CIMA Fundamentals of Financial Accounting 3

Question 1

A sole trader's drawings of $15,000 during the year would appear in the financial statements as:

Accepted Answer

A deduction from capital in the balance sheet

Answer

Drawings are not an expense; they represent the owner withdrawing capital, so they reduce the capital balance in the balance sheet.

Question 2

The double-entry for recording a bad debt written off is:

Accepted Answer

Debit Bad Debt Expense, Credit Accounts Receivable

Answer

Writing off a bad debt removes the receivable (credit) and recognizes the loss as an expense (debit Bad Debt Expense).

Question 3

Which inventory valuation method assigns the cost of the most recently purchased items to cost of goods sold first?

Accepted Answer

LIFO

Answer

LIFO (Last In, First Out) assumes that the most recently purchased inventory is sold first, resulting in higher COGS during inflationary periods.

Question 4

A prepayment of $3,600 rent paid on October 1 for 12 months would result in what balance sheet entry at December 31?

Accepted Answer

Prepaid expense of $2,700

Answer

Three months of rent ($900) has been expensed by December 31, leaving 9 months × $300 = $2,700 as a prepaid (current asset) on the balance sheet.

Question 5

The trial balance of a company shows total debits of $500,000 but total credits of $492,000. This most likely indicates:

Accepted Answer

A transposition error or omission of a $8,000 credit entry

Answer

An $8,000 difference in the trial balance suggests a missing credit entry or a transposition error (e.g., $80,000 entered as $72,000) causing an imbalance.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Fundamentals of Financial Accounting 3