Mock Exam Two

2 AAT L3 Financial Accounting:

Preparing Financial Statements

Assessment information:
You have 2 hours and 30 minutes to complete this practice assessment.

This assessment contains 6 tasks and you should attempt to complete every
task.
Each task is independent. You will not need to refer to your answers to previous
tasks.
The total number of marks for this assessment is 120.
Read every task carefully to make sure you understand what is required.
Where the date is relevant, it is given in the task data.
Both minus signs and brackets can be used to indicate negative numbers unless
task instructions state otherwise.
You must use a full stop to indicate a decimal point. For example, write 100.57
not 100,57 or 10057.
You
to. For example, 10000 and 10,000 are both acceptable.

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Task 1 (28 marks)
This task is about using daybooks, and accounting for and monitoring non-current
assets.
(a) Complete the following sentences about using a sales day book. (3 marks)

The total amount of all invoices in a sales day book are posted to the
All detailed transactions for invoices recorded in a sales day book are posted to the

The total VAT amount recorded in a sales day book will be a

entry to the VAT control account.
Picklist: Credit, Debit, Cash book, Sales, Receivables ledger control, Receivables
ledger, VAT control.

You are working on the accounting records of a business for the year ended 31 March
20X8. VAT can be ignored.
An old motor vehicle was sold on 3 September 20X7 for £4,000 to help fund the
purchase of a new motor vehicle. The sale proceeds were paid into the business
bank account on the same day.
The old motor vehicle was purchased for £13,800 on 13 March 20X6.
A new motor vehicle was purchased for £18,250 and was paid for from the
business bank account on 23 March 20X8.
Motor vehicles are depreciated at 25% per annum on a diminishing balance
basis. A full depreciation is charged in the year of acquisition and none in
the year of disposal.
(b)(i) Calculate the accumulated depreciation for the old motor vehicle to the
nearest £. (2 marks)
£

(b)(ii) Complete the disposals account shown below for the old motor vehicle.
Show clearly the balance to be carried down or transferred to the statement of
profit or loss, as appropriate. (8 marks)

Picklist: Bank, Vehicles accumulated depreciation, Vehicles at cost, Profit or loss

account, Balance b/d, Balance c/d.

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(b)(iii) Drag and drop the account names shown below to the debit and credit
columns, to show the accounting entries for the purchase of the new motor
vehicle.
(2 marks)

(b)(iv) Calculate depreciation charges for the new motor vehicle for the year
ended 31 March 20X8 and show the journal entries required. Depreciation should
be calculated to the nearest £.
(4 marks)

Picklist: Bank, Depreciation charges, Disposals, Vehicles accumulated depreciation,

Vehicles at cost, Suspense, Profit or loss account, Purchases, Vehicle running
expenses, Balance b/d, Balance c/d.

(b)(v) If the old motor vehicle was used as part-exchange against the cost of the
new motor vehicle. Drag and drop the account names to the debit and credit
columns to show where the entries for the part-exchange value would be made.
(2 marks)

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You are working on the accounting records of a business known as BZ Trading. BZ
Trading is a VAT registered business. BZ Trading purchased a new van during the year
ended 31 March 20X8. The relevant purchase invoice is shown below.

To: BZ Trading From: XPD Cars & Vans Date: 3 December 20X7
Invoice number: 099
Item Details £
Van Q3 Q3 model 12,950.00
Alloy wheels and roof rack for Q3 model 1,290.00
Business signage on van for Q3 model 299.00
Delivery 129.00
12 months road fund licence 225.00
Net total 14,893.00
VAT 20% 2978.60
Total 17,871.60
Finance lease arrangement 27.6% interest rate per annum.

VAT can be reclaimed on the purchase of the new van. BZ Trading has a policy of
capitalising expenditure over £500. Motor vehicles are depreciated at 25% per annum
on a diminishing balance basis.
(c)(i) Calculate the amount of capital expenditure that would be included in a non-
current asset register for the acquisition of Van Q3. Show your answers to the
nearest £.
(3 marks)
£

(c)(ii) Calculate depreciation charges for the new van for the year ended 31 March
20X8. Show your answers to TWO decimal places.
(2 marks)
£

(c)(iii) Calculate the carrying value of the new van for the year ended 31 March
20X8. Show your answers to TWO decimal places.
(2 marks)
£

End of Task

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Task 2 (14 marks)

This task is about recording period end adjustments.

You are working on the accounting records of a business for the year ended 30
September 20X7. VAT can be ignored.

(a) No entries have been made to the allowance for doubtful receivables account.
A general allowance for doubtful receivables needs to be 5% of trade receivables.
Trade receivables were £24,000 for the year ended 30 September 20X7.
(4 marks)

Picklist: Statement of financial position, Statement of profit or loss, Suspense,

Allowance for doubtful receivables, Allowance for doubtful receivables - adjustment,
Balance b/d, Balance c/d.

You are looking at rental income earned by the business.

The cash book for the year shows receipts for rental income of £36,000.
This includes £4,500 for the period 01/09/X7 to 30/11/X7.
(b)(i) Update the rental income account shown below for the year ended 30
September 20X7.
Show clearly:
the cash book figure
the year-end adjustment
the transfer to the statement of profit or loss account
(6 marks)

Picklist: Rental income, Bank, Accrued expenses, Accrued expenses (reversal),

Accrued income, Accrued income (reversal), Prepaid income, Prepaid income
(reversal), Statement of financial position, Profit or loss account, Prepaid expenses,
Prepaid expenses (reversal), Balance b/d, Balance c/d.

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(b)(ii) How are the elements of the accounting equation effected by the prepaid
income reversal of £7,500 in (b)(i) above. Tick ONE box for each row.
(3 marks)

(b)(iii) Which ONE of the following dates would be entered for the prepaid income
reversal of £7,500 in (b)(i) above.
(1 mark)

End of Task

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Task 3 (24 marks)

This task is about producing, adjusting, checking and extending the trial balance.

(a) Show whether the following statements are true or false.

(2 marks)

(b) Show whether the errors below will cause or will not cause an imbalance in a
trial balance, by placing the appropriate answer against each error. You may use
each answer more than once.
(4 marks)

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At the end of a month a trial balance was extracted and did not balance. The debit
column totalled £132,955 and the credit column totalled £129,472.

(c) What entry is needed in the suspense account to balance the trial balance.
Do not enter a zero in the unused column cell.
(1 mark)

You are preparing a receivables ledger control account reconciliation for a sole trader
on 30 September 20X7. The balance showing in the receivables ledger control account
is a debit balance of £13,042. The amount of all customer account balances shown in
the receivables ledger is a total debit balance of £11,540. The receivables ledger has
been compared with the receivables ledger control account and the following
adjustments have been identified:
1. The total column in the sales daybook was overcast by £1,100. The amount posted
to the receivables ledger control account was £81,670, the correct amount that
should have been posted is £80,570.
2. Sales returns of £1,220 have been credited to the receivables ledger account of
WX Traders Ltd instead of the receivables ledger account of Mr Wren.
3. A sales invoice of £34 for Strands Trading Ltd was omitted from the sales daybook.
The correct entry was made in the receivables ledger account of the customer.
4. A set-off entry of £504 was omitted from the receivables ledger account of
E. Barry. The correct entry was made in the receivables ledger control account.
5. Sales returns of £640 were in error debited to the receivables ledger control
account. The correct entry was made in the receivables ledger.
6. An irrecoverable debt of £340 has been written off in the receivables ledger control
account. No entry was made in the receivables ledger account of the customer.

(d) Use the following table to show the THREE adjustments that should appear in
the receivables ledger control account. Enter only ONE figure for each line. Do
not enter zeros in unused cells.
(6 marks)

Picklist: Adjustment 1, Adjustment 2, Adjustment 3, Adjustment 4, Adjustment 5,

Adjustment 6.

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You are now working on the accounting records of a different business. You have the
following partially extended trial balance. The adjustments have already been correctly
entered.
(e) Extend any remaining figures into the columns for the statement of profit or
loss and statement of financial position. Do NOT enter zeros into unused column
cells. Complete the extended trial balance by entering the profit or loss figure for
the year ended.
(11 marks)
Extended trial balance
Statement of Statement of
Ledger balances Adjustments
Ledger account profit or loss financial position
Dr £ Cr £ Dr £ Cr £ Dr £ Cr £ Dr £ Cr £
Bank 4103 4103
Opening inventory 8900
Prepaid expenses 400 400
Capital 11500 11500
Motor vehicle expenses 6722 1400 5322
Staff wages 28039 28039
Irrecoverable debts 6000 6000
Depreciation charges 21508 21508
Sales returns 1720 900
Telephone expenses 1321 400
Closing inventory 4300 4300
VAT 3251 3251
Motor vehicle at cost 60050 1400
Motor vehicle accumulated depreciation 21017 21508
Purchases 55430 1680 57110
Payables ledger control account 24591 24591
Sales 124000
Receivables ledger control account 25500 6000
Suspense 780 900 1680

Total 188462 188462 36188 36188 Autosum Autosum Autosum Autosum

Picklist: Profit for the year, Balance b/d, Balance c/d, Gross profit/Loss for the year.

End of Task

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Task 4 (24 marks)

This task is about producing financial statements for sole traders and partnerships.

(a) Select whether the following statements are TRUE or FALSE about the capital
account of a sole trader.
(4 marks)

The following details exist about a partnership:

An appropriation account has been completed and interest on capital and salary (if
applicable) has been allocated to each partner. The residual profit, after interest on
capital and salary has been allocated to each partner was £34,784 for the year ended
31 August 20X6.
(b) (i) Using the above information, complete the tasks below:
Calculate e residual profit:
(2 marks)

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The current accounts shown below for Robert and Sophie have been partially prepared.

(b) (ii) Complete the current accounts for each partner for the year ended 31
August 20X6. Show clearly the balances carried down. Do NOT use brackets or
minus signs.
(8 marks)

Picklist: Share of residual profit, Share of residual loss, Drawings, Balance c/d.

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This task is about final accounts for a sole trader. A trial balance is shown below for
XYZ Traders and all necessary adjustments have been made.

Trial balance as at 31 January 20X8

DR £ CR £
Sales Revenue 68,922
Opening Inventory 4,555
Purchases 36,927
Carriage Inwards 450
Gain on disposal of van 704
Sales Returns 1,530
Rent received 7,800
Office equipment at cost 12,000
Office equipment - accumulated depreciation 4,000
Discounts received 244
Payables
Purchaseledger
ledgercontrol
control account 6,000
Depreciation charges 2,000
Accrued expenses 65
Telephone expenses 374
Receivables
Sales ledgerledger
controlcontrol
account 8,977
General expenses 4,730
Bank 6,578
Wages 7,600
Irrecoverable Debts 624
Purchase returns 781
HMRC liability 5,044
Office expenses 16,799
Capital 4,218
Drawings 7,790
Closing inventory 4,500 4,500
TOTAL 108,856 108,856

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The following accounting policies are used by the business:
Sales revenue should include sales returns.
Purchases should include purchase returns and carriage inwards.
(c)(i) Calculate the sales revenue figure to be included in the statement of profit or
loss for XYZ Traders.
(2 marks)

(c)(ii) Calculate the purchase figure to be included in the statement of profit or

loss for XYZ Traders.
(2 marks)

(c)(iii) Prepare a trading account for XYZ Traders for the year ended 31 January
20X8. If necessary, use a minus sign to indicate ONLY the following:
the deduction of an account balance used to make up costs of goods sold
a gross loss for the year.
(6 marks)
Picklist: Sales Revenue, Opening Inventory, Purchases, Carriage Inwards, Sales
Returns, Discounts received, expenses, General expenses, Purchase returns, Closing
inventory.

End of Task

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Task 5 (18 marks)

This task is about accounting principles, qualities of useful financial information and
interpreting financial statements using profitability ratios.

(a) Complete the following sentences:

(3 marks)

The principle means that if the financial statements are sufficiently

incorrect they may impact on the economic decisions of a user.

The principle means to recognise income and expenses that were

earned or consumed in a period of time, regardless of whether cash was received or
paid.

The principle means to recognise a business can continue operating

and remain in business for the foreseeable future.

Picklist: Accruals, Going concern, Materiality, Business entity, Prudence.

(b) Complete the following sentences:

(2 marks)

The fundamental qualitative characteristics of useful financial information are

Two of the four enhancing qualitative characteristics that support the fundamental
qualitative characteristics, include

Picklist: Relevance and Timeliness, Relevance and Faithful representation, Verifiability

and Understandability, Comparability and Faithful representation.

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The following financial information exists for a business for the year ended 31
December 20X5.

(c)(i) Calculate the following ratios for the year ended 31 December 20X5.
Answers should be rounded to two decimal places.
(4 marks)

(c)(ii) Compare the two ratios in (c)(i) above. Show whether the following
sentences about the year ended 31 December 20X5 are TRUE or FALSE.
(4 marks)

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Mike is an accounting technician working in a finance department of a large company.
His manager is under pressure to deliver better profit results and has asked Mike to
falsify financial records for the company, his boss has made it clear that if Mike refuses,
he will lose his job.

(d) Which ONE of the following would be considered the most immediate and
ethical response to his manager request. Choose ONE only.
(2 marks)

(e) Identify whether the following statements about profitability ratios are true or
false.
(3 marks)

End of Task

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Task 6 (12 marks)

This task is about preparing accounting records from incomplete information.

You are a trainee accounting technician that prepares final accounts for a number of
sole trader businesses. You are trying to identify some missing figures from trading
records of business X and Z. You may ignore VAT in this task.
Business X

Sales for the year are £250,000.

Sales margin is 20%.
Opening inventory was £35,000.
Closing inventory was £55,000.

(a)(i) Using the information for business X calculate purchases for the year
ended.
(4 marks)

Business Z

Sales for the year £18,000

Opening inventory £750
Closing inventory £1,200
Purchases for the year £11,250

(a)(ii) Using the information for business Z calculate the sales margin percentage
Round your answer to one decimal place.
(3 marks)

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You are working on the accounting records of a sole trader to the year ended 30 June
20X8.
You have the following information:

A contra entry of £500 was made between the receivables ledger and payables ledger.

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Picklist: Payables ledger control, Balance b/d, Balance c/d, Bank, Sales, Sales returns,
Discounts allowed.

(b) Using only the figures supplied, find the closing balance for the receivables
ledger control account for the year ended 30 June 20X8.
(7 marks)

End of Task

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