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Q 1.7

Q 1.8

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A list of ledger balances shown in debit and credit columns


A list of all the assets owned and all the liabilities owed by a business
A record of income generated and expenditure incurred over a given period
A record of the amount of cash generated and used by a company in a given period

A
B
C
D

(2 marks)

Which ONE of the following statements correctly describes the contents of the Statement of Financial Position?

New Question.

Deleted

1.8

ERRATA

A supplier of goods on credit is interested only in the statement of financial position, ie an indication of the
current state of affairs.

D Providing reliable investment advice

Time Allocation changed from 34 to 39 minutes

Details of changes

We regret if these changes have caused any inconvenience.

We set out below the location and details of each change.

Please note that the FIA FFA F3 Practice & Revision Kit was updated in August 2014 and re-printed. Some questions have
therefore been updated or changed (third edition, dated 2013)

Errata sheet: November 2014

Practice & Revision Kit Pack (third edition, November 2013)

FIA FFA F3 Financial Accounting

FIA FFA F3 Financial Accounting

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Former Q 1.12

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ERRATA // FIA FFA F3 Financial Accounting

1 only
2 only
1 and 2
Both are incorrect

A
B
C
D

Companies should create provisions in times of company growth to be utilised in more difficult times, to
smooth profits.

A list of all the assets owned and all the liabilities owed by a business
A record of income generated and expenditure incurred over a given period
A record of the amount of cash generated and used by a company in a given period

B
C
D

Promote the use and rigorous application of International Financial Reporting Standards (IFRSs)
Ensure International Financial Reporting Standards (IFRSs) focus primarily on the needs of global, multinational organisations
Bring about the convergence of national accounting standards and IFRSs

B
C
D

(2 marks)

Through the IASB, develop a single set of globally accepted International Financial Reporting Standards
(IFRSs)

(2 marks)

1.15 Which ONE of the following is NOT an objective of the IFRS Foundation?

New Question Formerly Q 1.16

Formerly 1.15

Formerly 1.14

Formerly 1.13

Deleted

A list of ledger balances shown in debit and credit columns

1.10 Which ONE of the following statements correctly describes the contents of the Statement of Profit or Loss?

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Q 1.16

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ERRATA

To facilitate the enforcement of a single set of global financial reporting standards


To prevent national bodies from developing their own financial reporting standards

C
D

Accuracy

2.7

The presentation and classification of items in the financial statements should stay the same from one
period to the next.
Financial statements are required to present fairly, in all material respects, the financial results of the
entity
(2 marks)

Financial statements always treat the business as a separate entity.

Whenever legally possible, the commercial effect of a transaction should be reflected in the financial
statements.

Revenue earned must be matched against the expenditure incurred in earning it.

Which ONE of the following statements describes the substance over form concept?

Which of these are qualitative characteristics of financial information according to the IASB's Conceptual Framework
for Financial Reporting?

Consistency

Total marks changed from 34 to 32

To ensure high ethical standards are maintained by financial reporting professionals internationally

(2 marks)

To provide examples of best financial reporting practice for national bodies who develop their own
requirements

1.16 Which ONE of the following statements correctly describes how International Financial Reporting Standards
(IFRSs) should be used?

New Question Formerly 1.17

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Q4

Q 2.10

Q 2.9

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ERRATA // FIA FFA F3 Financial Accounting

A
B
C
D

The concept of substance over form requires the legal standing of a transaction to be reflected in the
financial statements.
Information is material if its omission or misstatement could influence the economic decisions of users
taken on the basis of the financial statements.
Based on faithful representation, it may sometimes be necessary to exclude material information from
financial statements due to difficulties establishing an accurate figure.
1 only
1 and 2 only
2 only
2 and 3 only
(2 marks)

Which of the following statements about accounting concepts and the characteristics of financial information
are correct?

Accuracy, Faithful representation, Comparability, Verifiability, Timeliness and Understandability


Relevance, Faithful representation, Consistency, Verifiability, Timeliness and Understandability
Relevance, Comparability, Consistency, Verifiability, Timeliness and Understandability

B
C
D

By requiring authorisation in line with organisational policies


By processing and recoding transactions in accordance with accounting rules
By preventing transactions from being processed inaccurately
By enabling transactions to be recorded as necessary to permit preparation of financial statements
(2 marks)

A
B
C
D

4.17 Which ONE of the following statements does NOT describe a way in which an effective accounting system
facilitates the provision of useful accounting information?

New Question

Time Allocation changed from 38 minutes to 43 minutes

Relevance, Faithful representation, Comparability, Verifiability, Timeliness and Understandability

2.10 The IASB's Conceptual Framework for Financial Reporting gives six qualitative characteristics of financial
information. What are these six characteristics?

2.9

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27

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Q4

Q 4.18

Question/Answer

The sales day books is used to keep a list of invoices received from suppliers.
Both statements are TRUE
Both statements are FALSE
Statement 1 is TRUE and statement 2 is FALSE
Statement 1 is FALSE and statement 2 is TRUE

2
A
B
C
D

5.5

5.4

(2 marks)

ERRATA

$
140,000*
65,000

//

$20,000
$23,333
$13,000

B
C
D

(2 marks)

A business commenced with capital in cash of $1,000. Inventory costing $800 plus sales tax is purchased
on credit, and half is sold for $1,000 plus sales tax, the customer paying in cash at once. The sales tax rate
is 20%.

$7,000

What was the total sales tax paid to regulatory authorities at the end of May 20X4 (to the nearest $)?

* Lauren Co's sales for the month of $140,000 included $20,000 of sales exempt from sales tax.

Sales tax is charged at a flat rate of 20%. Lauren Co's sales tax account had a zero balance at the beginning
of the month and at the end of the month.

Sales (including sales tax)


Purchases (net of sales tax)

Information relating to Lauren Co's transactions for the month of May 20X4 is shown below:

Total marks changed from 32 to 36

Cash purchases are recorded in the purchases day book.

4.18 Which of the following statements is/are TRUE or FALSE?

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31

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31

32

32

32

32

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33

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Q 6.17

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Q 6.11

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30

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ERRATA // FIA FFA F3 Financial Accounting

50 units purchased at a cost of $50 per unit


60 units sold at a selling price of $100 per unit

31

50 units held in opening inventory at a cost of $40 per unit

17

$4,000
$1,800
$2,000
$2,500

A
B
C
D

Under AVCO, what is the value of inventory held for item Z at the end of March 31?

March

6.18 The information below relates to inventory item Z.

New Question

Formerly Q 6.18

Formerly Q 6.17

Formerly Q 6.16

Formerly Q 6.15

Formerly Q 6.14

Formerly Q 6.13

Formerly Q 6.12

Formerly Q 6.11

Formerly Q 6.10

Formerly Q 6.9

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(2 marks)

35

40

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34

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33

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An internal control to ensure information relating to non-current assets in the nominal ledger and the
financial statements is correct
To enable the organisation to comply with IAS 16 Property, plant and equipment

C
D

Assets which are intended to be used by the business on a continuing basis, include both tangible and
intangible assets that do not meet the IASB definition of a current asset
Non-monetary assets without physical substance that are controlled by the entity and from which future
benefits are expected to flow
(2 marks)

B
C
D

Assets in the form of materials or supplies to be consumed in the production process

Assets that are held for use in the production of goods or services and are expected to be used during
more than one accounting period

Which one of the following statements correctly defines non-current assets?

A profit on disposal $5,500


A loss on disposal $4,500
A loss on purchase of a new asset $5,500
A profit on disposal $500

A
B
C
D

(2 marks)

8.15 A non-current asset (cost $15,000, depreciation $10,000) is given in part exchange for a new asset costing
$20,500. The agreed trade-in value was $5,500. Which of the following will be included in the statement of
profit or loss?.

The company's policy is to charge depreciation at 20% per year on the reducing balance basis, with proportionate
depreciation in the years of purchase and disposal.

7.6

New Question

(2 marks)

To ensure the organisation is aware of the age of plant and machinery

ERRATA

An internal control to ensure details of all assets are readily available in the event of loss or theft

//

Which of the statements below correctly states the purpose of the asset register?

Deleted

7.2

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FIA FFA F3 Financial Accounting

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Q9

Q 9.13

Q 10.13

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48

Former Q 10.14

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45

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45

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Former Q 10.12

42

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ERRATA // FIA FFA F3 Financial Accounting

$125,000
$25,000
$50,000

B
C
D

Formerly Q 10.15

Deleted

Formerly Q 10.13

Deleted

Time Allocation changed from 36 minutes to 34 minutes

Total Marks changed from 24 to 26

(2 marks)

To reduce the cost of an intangible non-current asset in the statement of financial position to its
estimated market value

To account for the risk associated with intangible assets

To ensure that funds are available for the eventual purchase of a replacement non-current asset

To allocate the cost of an intangible non-current asset over its useful life

(2 marks)

9.13 What is the purpose of amortisation?

New Question

$250,000

9.11 Theta Co purchased a patent on 31 December 20X3 for $250,000. Theta Co expects to use the patent for
ten years, after which it will be valueless. According to IAS 38 Intangible assets, what amount will be
amortised in Theta Cos statement of profit or loss and other comprehensive income for the year ended
31 December $20X4?

Time allocation changed from 29 minutes to 31 minutes

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Q 11.1

Q 11

Q 10

Q 10.14

Question/Answer

//
ERRATA

$125,000
$75,000
$25,000

B
C
D

$225,000

$325,000

$375,000

$425,000

Statement 1 only
Statements 1 and 2 only
Statements 1 and 3 only
Statement 3 only

A
B
C
D

3. Receivables represent money owed to the business.

2. Payables are an asset.

1. Payables represent money the business owes.

11.1 Which of the following statements regarding payables and receivables are TRUE?

New Question

Time Allocation changed from 48 minutes to 50 minutes

Total Marks changed from 30 to 28

$175,000

(2 marks)

(2 marks)

What will Bookz Co profit and net asset position be after an entry to correct the under-accrual has been
processed?
Profit for the year
Net asset position

Before this under-accrual was discovered, Bookz Co's draft statement of profit or loss for the accounting year
ended 31 December 20X2 showed a profit of $125,000 and their draft statement of financial position showed
net assets of $375,000.

As at the end of December 20X2, Bookz Co had accrued $100,000 in royalties due to writers. However, a
check of the royalty calculation performed in January 20X3 established that the actual figure due to be paid by
Bookz Co to writers was $150,000.

10.14 Bookz Co pays royalties to writers annually, in February, the payment covering the previous calendar year.

New Question

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FIA FFA F3 Financial Accounting

10

50

50

50

51

51

51

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Q 11.10

Q 11.9

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Q 11.7

Q 11.6

Q 11.5

Q 11.4

Q 11.12

50

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50

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Former Q 11.11

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ERRATA // FIA FFA F3 Financial Accounting

Irrecoverable debts
Allowance for receivables
Irrecoverable debts
Receivables

A
B
C
D

Debit

Allowance for receivables

Receivables

Receivables

Allowance for receivables

Credit

Which of the following is the correct double entry to create this allowance?

(2 marks)

11.12 Top Co has total receivables outstanding of $280,000. The accountant believes that approximately 1% of
these balances will not be collected, so wishes to make an allowance of $28,000. No previous allowance has
been made for receivables.

New Question

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Formerly Q 11.10

Formerly Q 11.9

Formerly Q 11.8

Formerly Q 11.7

Formerly Q 11.6

Formerly Q 11.5

Formerly Q 11.4

Formerly Q 11.3

Formerly Q 11.2

Formerly Q 11.1

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Q 12

Q 11

Q 11.21

Q 11.20

Q 11.19

Q 11.18

Q 11.17

Q 11.16

Q 11.15

Q 11.14

Q 11.13

Question/Answer

The separation of product and service delivery from payment


Provides time for appropriate payment approval procedures
Fewer irrecoverable debts

B
C
D

Time Allocation changed from 24 minutes to 26 minutes

Total Marks changed from 38 to 42

Improved convenience for the customer

11.21 Which one of the following statements is NOT a benefit of offering credit facilities to customers?

New Question

Formerly Q 11.19

Formerly Q 11.18

Formerly Q 11.17

Formerly Q 11.16

Formerly Q 11.15

Formerly Q 11.14

Formerly Q 11.13

Formerly Q 11.12

Details of changes

FIA FFA F3 Financial Accounting

//

11

(2 marks)

ERRATA

12

Q 13.7

60

Q 12

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56

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Former Q 13.7

56

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ERRATA // FIA FFA F3 Financial Accounting

$ 25,000
$300,000
$150,000

B
C
D

A
B
C
D

$128,200
$509,000
$224,200
$144,600

What should the closing balance be when all the errors are corrected?

All items relate to credit purchases.

PAYABLES LEDGER CONTROL ACCOUNT


$
Opening balance (amounts
318,600
Purchases
owed to suppliers)
Contras against debit
Cash paid to suppliers
1,364,300
balances in receivables ledger
Purchases returns
41,200
Discounts received
Refunds received from suppliers
2,700
Closing balance
$1,726,800

13.7 The payables ledger control account below contains a number of errors:

New Question

Deleted

Total Marks changed from 20 to 22

$125,000

(2 marks)

48,000
8,200
402,000
$1,726,800

$
1,268,600

(2 marks)

What amount should Mobiles Co include as a provision in the statement for profit or loss for the year ended 31
December 20X4?

Based on past experience, the company expects warranty claims for 5% of units sold. Half of these claims will
be for a major defect, with an average claim value of $50. The other half of these claims will be for a minor
defect, with an average claim value of $10.

12.11 Mobiles Co sells goods with a one year warranty under which customers are covered for any defect that
becomes apparent within a year of purchase. In calendar year 20X4, Mobiles Co sold 100,000 units.

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Control accounts help deter fraud.

Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for
payment.
Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not
been paid in at the bank.

(iii)
(iv)
(v)

$9,520 overdrawn
$11,200 overdrawn
$9,520 in credit
$11,200 in credit

A
B
C
D

13

(2 marks)

The bank has credited the account in error with $425 which belongs to another customer.

(ii)

What was the balance as shown by the bank statement before taking the above items into account?

The bank balance in the cashbook before taking the items below into account was $8,970 overdrawn.
Bank charges of $550 on the bank statement have not been entered in the cashbook.

(i)

14.5 The following information relates to a bank reconciliation.

New Question

Deleted

A receivables ledger control account aims to ensure there are no errors in the personal ledger.

(2 marks)

A receivables ledger control account ensures the trial balance balances.

ERRATA

A receivables ledger control account provides a check on the overall accuracy of the personal ledger
accounts.

//

13.11 Which one of the following is not a purpose of a receivables ledger control account?

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Q 15.16

Q 15

Question/Answer

ERRATA // FIA FFA F3 Financial Accounting

$700,000
$600,000
$725,000
$600,000

A
B
C
D

Total assets (SOFP)

$ 75,000

$225,000

$100,000

$200,000

Profit for year

(2 marks)

What would the total assets figure in the Statement of Financial Position, and the adjusted profit for the year
figure, be after adjusting for this error?

15.16 . Beta Co has total assets of $650,000 and profit for the year of $150,000 recorded in the financial
statements for the year ended 31 December 20X3. Inventory costing $50,000, with a resale value of
$75,000, was received into the warehouse on 2 January 20X4 and included in the inventory value that was
recorded in the financial statements at 31 December 20X3.

New Question

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Former Q 16.6

Q 15

Q 15.17

Question/Answer

720
900
840

1 November 20X0 for three months to 31 October 20X0


1 February 20X1 for three months to 31 January 20X1
30 June 20X1 for three months to 30 April 20X1

//
ERRATA

$560
$860
$860

B
C
D

Deleted

Total Marks changed from 32 to 34

$560

Statement of
financial position

$3,060

$3,320

$3,060

$3,320

Statement of
profit or loss

15

(2 marks)

What are the appropriate amounts for electricity to be included in the financial statements of Jingles Co for the
year ended 30 June 20X1?

Jingles Co expects the next bill due in September to be for the same amount as the bill received in June.

600

300

1 August 20X0 for three months to 31 July 20X0

Payments made during the year

Opening balance for electricity accrued at 1 July 20X0

15.17 The electricity account for Jingles Co for the year ended 30 June 20X1 was as follows.

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83

85

QB

QB

Q 17.6

Q 17.5

Q 17.4

82

Q 17.3

QB

81

QB

Q 17.2

Q 17.4

79

QB

Q 17.1

82

79

QB

Q 17

QB

79

QB

Q 16.6

Former Q 17.4

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ERRATA // FIA FFA F3 Financial Accounting

Suspense account
Plant and machinery
Plant and machinery
Suspense account
Bank current account
Suspense account

Formerly 17.7

Formerly 17.6

Exam Focus Point added

Formerly 17.5

Deleted

Exam Focus Point added

Exam Focus Point added

Exam Focus Point deleted

Time Allocation changed from 162 minutes to 144 minutes

Plant and machinery


Bank current account

Which of the following journal entries would correct the error?

25,000

25,000

25,000

25,000

Debit
$

25,000

25,000

25,000

25,000

Credit
$

(2 marks)

Subsequent investigation revealed the difference was due to one side of an entry to record the purchase of
machinery for $25,000, by cheque, failing to post to the plant and machinery account.

16.6 A company's trial balance failed to agree, the out of balance difference of $25,000 being posted to a suspense
account.

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92

95

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Former Q 19.19

Q 19.10

Q 19

Q 18.12

Q 17

Q 17.8

Q 17.8

Q 17.7

Question/Answer

//
ERRATA

$112,900
$381,600
$510,900

B
C
D

7,200
9,400

$
381,600
6,800
112,900

Deleted

17

(2 marks)

19.10 Which of the following items are required to be disclosed by a limited liability company, either on the face of
their main financial statements or in the notes, according to International Financial Reporting Standards?

Time Allocation changed from 53 minutes to 55 minutes

$517,900

Which of the following correctly represents Alpha's sales figure for 20X4?

Closing balance of Trade receivables

Other information, Alpha, 20X4


Irrecoverable debts written off
Discounts allowed to credit customers

Cash received from credit customers and paid into the bank
Expenses paid out of cash received from credit customers before banking
Cash sales

Bank and cash summary, Alpha, 20X4

Alphas first year of trading was 20X4. From reviewing Alphas bank statements and the incomplete records
relating to cash maintained, the following summary has been compiled.

18.12 Alpha is a sole trader who does not keep proper accounting records.

Total Marks changed from 135 to 120

Exam Focus Point added

Formerly 17.9

Formerly 17.8

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QB

QB

QB

QB

Q 21

Q 19

Q 19.23

Q 19.19

Question/Answer

ERRATA // FIA FFA F3 Financial Accounting

Non-statutory reserves must be distributed as dividends


Neither statutory nor non-statutory reserves are available for distribution as dividends.
Non-statutory reserves consist of profits which are distributable as dividends.
Statutory reserves are required by law and are available for the distribution of dividends.

(2 marks)

$15,000
$17,500
$20,000

B
C
D

Time Allocation changed from 19 minutes to 22 minutes

Total Marks changed from 44 to 46

$22,500

(2 marks)

What should the charge for taxation be in Fruitz's statement of profit or loss (SPL) for the year ended 31
December 20X2?

Fruitzs accountant estimates their tax liability for profits earned in 20X2 will be $20,000.

19.23 Fruitz Co has a tax liability relating to 20X1 brought forward in 20X2 of $16,000. This liability is finally
agreed at $18,500, which is paid is paid in 20X2.

New Question

A
B
C
D

19.19 A distinction is made between Statutory reserves and Non-statutory reserves. Which ONE of the following
statements is true?

New Question

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QB

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Q 22.17

Q 22

Q 21

Q 21.9

Question/Answer

//
ERRATA

Sales revenue was $33,400, including $900 receivables at the year end. Brought forward receivables
were $400.
Interest on cash deposits at the bank amounted to $175.
Using the direct method, what is Big Time Co's cash flow from operating activities?

19

(2 marks)

Interest of $2,100 on a long term loan was paid in the year.

$3,425
$3,775
$1,425
$6,775

Wages and salaries amounted to $9,500, of which $750 was unpaid at the year end. The accounts for
the previous year showed an accrual for wages and salaries of $1,500.

A
B
C
D

Purchases from suppliers were $18,500, of which $2,550 was unpaid at the year end. Brought
forward payables were $1,000.

22.17 Big Time Co had the following transactions during the year.

New Question

Time Allocation changed from 38 minutes to 48 minutes

Total Marks changed from 16 to 18

(2 marks)

An estimate of the financial effect (or a statement that such an estimate cannot be made) only

C
No disclosure required

The nature of the event only

The nature of the event and an estimate of the financial effect (or a statement that such an estimate
cannot be made)

21.9 If a material event occurs after the reporting date but before the financial statements are authorised for issue
outside the organisation, and this event does NOT require adjustment, what information should be disclosed in
the financial statements?

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QB

QB

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Q 22

Q 22.20

Q 22.19

Q 22.18

Question/Answer

ERRATA // FIA FFA F3 Financial Accounting

If a business makes a loss, it has negative cash flow.


A business may make a profit but have negative cash flow.
A business that breaks even has cash inflows equal to cash used.

B
C
D

(2 marks)

Total Marks changed from 32 to 40

(2 marks)

Under IAS 7 Statement of cash flows the statement of cash flows may cover a different period of time to the
other financial statements.

Cash flow figures are more open to manipulation than the profit figure.

There is an opportunity to reclassify some cash outflows that might have been reported in the operating
section as investing cash outflows.

Under IAS 7 Statement of cash flows, an entity may use any format for their statement.

22.20 Which one of the following statements correctly identifies a valid disadvantage to users of financial statements
of the statement of cash flows?

New Question

(2 marks)

Jo is correct. Proactive cash flow management is required under IAS 7 Statement of cash flows.

Jo is correct. A business that does not have cash available to fund operations is likely to fail.

Adam is correct. A profitable business will always survive and prosper.

B
D

Adam is correct. A profitable business should not waste management time on cash flow issues.

Adam and Jo have two different views. Who is correct, and why?

22.19 Toots Co has made healthy profits for the past year, although at times the company has been close to running
out of cash. Because Toots Co is profitable, Adam, their accountant is unconcerned by the cash shortage. Jo,
the financial controller at Toots Co, is concerned. Jo tells Adam, profits are fine on paper, but in the real world
cash is king. Jo believes Toots Co needs to take a more proactive approach to cash flow management.

New Question

If a business makes a profit, it has positive cash flow.

22.18 Which one of the following statements is correct?

New Question

Details of changes

123

123

123

123

127

128

QB

QB

QB

QB

QB

QB

128

128

129

129

QB

QB

QB

QB

QB

Q 26.2

128

QB

Former Q 26.8

Q 26.6

Q 26.5

Q 26.4

Q 26.3

Former Q 26.2

QB

Q 26

Q 25

Q 24

Q 24.23

Q 24.22

Q 24.21

Q 24.20

122

QB

Q 24

Former Q 24.20

116

QB

Question/Answer

QB

Page

Question section

//
ERRATA

Deleted

26.6 Which of the following is a ratio which is used to measure how much a business owes in relation to its size?

Formerly Q 26.7

21

26.5 Quality Co are drafting their financial statements. An extract from their draft statement of financial position at
31 March 20X8 is set out below.

Formerly Q 26.6

Formerly Q 26.5

Formerly Q 26.4

Formerly Q 26.3

Deleted

Time Allocation changed from 31 minutes to 22 minutes

Exam focus point. It is unlikely that there would be a 15 mark question solely on interpretation in the exam.
However, interpretation could easily form part of a 15 mark question and test the skills covered in this question.
Interpretation could also be tested in a multiple-choice question, such as those included in section 26 of this Kitfair.

Total Marks changed from 48 to 46

Formerly Q 24.24

Formerly Q 24.23

Formerly Q 24.22

Formerly Q 24.21

Deleted

Time Allocation changed from 58 minutes to 55 minutes

Details of changes

FIA FFA F3 Financial Accounting

22

Q 26.9

130

130

130

132

132

132

132

133

133

133

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

Q 27. 10

Q 27.9

Q 27.8

Q 27.7

Q 27.6

Q 27.5

Former Q 27.5

Q 27

Q 26

Former Q 26.12

QB

Q 26.8

130

QB

Q 26.7

Former Q 26.10

129

QB

Question/Answer

QB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

(iii) A contingent liability should be disclosed in the notes to the financial statements.

Formerly Q 27.11

Formerly Q 27.10

Formerly Q 27.9

Formerly Q 27.8

Formerly Q 27.7

Formerly Q 27.6

Deleted

Time Allocation changed from 48 minutes to 46 minutes

Total Marks changed from 26 to 18

Formerly 26.13

Deleted

D Liquidity appears to be poorly-controlled as shown by the existence of a bank overdraft

C Liquidity appears to be poorly-controlled as shown by the companys relatively high current ratio

B Liquidity appears to be poorly-controlled as shown by the large payables balance

A Liquidity appears to be well managed as the bank overdraft is relatively low

Which of the following statements accurately describe the companys liquidity position?

(2 marks)

The industry the company operates in has a current ratio norm of 1.8. Companies who manage liquidity well in this
industry have a current ratio lower than the norm.

Formerly Q 26.11

Deleted

Formerly Q 26.9

Details of changes

134

135

135

135

135

135

139

142

QB

QB

QB

QB

QB

QB

QB

QB

Q 29

Q 28.11

Q 27

Q 27.19

Q 27.18

Q 27.17

Q 27.16

Q 27.15

Q 27.14

Q 27.13

Q 29.2

134

QB

142

134

QB

Q 27.12

QB

134

QB

Q 27.11

Former Q 29.2

133

QB

Question/Answer

QB

Page

Question section

1 only
1 and 3
2 and 3
3 only

A
B
C
D

Formerly Q 29.3

Deleted

Time Allocation changed from 48 minutes to 46 minutes

Material non-adjusting events are disclosed by note in the financial statements.

23

(2 marks)

Contingent liabilities must be provided for in financial statements if it is probable that they will arise.

ERRATA

Contingent assets are included as assets in financial statements if it is probable that they will arise.

//

28.11 Which of the following statements are correct?

Total Marks changed from 40 to 38

Formerly Q 27.20

Formerly Q 27.19

Formerly Q 27.18

Formerly Q 27.17

Formerly Q 27.16

Formerly Q 27.15

Formerly Q 27.14

Formerly Q 27.13

Formerly Q 27.12

Details of changes

FIA FFA F3 Financial Accounting

24

142

142

143

143

143

143

144

144

144

145

145

145

145

146

146

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

QB

Page

Question section

Former 29.19

Q 29.17

Q 29.16

Q 29.15

Q 29.14

Q 29.13

Q 29.12

Q 29.11

Q 29.10

Q 29.9

Q 29.8

Q 29.7

Q 29.6

Q 29.5

Q 29.4

Q 29.3

Question/Answer

ERRATA // FIA FFA F3 Financial Accounting

Deleted

Formerly Q 29.18

Formerly Q 29.17

Formerly Q 29.16

Formerly Q 29.15

Formerly Q 29.14

Formerly Q 29.13

Formerly Q 29.12

Formerly Q 29.11

Formerly Q 29.10

Formerly Q 29.9

Formerly Q 29.8

Formerly Q 29.7

Formerly Q 29.6

Formerly Q 29.5

Formerly Q 29.4

Details of changes

148

148

149

149

QB

QB

QB

QB

Q 30.8

Q 30.7

Q 30.6

Q 30.5

Q 30.4

148

QB

Q 30

Q 30.3

147

QB

Q 29

147

147

QB

Q 29.19

QB

147

QB

Q 29.18

Former Q 30.3

146

QB

Question/Answer

QB

Page

Question section

//
ERRATA

$286,430
$282,830
$284,430

B
C
D

Formerly Q 30.9

Formerly Q 30.8

Formerly Q 30.7

Formerly Q 30.6

Formerly Q 30.5

Formerly Q 30.4

Deleted

Time Allocation changed from 48 minutes to 43 minutes

Total Marks changed from 40 to 38

Formerly 29.20

$290,150

What should the closing balance on the account be when the errors in it are corrected?

25

(2 marks)

29.18 The following receivables ledger control account has been prepared by a trainee accountant:
$
$
20X3
20X3
1 Jan Balance
31 Dec Cash received from credit
284,680
31 Dec Credit sales
customers
189,120
179,790
Discounts allowed
Contras against amounts
3,660
Irrecoverable debts
owing by company in
written off
1,800
payables ledger
800
Sales returns
Balance
4,920
303,590
484,180
484,180

New Question

Details of changes

FIA FFA F3 Financial Accounting

26

151

151

152

152

152

158

QB

QB

QB

QB

QB

QB

Q 32.3

159

159

159

159

160

160

160

160

QB

QB

QB

QB

QB

QB

QB

QB

Q 32.10

Q 32.9

Q 32.8

Q 32.7

Q 32.6

Q 32.5

Q 32.4

Former Q 32.3

QB

Q 32

Q 30

Q 30.18

Q 30.17

Q 30.16

Q 30.15

Q 30.14

151

QB

Q 30.12

Q 30.13

150

QB

Q 30.11

151

150

QB

Q 30.10

QB

150

QB

Q 30.9

Former Q 30.14

149

QB

Question/Answer

QB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

Formerly Q 32.11

Formerly Q 32.10

Formerly Q 32.9

Formerly Q 32.8

Formerly Q 32.7

Formerly Q 32.6

Formerly Q 32.5

Formerly Q 32.4

Deleted

Time Allocation changed from 48 minutes to 46 minutes

Total Marks changed from 40 to 36

Formerly Q 30.20

Formerly Q 30.19

Formerly Q 30.18

Formerly Q 30.17

Formerly Q 30.16

Formerly Q 30.15

Deleted

Formerly Q 30.13

Formerly Q 30.12

Formerly Q 30.11

Formerly Q 30.10

Details of changes

162

162

163

163

163

QB

QB

QB

QB

QB

Q 33

Q 32

Q 32.19

Q 32.18

Q 32.17

Q 32.16

Q 33.13

166

166

167

167

167

167

167

QB

QB

QB

QB

QB

QB

QB

Q 33

Q33.18

Q 33.17

Q 33.16

Q 33.15

Q 33.14

Former Q 33.14

QB

Q 33.12

166

162

QB

Q 32.15

QB

162

QB

Q 32.14

Q 33.11

161

QB

Q 32.13

166

161

QB

Q 32.12

QB

161

QB

Q 32.11

Former Q 33.11

161

QB

Question/Answer

QB

Page

Question section

Total Marks changed from 40 to 36

Formerly Q 33.20

Formerly Q 33.19

Formerly Q 33.18

Formerly Q 33.17

Formerly Q 33.16

Formerly Q 33.15

Deleted

Formerly Q 33.13

Formerly Q 33.12

Deleted

Time Allocation changed from 48 minutes to 43 minutes

Total Marks changed from 40 to 38

Formerly Q 32.20

Formerly Q 32.19

Formerly Q 32.18

Formerly Q 32.17

Formerly Q 32.16

Formerly Q 32.15

Formerly Q 32.14

Formerly Q 32.13

Formerly Q 32.12

Details of changes

FIA FFA F3 Financial Accounting

//

27

ERRATA

28

171

171

AB

AB

A 1.12

171

171

171

171

171

171

AB

AB

AB

AB

AB

AB

A1

A 1.16

A 1.15

A 1.14

A 1.13

Former A 1.12

AB

A 1.10

A 1.9

A 1.8

171

AB

Answer 1.3

Former A 1.8

171

Answer Bank

Question/Answer

AB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

(2) is the IASBs Conceptual framework description of the purpose of financial statements. (1) is false although the supplier needs to know the current situation, the supplier also needs to be able to assess
future prospects to ensure the entity has the ability to pay and to support an ongoing relationship.

(1) is incorrect, the presentation or classification can be changed if there is a significant change in the
nature of operations, if an IFRS requires it or if a review of the accounts indicates a more appropriate
presentation. (2) is incorrect, companies should not make provisions in order to smooth profits,
provisions should only be made in accordance with IAS 37.

The Statement of Financial Position contains a list of all the assets owned and all the liabilities owed by
a business.

The Statement of Profit or Loss contains a record of income generated and expenditure incurred over a
given period.

The IFRS Foundation does not focus primarily on the needs of global, multi-national organisations. One
of the objectives of the foundation is to take account of the financial reporting needs of emerging
economies and small and medium-sized entities (SMEs).

One of the ways IFRSs are used is as an international benchmark for those countries which develop
their own requirements.

Total Marks changed from 34 to 32

1.16 A

Answer to New Question Formerly A 1.17

1.15 C

Answer to New Question Formerly A 1.16

Formerly A 1.15

Formerly A 1.14

Formerly A 1.13

Deleted

1.10 C

Answer to New Question

1.9

1.8

Answer to New Question

Deleted

1.3

Details of changes

Page

172

172

172

175

175

175

176

176

176

177

177

177

Question section

AB

AB

AB

AB

AB

AB

AB

AB

AB

AB

AB

AB

A 6.12

A 6.11

A 6.10

A 6.9

A 6.8

Former A 6.8

A 5.4

A 4.18

A 4.17

A 2.10

A 2.9

A 2.7

Question/Answer

Relevance, Faithful representation, Comparability, Verifiability, Timeliness and Understandability.

No system can prevent a transaction being processed inaccurately, for example being posted to an
incorrect but valid account code (although an effective system can reduce the likelihood of this).

$7,000

6.12 C

Sales ($120,000 x 20% / 120%)

$2,950 (10 units @$45 and 50 units @$50)

Formerly A 6.13

Formerly A 6.12

Formerly A 6.11

Formerly A 6.10

Formerly A 6.9

Deleted

$
13,000
7,000
20,000

SALES TAX CONTROL ACCOUNT

20,000

$
20,000

29

Cash purchases are recorded in the cash book. The sales day book lists invoices sent to customers, not
invoices received from suppliers.

Purchases ($65,000 20%)


Paid to tax authority

5.4

4.18 B

ERRATA

Information is material if its omission or misstatement could influence the economic decisions of users
taken on the basis of the financial statements. Statement 1 contradicts substance over form. Statement
3 is also incorrect, faithful representation does not prevent estimates being made.

Answer to New Question

4.17 C

//

Whenever legally possible, the commercial effect of a transaction should be reflected in the financial
statements..

Answer to New Question

2.10 A

2.9

2.7

Details of changes

FIA FFA F3 Financial Accounting

30

177

177

178

AB

AB

AB

A 7.2

A 6.18

A 6.17

A 6.16

A 6.15

A 7.6

177

AB

178

177

AB

A 6.14

AB

177

AB

A 6.13

Former A 7.6

177

AB

Question/Answer

AB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

- 60
40

31 March

7.6

$45
$45

$40
$50
$45*

2,700

Cost
of issues
$

1,800

Balance in
inventory
$
2,000
2,500
4,500

An internal control to ensure information relating to non-current assets in the nominal ledger and the
financial statements is correct.

Assets which are intended to be used by the business on a continuing basis, including both tangible
and intangible assets that do not meet the IASB definition of a current asset.

Answer to New Question

Deleted

7.2

50
50
100

1 March
17 March

* 4,500 / 100

Units

Date

6.18 B
Unit cost

Continuous inventory reduces the need for physical inventory counts, but in practice periodic counts are
needed to ensure that the recorded quantities of inventory match the physical quantities that are held
(and, for example, there have not been significant losses of inventory due to theft).

Answer to New Question

6.17 C

Formerly A 6.18

Formerly A 6.17

Formerly A 6.16

Formerly A 6.15

Formerly A 6.14

Details of changes

184

184

184

184

184

184

184

184

AB

AB

AB

AB

AB

AB

AB

AB

A 11.6

A 11.5

A 11.4

A 11.3

A 11.2

A 11.1

A 10.14

A 10.13

A 10.12

9.13

183

181

AB

9.11

AB

181

AB

A 8.15

Former A 10.12

180

AB

Question/Answer

AB

Page

Question section

500

Profit on disposal

Formerly A 11.5

Formerly A 11.4

Formerly A 11.3

Formerly A 11.2

Formerly A 11.1

Payables are a liability, so statement 2 is false.

Answer to New Question

Dr Expenses (SPL) $50,000


Cr Accruals (SOFP)
$50,000
This reduces profit from $125,000 to $75,000 and the net asset position from $375,000 to
$325,000.

The double entry to record the accrual in the accounts is:

Answer to New Question

11.1 C

31

ERRATA

Amortisation is an application of the matching concept and allocates the cost of the intangible asset
over its useful life (over the accounting periods expected to benefit from its use).

Formerly A 10.15

10.14 C

//

The patent should be amortised over its useful life of 10 years. (250,000 / 10) = $25,000.

5,500

Trade-in allowance

Formerly A 10.13

Deleted

9.13 A

$
Carrying amount at disposal (15,000 10,000) 5,000

Answer to New Question

9.11 C

8.15 D

Details of changes

FIA FFA F3 Financial Accounting

32

185

185

185

185

185

185

185

185

AB

AB

AB

AB

AB

AB

AB

AB

AB

185

AB

Former A 13.7

A 11.21

A 11.20

A 11.19

A 11.18

A 11.17

A 11.16

A 11.15

A 11.14

A 11.13

A 11.12

185

AB

A 11.10

A 11.11

184

AB

A 11.9

185

184

AB

A 11.8

AB

184

AB

A 11.7

Former A 11.11

184

AB

Question/Answer

AB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

When a business first establishes an allowance for receivables the full amount of the allowance should
be debited to Irrecoverable debts (statement of profit or loss) and credited to Allowance for receivables
(statement of financial position).

Deleted

Answer to New Question


11.21 D
Offering credit facilities will not reduce the level of irrecoverable debts.

Formerly 11.19

Formerly A 11.18

Formerly A 11.17

Formerly A 11.16

Formerly A 11.15

Formerly A 11.14

Formerly A 11.13

Formerly A 11.12

11.12

Answer to New Question

Formerly A 11.10

Deleted

Formerly A 11.9

Formerly A 11.8

Formerly A 11.7

Formerly A 11.6

Details of changes

191

AB

A 15.16

A 14.5

189

A 13.11

AB

187

AB

A 13.7

Former 14.5

187

AB

Question/Answer

AB

Page

Question section

PAYABLES LEDGER CONTROL ACCOUNT


$
$
Purchases returns
41,200
Bal b/f
318,600
Cash paid
1,364,300
Purchases
1,268,600
Discounts received
8,200
Refunds
2,700
Contras
48,000
Bal c/f
128,200
1,589,900
1,589,900

Bank charges

Balance

Cash book

15.16 B

$600,000 - $50,000 = $600,000.

(9,520)

(550)

(8,970)

$11,200 overdrawn

Answer to New Question

14.5 B

Answer to New Question

Deleted

$150,000 - $50,000 = $100,000.

5,380
Outstanding deposits

(9,520)

(3,275)

(425)

(11,200)

Unpresented cheques

Credit in error

Balance b/f (bal fig)

Bank statement

13.11 B A receivables ledger control account does not ensure the trial balance balances.

13.7 A

Answer to New Question

Details of changes

FIA FFA F3 Financial Accounting

//

33

ERRATA

34

199

201

202

203

AB

AB

AB

AB

A 17.8

A 17.7

A 17.6

A 17.5

A 17.4

197

A 16.6

AB

192

AB

A 15.17

Former A 17.4

191

AB

Question/Answer

AB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

Paid bank

1 November

560

Paid bank
Accrual c/d $840 2/3

30 June
30 June

SPL

Balance b/fwd

3,620

3,320

300

The $25,000 currently held in the Suspense account needs to be posted to Plant and machinery.

Formerly 17.9

Formerly 17.8

Formerly A 17.7

Formerly A 17.6

Formerly A 17.5

Deleted

16.6 C

3,620

840

Paid bank

900

720

600

1 February

20Y0:

Paid bank

1 August

20X9:

ELECTRICITY ACCOUNT

Statement of financial position $560, Statement of profit or loss $3,320.

Answer to New Question

15.17 A

Answer to New Question

Details of changes

Page

205

207

207

207

207

208

Question section

AB

AB

AB

AB

AB

AB

A 21.9

A 19.23

A 19.20

A 19.19

A 19.17

A 18.12

Question/Answer

Share premium @ 1.1.20X0


1.4.20X0 200,000 shares @ (130c 50c)
Bonus issue (as above)

Share capital @ 1.1.20X0


Issue on 1.4.20X0 (200,000 @ 50c)
Bonus issue (1.2m 4) @ 50c
Share capital as at 31.12.20X0

Non-statutory reserves consist of profits which are distributable as dividends

21.9

ERRATA

300,000
160,000
(150,000)
310,000

$
500,000
100,000
150,000
750,000

The nature of the event and an estimate of the financial effect (or a statement that such an estimate
cannot be made) should be disclosed.

35

The under provision for the previous year of $2,500 plus the provision for the current year of $20,000
gives a charge to the SPL of $22,500.

Answer to New Question

19.23 A

Answer to New Question

19.20

19.19 C

//

A bonus issue does not raise any funds, instead other reserves are capitalised and reclassified as share
capital. A rights issue is an issue of shares for cash, the right to buy the shares are initially offered to
existing shareholders. If the existing shareholders do not take up their right to buy the shares, then their
shareholding will be diluted.

Answer to New Question

19.17 B

18.12 A
Sales = 381,600 + 6,800 + 112,900 + 7,200 + 9,400 = $517,900

Details of changes

FIA FFA F3 Financial Accounting

36

218

AB

A 24.12

A 22.20

A 22.19

A 24.20

210

AB

218

210

AB

A 22.18

AB

210

AB

A 22.17

Former A 24.20

210

AB

Question/Answer

AB

Page

Question section

ERRATA // FIA FFA F3 Financial Accounting

(10,250)
(2,100)

Cash paid to employees ($1,500 + $9,500 $750)


Interest paid

Net cash flow from operating activities


A business may make a profit but have negative cash flow.

Jo is correct. A business that does not have cash available to fund operations is likely to fail

An investor must have significant influence over the investee in order for the investee to be classified as
an associate. If the investor holds 20% or more of the voting power of the entity, significant influence
can be assumed (unless it can clearly be shown that this is not the case). Therefore 1 is true. For an
investee to be classified as a subsidiary, the investor (the parent) must have control over the investee
(the subsidiary). Control can be demonstrated if the investor has the power to appoint the majority of
board members of the investee, so 2 is true. 3 is incorrect because the power to govern the financial
and operating policies of F make F a subsidiary of E. Likewise, 4 is incorrect as the power to govern the
financial and operating policies of H makes H a subsidiary of G.

3 and 4 are incorrect.

There is an opportunity to reclassify some cash outflows that might have been reported in the operating
section as investing cash outflows. For example, questionable capitalisation of expenses.

Formerly A 24.21

Deleted

24.12 C

22.20 B

Answer to New Question

22.19 D

Answer to New Question

22.18 C

3,775

175

(16,950)

Cash paid to suppliers ($1,000 + $18,500 $2,550)

Interest received

32,900

Cash received from customers ($400 + $33,400 $900)

Cash flows from operating activities

Answer to New Question

22.17 B

Answer to New Question

Details of changes

220

220

220

AB

AB

AB

A 27.5

221

221

221

221

AB

AB

AB

AB

A 27.8

A 27.7

A 27.6

Former A 27.5

AB

A 26.9

AB

220

Former 26.12

AB

A 26.8

AB

220

Former 26.10

A 26.7

AB

AB

Former 26.8

A 26.6

A 26.5

A 26.4

AB

220

220

AB

A 26.3

A 26.2

A 24.23

220

219

AB

A 24.22

AB

219

AB

A 24.21

Former 26.2

219

AB

Question/Answer

AB

Page

Question section

The gearing ratio is used to assess how much the company owes in relation to its size.

Current ratio is 2,900 : 1,100 = 2.6: 1 ie high compared to the industry norm

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All three statements are correct

Only statements 2 and 3 are correct.

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Opening balance
Credit sales

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RECEIVABLES LEDGER CONTROL ACCOUNT


$
Cash received
284,680
Discounts allowed
189,120
Irrecoverable debts written off
Sales returns
Contras
Closing balance
473,800

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$
179,790
3,660
1,800
4,920
800
282,830
473,800

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$1,460
$2,300
$2,580
$3,140

A
B
C
D

What is the adjusted bank balance per the cash book at 30 April 20X8?

Equity is a present obligation of the entity arising from past events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic benefit.
Equity is a resource controlled by an entity as a result of past events and from which future economic
benefits are expected to flow to the entity.
Equity is the residual interest in the assets of the entity after deducting all its liabilities.
Equity is increases in economic benefits during the accounting period in the form of inflows or
enhancements of assets or decreases of liabilities.
(2 marks)

A
B
C
D

Which of the following correctly defines equity according to the IASB's Conceptual Framework for Financial
Reporting?

New Question

(2 marks)

Your firm's cash book at 30 April 20X8 shows a balance at the bank of $2,490. Comparison with the bank
statement at the same date reveals the following differences:
$
Unpresented cheques
840
Bank charges not in cash book
50
Receipts not yet credited by the bank
470
Dishonoured cheque not in cash book
140

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Relevance
Fair presentation
Consistency
Accruals

(2 marks)

Improved inventory control.


The refinancing of a long-term loan.
A reduction in payables.
An increase in payables.

A
B
C
D

IFRS Advisory Council


International Accounting Standards Board
The United Nations

B
C
D

Original cash book figure


Adjustment re charges
Adjustment re dishonoured cheque

Answer to New Question

IFRS interpretations Committee

2,490
(50)
(140)
2,300

43

(2 marks)

(2 marks)

A companys quick ratio has increased from 0.9:1 at 31 December 20X1 to 1.5:1 at 31 December 20X2.
Which of the following events could explain this increase?

A
B
C
D

//

Which of the following is a qualitative characteristic of financial information included in the IASBs Conceptual
framework for financial reporting?

Which body is responsible for issuing International Financial Reporting Standards?

19

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$88,000

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19

5,000
2,000
1,000

Installation
Delivery
Testing
88,000

80,000

Cost of machine

70,000 (70,000 2/20)

Carrying value at the end of year 5:

= $63,000

100,000 (100,000 3/10) = $70,000

Carrying value at the end of year 3:

$63,000.

The quick ratio does not include inventories or long term loans, so A and B will have no effect. An
increase in payables would reduce the quick ratio.

Quick ratio = current assets excluding inventories / current liabilities.

Relevance is a qualitative characteristic. The other options are accounting concepts.

A is the definition of a liability, B is the definition of an asset and D is the definition of income according
to the Conceptual framework.

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