears, at either year end. first second marker marker 2001 2002 $ $ Joining fees 8,000 10,000 Annual fees 5,000 7,000 Life membership fees 4,000 6,000 17,000 23,000 Joining fees are recognised over a period of 4 years and life membership fees are recognised over 10 years.What should be the total amount of fees recognised in the income and expenditureaccount for the year ended 31 December 2002?A $7,000B $11,500C $12,500D $23,000November 2003 9 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.18 ABC plc declared a final dividend of 5% for the year ended 28 February 2003. For use For use The nominal value of the shares is 50 cents. X bought 1,000 shares at a price by the by the of $4 in December 2002 and the shares were valued at a price of $3 on first second 28 February 2002. marker markerWhat should be the final dividend received by X?A $25B $50C $150D $2001.19 The internal accounts of E Ltd value stock at replacement cost. The For use For use warehouse manager has produced the following schedule for the values of the by the by the three items (X1, X2 and X3) in stock at the year end. first second marker marker First In/ Net realisable Replacement First Out value cost $000 $000 $000 X1 10 20 30 X2 15 11 8 X3 12 14 13 37 45 51At what value should the stock be stated in the statutory financial statements?A $33,000B $37,000C $45,000D $51,0001.20 The job descriptions of staff in the credit control department are normally For use For use segregated because by the by the first second marker markerA lower salaries can be paid.B work is completed more efficiently.C control is facilitated.D staff are less likely to become bored.FAFN 10 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.21 The style of management accounts within an enterprise is determined by For use For use by the by the first second marker markerA company law.B company law and accounting standards.C the shareholders.D the directors.1.22 Which of the following is the best description of current purchasing power For use For use accounting? by the by the first second marker markerA A method of accounting which considers the effects of changing price levels by reference to the retail price index.B A method of adjusting historical cost accounts for the effects of changing price levels by using indices specific to the enterprise.C A method of accounting which uses market values.D A method of accounting which uses economic values (value in use).1.23 The following information relates to P Ltd at 30 September: 2003 2002 $000 $000 Stock of raw materials 60 40 Work-in-progress stock 50 85 Stock of finished goods 20 28 For the year ended 30 September 2003: $000 Purchases of raw materials 710 Manufacturing wages 42 Factory overheads 360 The prime cost of production in the manufacturing account for the year ended For use For use 30 September 2003 is by the by the first second marker markerA $690,000B $732,000C $1,092,000D $1,135,000November 2003 11 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns below1.24 The following information was extracted from the pay slip of J, who received For use For use her net salary in cash for the month ended 31 March 2003: by the by the first second marker marker £ Gross salary 3,000 Tax deducted 450 Employer’s national insurance 300 Employee’s national insurance 250 Employer’s contribution to pension fund 210 Employee’s contribution to pension fund 180 Voluntary deduction for payment to charity 20The charge to the profit and loss account, the balance on the payroll control accountand the net pay for J’s salary for March was Charge to Balance on payroll control Net pay profit and loss account accountA £2,100 £1,410 £2,100B £3,510 £700 £2,300C £3,000 £1,000 £1,590D £3,510 £1,410 £2,1001.25 Which of the following are normally produced in the month-end routine of a For use For use computerised accounting system? by the by the first second marker marker (i) Balances on all ledger accounts at the end of the month (ii) Balances on the debtors’ and creditors’ personal ledgers and the debtors’ and creditors’ control accounts (iii) Balance on stock (inventory) (iv) The profit and loss account and balance sheetA (i) onlyB (i) and (ii) onlyC (i), (ii) and (iii) onlyD All of them. (Total = 50 Marks) End of Section AFAFN 12 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • SECTION B – 50 MARKSANSWER ALL THREE QUESTIONS IMPORTANT MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN. DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.Question TwoVA is a sole proprietor. He employs a book-keeper who uses an accounting software package to produce atrial balance. At the year end, his accountant manually prepares journal entries and asks the book-keeper toenter these into the accounting software package.The trial balance of VA at 31 August 2003 is set out below. Dr Cr $ $ Advertising 8,000 Bank 2,000 Bank loan 20,000 Bank interest 2,000 Capital at 1 September 2002 20,000 Capital introduced 5,000 Carriage outwards 12,000 Computing expenses 10,000 Creditors 20,000 Debtors 30,000 Discount received 3,000 Drawings 33,000 Fixtures at cost 60,000 Power 3,000 Provision for depreciation on fixtures at 1 September 2002 15,000 Provision for doubtful debts at 1 September 2002 1,000 Purchases 240,000 Rent 7,000 Salaries 36,000 Sales 383,000 Stock at 1 September 2002 24,000 467,000 467,000The following additional information has been provided by the book-keeper to the accountant.(i) The stock at 31 August 2003 has been valued at $20,000.(ii) The prepayment for rent at 31 August 2003 is $2,000.(iii) The computer crashed in August 2003. An engineer gave an estimate of $500 to repair the computer, which VA accepted. The engineer repaired the computer in August, but has not yet submitted his invoice.(iv) Depreciation on the fixtures is to be provided for the year ended 31 August 2003 on the reducing balance basis at 1/3 per annum.(v) The provision for doubtful debts is to be 5% of the debtors.November 2003 13 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns belowRequired: (a) For use For use by the by the Marks first second available marker marker(1) Prepare the journal entries for the information in items (i) to (v) on page 20. Use the journal schedule set out below and complete the name of the ledger account and the amount of the debit and credit in the shaded areas. You are NOT required to write a narrative for the journal entries. Ledger account Dr Cr $ $ (i) 1 (ii) 1 (iii) 1(iv) 1 (v) 1 sub-total: 5FAFN 14 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Required: (a) For use For use by the by the Marks first second available marker marker(2) Prepare the accounts for VA for the year ended 31 August 2003 by completing the shaded areas in the accounts below. VA Trading, Profit and Loss Account year ended 31 August 2003 $ $SalesGross profit 2 1 /2Less: Expenses 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2Net profit sub-total: 7November 2003 15 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Two continued Do not write in these columns below For use For use by the by the Marks first second available marker marker VA Balance Sheet at 31 August 2003 $ $ $Fixed Asset Cost Provision for depreciation 1Current Assets 1 /2 1 /2 1 /2 1 /2 1 /2Current Liabilities 1 /2Net Current AssetsLong-term Liability 1 /2Capital at 1 September 2002 1 /2 1 /2 1 /2Capital at 31 August 2003 Sub-total: 6(b) VA is considering converting his business into a limited liabilitycompany. He has asked his accountant about the differences between theaccounts of a sole proprietor and those of a limited liability company.His accountant explained that one of the differences is that the accounts ofa limited liability company must show a true and fair view.You are required to explain the meaning of a “true and fair view” in theshaded area below. (maximum of 30 words) Sub-total: 2 Question Two Total = 20 MarksFAFN 16 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question ThreeAll transactions with customers of PFI Limited are recorded in personal accounts in the sales ledger, and thesales ledger control account is part of the double entry in the nominal ledger.The following information relates to transactions with customers for the month ended 31 October 2003. $ Sales ledger control account balance at 1 October 2003 20,000 Credit sales 200,000 Cheques received from customers 175,000 Discounts allowed 4,000 Returns inwards 5,000 Bad debts written off 7,000 Interest charged on debtors’ accounts overdue 500 Contra with the purchase ledger control account 3,000 Cheque received relating to a debt which had previously been written off as bad 600 Total of the balances on personal accounts in the sales ledger at 31 October 2003 24,500 Required: For use For use(a) Prepare the sales ledger control account by entering the description by the by the and the appropriate amount of the debit or credit in the schedule Marks first second below. available marker marker Sales ledger control account Dr Cr Description $ $ 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 1 /2 Sub-total: 5(b) The following errors were subsequently discovered:(i) The total of the sales day book had been over-cast by $1,000.(ii) A discount allowed of $500 had been correctly entered in a debtor’s personal account in the sales ledger, but no other entries in the books had been made.(iii) A credit note of $800 for goods returned had been correctly entered in the sales ledger control account, but had not been entered in the debtor’s personal account in the sales ledger.(iv) NHS is both a customer of and supplier to PFI Limited. A contra of $1,200 between NHS debtor’s account in the sales ledger and creditor’s account in the purchase ledger had been omitted from the books.(v) The schedule of the balances on the personal accounts in the sales ledger had been under-cast by $1,300.November 2003 17 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Do not write in these columns belowRequired:Prepare a statement reconciling the sales ledger control account and the For use For usetotal of the balances on the personal accounts in the sales ledger by by the by theentering a description and the appropriate amount in the shaded areas of Marks first secondthe schedule below. available marker marker Sales ledger Total of Description control balances on account personal accounts in the sales ledger $ $Original balances at 31 October 2003 24,500 1 1 1 1 1Revised balances at 31 October 2003 Sub-total: 5 Question Three Total = 10 MarksFAFN 18 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question FourThe objective of the financial statements of an enterprise is to provide information about the financialposition, performance and financial adaptability of that enterprise which is useful to a wide range of users forassessing the stewardship of management and for making economic decisions. For use For useRequired: by the by the Marks first second available marker marker(a) (i) State the financial statement which provides information about the financial position of an enterprise and describe its key components. State why this information may be useful to users. (maximum of 30 words) 4(ii) State the financial statement which provides information about the performance of an enterprise and describe its key components. State why this information may be useful to users. (maximum of 30 words) 4(iii) State the key components of a cash flow statement. State why this information may be useful to users. (maximum of 30 words) 4(b) (i) Give two examples of users of financial statements. (maximum of 30 words) 2 Sub-total: 14November 2003 19 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
    • Question Four continued For use For use Required: by the by the Marks first second available marker marker(ii) Give one example of an economic decision based on accounting information that may be made by each of two different categories of users of financial statements. (maximum of 30 words) 3(c) Explain the meaning of the term “stewardship”. (maximum of 30 words) 3 Sub-total: 6 Question Four Total = 20 Marks End of Question PaperFAFN 20 November 2003 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com