FREE ACCA F3 (Management Accounting) Questions and Answers

Question 1

According to IAS 10 occurrences After the Reporting Period, which of the following occurrences would typically be considered modifying events following the reporting?

1. A credit customer's bankruptcy if they have an outstanding balance at the conclusion of the reporting period
2. A decrease in investments' market value
3. The declaration of an ordinary dividend
4. The determination of the cost of assets purchased before the end of the reporting period.

Accepted Answer

1 and 4 only

Answer

IAS 10 defines adjusting events as those providing evidence of conditions that existed at the end of the reporting period. A credit customer's bankruptcy (1) indicates an impairment existing at year-end, and the determination of asset costs (4) confirms the value of an existing asset. A decrease in investments' market value (2) and dividend declarations (3) typically reflect conditions arising after the period, making them non-adjusting events.

Question 2

Out of the above, which is the true statement regarding intangible assets?

1. Research expenditure has to be recorded as an intangible asset if certain requirements are satisfied.
2. For every form of intangible asset, the gross carrying amount and the cumulative amortization at the start and end of the period should be disclosed in the financial statements' notes.
3. Intangible assets must be amortized over their useful life.

Accepted Answer

2 and 3 only

Answer

Statement 1 is false because research expenditure is generally expensed, while development expenditure can be capitalized if specific criteria are met. Statements 2 and 3 are true: IAS 38 requires disclosure of gross carrying amount and cumulative amortization for intangible assets, and intangible assets with a finite useful life must be amortized over that life to reflect the consumption of their economic benefits.

Question 3

Regarding the transactions of Razil, a lone proprietor who neglects to maintain accurate accounting records, the following details are accessible.

Opening inventory --> $77,000
Closing inventory --> $84,000
Purchases --> $763,000

Gross profit as a percentage of sales --> 30%

Based on this information, what is Razil's sales revenue for the year?

Accepted Answer

$1,080,000

Answer

First, calculate the Cost of Goods Sold (COGS): Opening Inventory ($77,000) + Purchases ($763,000) - Closing Inventory ($84,000) = $756,000. Since gross profit is 30% of sales, COGS represents 70% of sales (100% - 30%). Therefore, Sales Revenue = COGS / 0.70 = $756,000 / 0.70 = $1,080,000.

Question 4

Out of the following assertions, which one is true?

1. If there is a reasonable chance that they may materialize, contingent assets are recorded as assets in financial accounts.

2. If it is likely that contingent liabilities will arise, then financial statements must account for them.

3. Notes in the financial statements are used to disclose material non-adjusting events.

Accepted Answer

2 and 3

Answer

Statement 1 is false because contingent assets are not recognized in financial statements due to prudence, only disclosed if probable. Statement 2 is true: contingent liabilities are recognized as provisions if an outflow of resources is probable and reliably estimable. Statement 3 is also true: material non-adjusting events must be disclosed in the notes to the financial statements if they are significant.

Question 5

The receivables ledger control account serves which THREE of the following purposes?

Accepted Answer

A receivables ledger control account helps to locate errors in the trial balance

Answer

A receivables ledger control account provides a summary total of all individual customer balances, allowing for a check on the arithmetical accuracy of the personal ledger accounts. Discrepancies between the control account balance and the sum of individual ledger balances indicate errors, which can help locate errors in the trial balance. Furthermore, control accounts can deter fraud by requiring reconciliation and providing an independent check on the detailed records.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

FREE ACCA F3 (Management Accounting) Questions and Answers