Foundations level
Recording Financial
Transactions
(FA1)
Mock Exam 2 – Questions
Time allowed:
2 hours
This exam contains 50 questions each worth 2 marks,
100 marks in total.
All questions are compulsory.
©2023 ACCA. All rights reserved
This exam contains 50 questions each worth 2 marks, 100 marks in total.
All questions are compulsory.
1
A business has a balance on its Trade Receivables account of $87,500 at the end of August.
What does this mean?
A
B
C
D
2
Total sales for August were $87,500
Credit sales for August were $87,500
The business owes suppliers $87,500 at the end of August
Customers owe the business $87,500 at the end of August
A business received a supplier statement showing an outstanding balance of $637.
However, the business has not yet received an invoice for $84, and payment was sent
yesterday by cheque to the supplier for $432.
What would be the amount recorded as owing to the supplier in the supplier’s
account?
A
B
C
D
3
$289
$1,153
$205
$121
Business A has the following information about transactions conducted with Business B
during May.
Credit sales
Remittances received
Credit notes issued
$5,000
$4,500
$500
If there was no opening balance, what balance should appear on the month-end
statement of account?
A
B
C
D
4
Which statement is true?
A
B
C
D
5
$1,000
Nil
$2,000
$500
Every transaction must be recorded in two ledger accounts
If the trial balance balances, the financial statements must be accurate
A suspense account is always included in the trial balance
The financial statements are prepared from the trial balance
A business has recorded the credit purchase of office furniture as an expense.
Which statements are true?
(i)
(ii)
(iii)
(iv)
Assets are overstated
Expenses are overstated
Assets are understated
Expenses are understated
A
B
C
D
i) and ii)
iii) and iv)
i) and iv)
ii) and iii)
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2
6
A motor vehicle purchase for $4,300 was correctly debited to the motor vehicle asset
account but incorrectly debited to the cash book as $3,400.
Which journal entry would correctly adjust for this error?
A
B
C
D
7
DR Suspense $900
CR Bank $900
DR Suspense $7,700
CR Bank $7,700
DR Suspense $3,400
CR Bank $3,400
DR Suspense $4,300
CR Bank $4,300
A business sells goods with a list price of $7,000 to a customer. The customer is entitled to
a 5% discount for payment within seven days. The customer pays half of the amount two
weeks later.
What remaining amount should the business record as outstanding from the
customer?
A
B
C
D
8
$3,500
$3,325
$3,675
$3,725
Business A is a credit customer of Business B. Business A says that a statement of account
sent by Business B with a balance of $50,000 is incorrect because a credit note of $2,000
and remittance advice of $15,000 have not been included.
What should be the correct balance on the statement of account?
A
B
C
D
9
$63,000
$37,000
$33,000
$67,000
A business is owed $10,000 by its credit customers at the beginning and $30,000 at the
end of the month. The customers paid the business $40,000 during the month.
What were the business's credit sales?
A
B
C
D
10
Which ledger account records goods returned by credit customers?
A
B
C
D
11
$20,000
$50,000
$70,000
$60,000
Sales
Sales Returns
Purchase
Purchase Returns
An employee's wages vary weekly depending on the number of units produced.
What is the basis on which the employee is paid?
A
B
C
D
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Overtime
Piecework
Unitised
Piecework hours
3
12
Charlie is paid a basic hourly rate of $12. If his weekly hours exceed 38, he receives an
overtime rate of 150% of the basic hourly rate. In addition, he receives a productivity bonus
of $25 if he produces more than 100 units weekly.
If the employer deducts tax at 20%, what is Charlie's net pay for a week in which
he works 42 hours and produces 106 units?
A
B
C
D
13
Which of the following are not details shown in the journal?
A
B
C
D
14
15
$423.20
$553.00
$447.40
$442.40
Journal reference
Ledger accounts to be removed
Description of the journal entry
Ledger account to be debited and credited
Which transactions require journal entries?
(i)
(ii)
The transfer of an asset into a business by its owner
Writing off an irrecoverable debt
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
Clive offers the following three discounts to his customers:
5% for bulk purchase
2% for regular customers
3% for early settlement of invoices
All customers are expected to take advantage of the early settlement discounts.
When Clive calculates sales to be recorded in his financial statements, which
discounts should be deducted?
A
B
C
D
16
17
1 only
1 and 2 only
3 only
1, 2 and 3
Why must a business take extra care when accounting for payroll?
(i)
Employers effectively act as tax collectors and have statutory responsibilities in
most countries
(ii)
The accuracy of wages is a matter of great sensitivity for employees
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
A business’s petty cash box contains payment vouchers totalling $457 and
receipts vouchers of $84. If the business has an imprest amount of $750, how
much cash should the cashier have found in the petty cash box?
A
B
C
D
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$1,291
$750
$377
$84
4
18
Which statement is true about petty cash?
A
B
C
D
19
21
Reimbursement of a taxi fare
Drawings
Purchase of a non-current asset
Supplier refunds
(i)
When paying casual labour through petty cash, there is no obligation to deduct
income tax
(ii)
There should be limits on the amount of petty cash held and the maximum
allowable petty cash payment.
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
Which document is NOT used to verify a supplier invoice for inclusion in the
Purchase ledger account?
Delivery note
Goods received note
Purchase order
Cheque requisition
Which item is a current liability?
A
B
C
D
23
payments do not have sales tax
float remains fixed at the start of each month
tin must be balanced at the end of each day
vouchers are the source documents recorded therein
Which statements are correct?
A
B
C
D
22
cash
cash
cash
cash
Which is most likely paid using petty cash?
A
B
C
D
20
Petty
Petty
Petty
Petty
Bank loan payable in 1 year
Interest charges on a loan
Bank (statement balance in credit)
Trade payables
A business needs to make a substantial payment to purchase an item of machinery. The
supplier requires payment before delivery.
Which method of payment is most appropriate for this purpose?
A
B
C
D
24
Cash
Cheque
Direct credit transfer
Direct debit
One of a business's suppliers offers a 5% settlement discount for invoices settled within 30
days. The business has also negotiated a 10% trade discount from the supplier.
The settlement discount is not recorded on the purchase date.
How will the business record the payment if it buys goods with a list price of
$7,400 and pays after 20 days? (Ignore sales tax)
A
B
C
D
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DR
DR
DR
DR
Trade
Trade
Trade
Trade
Payables
Payables
Payables
Payables
$6,660,
$7,400,
$7,400,
$6,660,
CR
CR
CR
CR
Cash
Cash
Cash
Cash
$6,327,
$6,327,
$6,290,
$6,290,
CR
CR
CR
CR
Discounts
Discounts
Discounts
Discounts
Received
Received
Received
Received
$333
$1,073
$1,110
$370
5
25
Which is true in respect of business cheques?
A
B
C
D
26
They always require two signatories
Any employee can sign
Only individuals on the bank mandate can sign
All directors of a company can sign
Alice is responsible for processing all purchase transactions. Before she processes a
purchase invoice for payment, she completes a checklist to ensure all checks have been
carried out.
Which would appear on the purchase invoice checklist?
27
(1)
(2)
(3)
(4)
(5)
Checked against the purchase order
Checked against the delivery note
Calculations checked
Customer account code entered for posting
General ledger account code entered for posting
A
B
C
D
1 and 2 only
3, 4 and 2 only
1, 2, 3 and 5 only
1, 2 3, 4 and 5
Gavin is a sole trader. During the year ended 31 December 20X6, he received a salary from
the business.
In which ledger account should his salary be debited?
A
B
C
D
28
Drawings
Business Expenses
Cost of Sales
Bank
The bank reconciliation of a business has uncovered the following:

a cheque written to a supplier of $341 has not been cashed

cheques paid yesterday totalling $836 have not yet cleared into the business's
account.

a cheque written for $1,270 was recorded as $1,720.
If the cash account balance was DR $8,923 before the reconciliation, what was
the balance on the business's bank statement?
A
B
C
D
29
DR $8,878
CR $8,878
DR $9,868
CR $9,868
Which best describes the segregation of duties concerning receiving payments?
A
Two members of staff should go to the bank to deposit receipts
B
Different individuals should record monies received each week
C
The person receiving and counting monies received should not also be responsible
for recording them
D
Incoming mail should be opened in the presence of a second employee
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6
30
Edward’s insurance company makes monthly deductions from his bank account to pay his
insurance premium.
What is this type of deduction known as?
A
B
C
D
31
Standing order
Direct debit
BACS payment
Cheque payment
Colin is starting a new business as a sole trader, and the business has taken out a loan
from the bank for $10,000. He has also paid $2,500 of his own money into the business
bank account and used it to purchase a van for $1,000.
What is the balance on Colin's capital account?
A
B
C
D
32
$10,000
$2,500
$1,500
$12,500
What may debit entry to a general ledger account relate to?
A
B
C
D
33
A
A
A
A
decrease
decrease
decrease
decrease
in
in
in
in
an expense
an asset
a liability
drawings
A business's Trade Payables ledger had a total balance of $5,400 at the start of May. In
May, the business purchases goods to the value of $8,200, half of which is for cash, and
sends cheques to suppliers totalling $3,000, only $2,500 of which have been presented at
the month’s end.
What is the balance of the business's Trade Payables ledger at the end of May?
A
B
C
D
34
$11,100
$10,600
$7,000
$6,500
A business is registered for sales tax and buys goods from a supplier. The business's
purchase net of sales tax of 20% was $31,000.
What are the necessary accounting entries?
A
B
C
D
35
DR
DR
DR
DR
Sales Tax $6,200, DR Purchases $31,000, CR Payables $37,200
Payables $37,200, CR Purchases $31,000, CR Sales Tax $6.200
Purchases $31,000, CR Payables $31,000
Purchases $37,200, CR Payables $37,200
The trial balance of Chief failed to balance. Total debit balances were $842,000, and total
credit balances were $821,700.
A suspense account was opened for the difference, and the following error was found and
corrected:

A discount of $4,300 for prompt settlement of a credit purchase had not been posted
to the Discount Received ledger.
After correcting this error, what will the remaining balance be on the suspense
account?
A
B
C
D
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$16,000
$16,000
$24,600
$24,600
Dr
Cr
Dr
Cr
7
36
A business owes a supplier $6,400 for goods supplied. The supplier is also a customer that
owes the business $3,850.
The business and its supplier/customer have agreed to net off their respective amounts
owed.
What entries to the business’s general ledger would correctly reflect the net off?
A
B
C
D
37
Trade
Trade
Trade
Trade
Payables $3,850, CR Trade Receivables
Receivables $3,850, CR Trade Payables
Payables $6,400, CR Trade Receivables
Receivables $6,400, CR Trade Payables
$3,850
$3,850
$6,400
$6,400
If a business's liabilities increase by $20,000 and capital falls by $5,000, what
must be the change in total assets?
A
B
C
D
38
DR
DR
DR
DR
Increase of $15,000
Decrease of $15,000
Increase of $25,000
Decrease of $25,000
A business commences business in June. Its sales account from the general ledger at the
end of June is as follows.
Dr.
Sales Account (Income)
Sales Return
$100
Cr.
Cash
$250
Trade Receivables
$800
What is the brought-down balance at the start of July?
A
B
C
D
39
40
CR $1,050
DR $1,050
DR $950
CR $950
If a business takes advantage of an early settlement discount, which statements
are true?
(i)
(ii)
It increases purchases
It increases net assets
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
A business discovers that a customer has become bankrupt. The customer owes the
business $2,360.
If the sales tax is 20%, what accounting entries are necessary?
A
B
C
D
41
DR
DR
DR
DR
Irrecoverable
Irrecoverable
Irrecoverable
Irrecoverable
debts $2,360, CR Receivables $2,360
debts $1,888, DR Sales tax $472, CR Receivables $2,360
debts $2,360, CR Sales tax $393.33, CR Receivables $1,966.67
debts $1,966.67, DR Sales tax $393.33, CR Receivables $2,360
A cash purchase of $529 was entered into a business's accounting system as $259.
What error is this?
A
B
C
D
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Compensating error
Error of principle
Transposition error
Reversal error
8
42
A credit sale of $34,562 was posted as $35,462 in error, debiting Sales and crediting the
Trade Receivables account.
What entry would be made to correct this error? (Ignore sales tax)
A
B
C
D
43
DR
DR
DR
DR
Trade
Trade
Trade
Trade
Receivables
Receivables
Receivables
Receivables
$70,024,
$34,562,
$35,462,
$69,124,
CR
CR
CR
CR
Sales
Sales
Sales
Sales
$70,024
$34,562
$35,462
$69,124
A business's general ledger contains the following balances:
Sales
Purchases
Irrecoverable debts
Receivables
Payables
Non-current assets
Wages and salaries
Capital
Cash
$10,000
$4,000
$500
$4,000
$2,000
$5,000
$2,000
$4,450
$950
What is the total of the debit side of the trial balance?
A
B
C
D
44
45
$3,500
$7,950
$32,900
$16,450
Which statements are true of the Trade Payables account?
(i)
The Trade Payables account can be used to derive missing figures such as
purchases and cash paid
(ii)
It provides a figure for inclusion in the trial balance
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
When a business's accountant prepares the trial balance, a credit of $810 is transferred to
the suspense account.
Which would explain the need for this?
A
B
C
D
46
47
The entries for a credit sale of $810 were made the wrong way round
A cash sale of $1,900 was recorded as $1,090
A cash purchase of $810 was omitted from the accounting records
Both entries about a cash sale of $405 were recorded as debits
Which statements are true?
(i)
Opening a suspense account allows the trial balance to be redrafted
(ii)
When the suspense account balance is zero, all errors in the accounting records
have been detected and corrected
A
B
C
D
i) only
ii) only
Both i) and ii)
Neither i) nor ii)
Which of the following is classified as capital expenditure?
A
B
C
D
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Purchase of shelving units
Payment of wages to employees
Bank fees
Cost of repairing existing computers
9
48
Which of the following would not be found on the credit side of the Trade
Receivables account?
A
B
C
D
49
If sales exceed purchases, on which side would the Sales Tax balance be in the
trial balance?
A
B
C
D
50
Irrecoverable Debts
Sales
Cash received
Returns
A credit
A debit
Zero
Either a credit or a debit
It has been identified that a credit sale of $349 has been entered twice, and another credit
sale of $571 was omitted entirely. In addition, a cash sale of $286 was posted as $826.
To correct these errors, what would be the total value of entries to the Trade
Receivables account?
A
B
C
D
$762
$222
$762
$222
DR
DR
CR
CR
End of Questions
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10