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

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

  1. 1. 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. (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
  23. 23. 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
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. 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
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. (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
  39. 39. 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
  40. 40. (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
  41. 41. 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
  42. 42. 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
  43. 43. 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
  44. 44. 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
  45. 45. 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
  46. 46. DO NOT WRITE ON THIS SHEETMay 2002 23 FAFN FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
  47. 47. 1 FAFN Financial Accounting Fundamentals Day 3 – morningFAFN 24 May 2002 FOR FREE CIMA, ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com
  48. 48. 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
  49. 49. 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
  50. 50. 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
  51. 51. 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
  52. 52. 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
  53. 53. 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
  54. 54. 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

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