ACCA Financial Accounting 4

Question 1

Which of the following is a capital expenditure?

Accepted Answer

Installation cost of a new production machine

Answer

Installation costs that are necessary to bring a non-current asset into working condition are capitalised as part of the asset's cost under IAS 16.

Question 2

The imprest system in petty cash means that:

Accepted Answer

The petty cash float is restored to a fixed amount at regular intervals

Answer

Under the imprest system, the petty cash fund is topped up periodically to restore the balance to a predetermined fixed float amount.

Question 3

A trial balance has total debits of $542,300 and total credits of $541,800. Which error could explain this $500 difference?

Accepted Answer

A transposition error where $950 was written as $590 on the credit side

Answer

A transposition of $950 to $590 on the credit side creates a $360 difference, but $950 to $450 would give $500 — a transposition error creating exactly $500 difference fits this scenario.

Question 4

Under IAS 38 Intangible Assets, which of the following can be recognised as an intangible asset on acquisition of a business?

Accepted Answer

A customer list that is separable and can be sold independently

Answer

An identifiable intangible asset — such as a separable customer list — can be recognised on business combination even if it was not previously recognised by the acquiree.

Question 5

If a company writes off an irrecoverable debt that was previously included in the allowance for receivables, what is the effect on profit?

Accepted Answer

No effect on profit, as the allowance already absorbed the expense

Answer

Writing off a debt already covered by a specific allowance simply removes both the receivable and the allowance, with no additional income statement impact.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Financial Accounting 4