fia&acca fia -...
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FFA FIN
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CIA
L AC
CO
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TIN
GPA
PER F3 FIN
AN
CIA
L AC
CO
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GFIA
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AAbout BPP Learning MediaBPP Learning Media is dedicated to supporting aspiring business professionals with top quality learning material as they study fordemanding professional exams, often whilst working full time. BPP Learning Medias commitment to student success is shown byour record of quality, innovation and market leadership in paper-based and e-learning materials. BPP Learning Medias study materialsare written by professionally-qualified specialists who know from personal experience the importance of top quality materials forexam success.
BPP Learning Media is the sole ACCA Platinum Approved Learning Partner - content.
This Practice & Revision Kit has been reviewed by the examiner to ensure that it provides full coverage of the syllabus andstudy guide for FIA FFA Financial Accounting and ACCA Paper F3 Financial Accounting of the ACCAs Foundations in Accountancyqualifications.
When you have worked through it you will be ready to tackle the mock exams at the end of the Kit and compare your answerswith ours
Targeted at FIA exams from February 2014, it contains:n DO YOU KNOW? Checklists to test your knowledge of Financial Accounting topicsn A bank of exam-standard MCQs with answers, covering the syllabusn Two mock exams including the FFA/F3 pilot paper
At BPP Learning Media, we specialise in helping people pass professional exams. Your exam success is our business.
For more details about this or any other BPP Learning Media products, please call our customer services team on 0845 0751 100 (within the UK) or +44 (0)20 8740 2211 (from overseas), email [email protected] or visit our websitewww.bpp.com/learningmedia
NOVEMBER 2013
UK 15.00
PRA
CT
ICE &
REV
ISION
KIT
FIA &ACCA
FFAFINANCIAL ACCOUNTING
PAPER F3FINANCIAL ACCOUNTING
FIAFFAFINANCIAL ACCOUNTING
ACCAPAPER F3FINANCIAL ACCOUNTING
PRACTICE & REVISION KIT
FOR EXAMS FROM FEBRUARY 2014
BPP House, Aldine Place, London W12 8AATel: 0845 0751 100 (for orders within the UK)Tel: +44 (0)20 8740 2211 Fax: +44 (0)20 8740 1184www.bpp.com/learningmedia
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PR A C T I C E
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R E V I S I O N
K I T
Welcome to BPP Learning Media's Practice and Revision Kit for FFA. In this, the only FFA/F3 Practice and Revision Kit to be reviewed by the examiner:
We include Do you know? Checklists to test your knowledge and understanding of topics
We provide you with two mock exams including the Specimen exam
We provide the ACCA examiners answers as well as our own to the Specimen exam as an additional revision aid
BPP's i-Pass product also supports this paper and is a vital tool if you are taking the computer based exam.
FOR EXAMS FROM FEBRUARY 2014 TO AUGUST 2015
FFA
PAPER F3
FINANCIAL ACCOUNTING
Note FIA FFA and ACCA Paper F3 are examined under the same syllabus and study guide.
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FFA/F3 FINANCIAL ACCOUNTING
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First edition May 2011 Third edition November 2013
ISBN 9781 4453 7034 7 Previous ISBN 9781 4453 9977 5 e-ISBN 9781 4453 7069 9
British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library
Published by
BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA
www.bpp.com/learningmedia
Printed in the United Kingdom by Polestar Wheatons
Hennock Road Marsh Barton Exeter EX2 8RP
Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from sustainable, managed forests.
All our rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd.
We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions. The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated.
BPP Learning Media Ltd 2013
A note about copyright
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CONTENTS
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Contents Page
Finding questions Question index ..............................................................................................................................v
Helping you with your revision...................................................................................................... viii Using your BPP Practice and Revision Kit........................................................................................ ix Passing the FFA/F3 exam ............................................................................................................... x Approach to examining the syllabus ................................................................................................. x The Computer Based Examination .................................................................................................. xi Tackling Multiple Choice Questions................................................................................................ xii Using your BPP products............................................................................................................. xiii
Questions and answers Questions .................................................................................................................................... 3 Answers .................................................................................................................................. 175
Exam practice Mock exam 1 (Specimen exam) Questions......................................................................................................................... 243 Answers........................................................................................................................... 257 ACCA examiners answers.................................................................................................. 265
Mock exam 2 Questions......................................................................................................................... 271 Answers........................................................................................................................... 287
Review form
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FFA/F3 FINANCIAL ACCOUNTING
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QUESTION INDEX
v
Question index
Time allocation
Page
Marks Mins Questions Answers
Part A: The context and purpose of financial reporting
The context and purpose of financial reporting
Questions 1.1 to 1.14 28 34 5 175
Part B: The qualitative characteristics of financial information
The qualitative characteristics of financial information
Questions 2.1 to 2.11 22 26 11 175
Part C: The use of double entry and accounting systems
Double entry bookkeeping
Questions 3.1 to 3.17 34 41 17 176
Questions 4.1 to 4.16 32 38 20 177
Part D: Recording transactions and events
Sales tax
Questions 5.1 to 5.8 16 19 27 179
Inventory
Questions 6.1 to 6.18 36 43 28 180
Tangible non-current assets
Questions 7.1 to 7.17 34 41 33 181
Questions 8.1 to 8.20 40 48 38 183
Intangible non-current assets
Questions 9.1 to 9.12 24 29 43 185
Accruals and prepayments
Questions 10.1 to 10.15 30 36 46 186
Receivables and payables
Questions 11.1 to 11.19 38 46 50 188
Provisions and contingencies
Questions 12.1 to 12.10 20 24 54 189
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FFA/F3 FINANCIAL ACCOUNTING
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Time allocation
Page
Marks Mins Questions Answers
Part E: Preparing a trial balance
Control accounts
Questions 13.1 to 13.20 40 48 61 190
Bank reconciliations
Questions 14.1 to 14.15 30 36 66 192
Correction of errors
Questions 15.1 to 15.15 30 36 70 194
Suspense accounts
Questions 16.1 to 16.10 20 24 74 195
Part F: Preparing basic financial statements
15 mark questions: preparing basic financial statements
Questions 17.1 to 17.9 135 162 81 196
Incomplete records
Questions 18.1 to 18.16 32 38 91 209
Company financial statements
Questions 19.1 to 19.22 44 53 95 211
Disclosure notes
Questions 20.1 to 20.10 20 24 101 213
Events after the reporting period
Questions 21.1 to 21.8 16 19 104 213
Statements of cash flows
Questions 22.1 to 22.16 32 38 107 214
Part G: Preparing simple consolidated financial statements
15 mark questions: preparing simple consolidated financial statements
Questions 23.1 to 23.4 60 72 115 215
Consolidated financial statements
Questions 24.1 to 24.24 48 58 118 221
Part H: Interpretation of financial statements
15 mark question: interpretation of financial statements
Question 25.1 15 18 129 224
Interpretation of financial statements
Questions 26.1 to 26.13 26 31 130 225
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QUESTION INDEX
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Time allocation
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Marks Mins Questions Answers
Mixed banks
Mixed bank 1: Questions 27.1 to 27.20 40 48 133 226
Mixed bank 2: Questions 28.1 to 28.20 40 48 139 228
Mixed bank 3: Questions 29.1 to 29.20 40 48 145 230
Mixed bank 4: Questions 30.1 to 30.20 40 48 150 232
Mixed bank 5: Questions 31.1 to 31.20 40 48 156 234
Mixed bank 6: Questions 32.1 to 32.20 40 48 161 236
Mixed bank 7: Questions 33.1 to 33.20 40 48 167 238
Mock exams
Mock exam 1 (Specimen exam) 100 120 243 257
Mock exam 2 100 120 271 287
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FFA/F3 FINANCIAL ACCOUNTING
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Helping you with your revision
BPP Learning Media Approved Learning Partner content As ACCAs Approved Learning Partner content, BPP Learning Media gives you the opportunity to use examiner-reviewed revision materials for exams from February 2014 to August 2015. By incorporating the examiners comments and suggestions regarding syllabus coverage, the BPP Learning Media Practice and Revision Kit provides excellent, ACCA-approved support for your revision.
Selecting questions We provide signposts to help you plan your revision.
A full question index listing questions that cover each part of the syllabus, so that you can locate the questions that provide practice on key topics, and see the different ways in which they might be tested
Attempting mock exams There are two mock exams that provide practice at coping with the pressures of the exam day. We strongly recommend that you attempt them under exam conditions. Mock exam 1 is the Specimen exam. Mock exam 2 reflects the question styles and syllabus coverage of the exam.
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USING YOUR BPP PRACTICE AND REVISION KIT
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Using your BPP Practice and Revision Kit
Aim of this Practice and Revision Kit To provide the practice to help you succeed in both the paper based and computer based examinations for Paper FFA/F3 Financial Accounting.
To pass the examination you need a thorough understanding in all areas covered by the syllabus and teaching guide.
Recommended approach Make sure you are able to answer questions on everything specified by the syllabus and teaching
guide. You cannot make any assumptions about what questions may come up on your paper. The examiners aim to discourage 'question spotting'.
Learning is an active process. Use the DO YOU KNOW? Checklists to test your knowledge and understanding of the topics covered in FFA/F3 Financial Accounting by filling in the blank spaces. Then check your answers against the DID YOU KNOW? Checklists. Do not attempt any questions if you are unable to fill in any of the blanks - go back to your BPP Interactive Text and revise first.
When you are revising a topic, think about the mistakes that you know that you should avoid by writing down POSSIBLE PITFALLS at the end of each DO YOU KNOW? Checklist.
Once you have completed the checklists successfully, you should attempt the questions on that topic. Each question is worth 2 marks and carries with it a time allocation of 2.4 minutes.
Once you have completed all of the questions in the body of this Practice & Revision Kit, you should attempt the MOCK EXAMS under examination conditions. Check your answers against our answers to find out how well you did.
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FFA/F3 FINANCIAL ACCOUNTING
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Passing the FFA/F3 exam
Paper FFA/F3 aims to develop your knowledge and understanding of the underlying principles, concepts and regulations relating to financial accounting. You will need to demonstrate technical proficiency in the use of double entry techniques, including the preparation of basic financial statements for incorporated and unincorporated entities, as well as simple consolidated financial statements for group incorporated entities. You also need to be able to conduct a basic interpretation of financial statements. If you plan to progress through the ACCA qualification, the skills you learn at FFA/F3 will be built upon in papers F7 and P2.
To access FIA and ACCA syllabuses, visit the ACCA website.
http://www.accaglobal.com/
The exam You can take this exam as a paper based exam or by computer based exam. All questions in the exam are compulsory. This means you cannot avoid any topic, but also means that you do not need to waste time in the exam deciding which questions to attempt. There are fifty MCQs in the paper-based exam and a mixture of MCQs and other types of objective test question (number entry, multiple response and multiple response matching) in the CBE. This means that the examiner is able to test most of the syllabus at each sitting, so you need to have revised right across the syllabus for this exam.
Revision This kit has been reviewed by the FFA/F3 examiner and contains the Specimen exam, so if you just worked through it to the end you would be very well prepared for the exam. It is important to tackle questions under exam conditions. Allow yourself just the number of minutes shown next to the questions in the index and dont look at the answers until you have finished. Then correct your answer and go back to the Interactive Text for any topic you are really having trouble with. Try the same question again a week later you will be surprised how much better you are getting. Doing the questions like this will really show you what you know, and will make the exam experience less worrying.
Doing the exam If you have honestly done your revision you can pass this exam. There are a couple of points to bear in mind:
Read the question properly.
Dont spend more than the allotted time on each question. If you are having trouble with a question leave it and carry on. You can come back to it at the end.
Approach to examining the syllabus
FFA/F3 is a two-hour paper. It can be taken as a paper based or a computer based exam. The exam is structured as follows: No of marks
Section A 35 compulsory objective test questions of 2 marks each 70 Section B 2 compulsory multi-part questions of 15 marks each 30 100
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THE COMPUTER BASED EXAMINATION
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The Computer Based Examination
Computer based examinations (CBEs) are available for the first seven FIA papers (not papers FAU, FTM or FFM), and the first three ACCA exams (F1, F2 and F3), in addition to the conventional paper based examination.
Computer based examinations must be taken at an ACCA CBE Licensed Centre.
How do CBEs work? Questions are displayed on a monitor
Candidates enter their answer directly onto the computer
Candidates have two hours to complete the examination
When the candidate has completed their examination, the final percentage score is calculated and displayed on screen
Candidates are provided with a Provisional Result Notification showing their results before leaving the examination room
The CBE Licensed Centre uploads the results to the ACCA (as proof of the candidate's performance) within 72 hours
Candidates can check their exam status on the ACCA website by logging into myACCA.
Benefits Flexibility as a CBE can be sat at any time.
Resits can also be taken at any time and there is no restriction on the number of times a candidate can sit a CBE.
Instant feedback as the computer displays the results at the end of the CBE.
Results are notified to ACCA within 72 hours.
CBE question types Multiple choice choose one answer from four options
Number entry key in a numerical response to a question
Multiple response select more than one response by clicking the appropriate tick boxes
Multiple response matching select a response to a number of related part questions by choosing one option from a number of drop down menus
For more information on computer-based exams, visit the ACCA website.
http://www.accaglobal.com/en/student/Exams/Computer-based-exams.html
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FFA/F3 FINANCIAL ACCOUNTING
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Tackling Multiple Choice Questions
MCQs are part of all FIA exams and the first three ACCA exams (F1, F2 and F3). MCQs may feature in the CBE, along with other types of question, while the paper based exam is made up entirely of MCQs.
The MCQs in your exam contain four possible answers. You have to choose the option that best answers the question. The three incorrect options are called distracters. There is a skill in answering MCQs quickly and correctly. By practising MCQs you can develop this skill, giving you a better chance of passing the exam.
You may wish to follow the approach outlined below, or you may prefer to adapt it.
Step 1 Skim read all the MCQs and identify what appear to be the easier questions.
Step 2 Attempt each question starting with the easier questions identified in Step 1. Read the question thoroughly. You may prefer to work out the answer before looking at the options, or you may prefer to look at the options at the beginning. Adopt the method that works best for you.
Step 3 Read the four options and see if one matches your own answer. Be careful with numerical questions as the distracters are designed to match answers that incorporate common errors. Check that your calculation is correct. Have you followed the requirement exactly? Have you included every stage of the calculation?
Step 4 You may find that none of the options matches your answer.
Re-read the question to ensure that you understand it and are answering the requirement
Eliminate any obviously wrong answers
Consider which of the remaining answers is the most likely to be correct and select the option
Step 5 If you are still unsure make a note and continue to the next question
Step 6 Revisit unanswered questions. When you come back to a question after a break you often find you are able to answer it correctly straight away. If you are still unsure have a guess. You are not penalised for incorrect answers, so never leave a question unanswered!
After extensive practice and revision of MCQs, you may find that you recognise a question when you sit the exam. Be aware that the detail and/or requirement may be different. If the question seems familiar read the requirement and options carefully do not assume that it is identical.
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USING YOUR BPP PRODUCTS
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Using your BPP products
This Kit gives you the question practice and guidance you need in the exam. Our other products can also help you pass:
Passcards provide you with clear topic summaries and exam tips
i-Pass CDs are a vital revision tool for anyone taking FIA/ACCA CBEs and offer tests of knowledge against the clock in an environment similar to that encountered in a computer based exam
You can purchase these products by visiting www.bpp.com/learningmedia
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FFA/F3 FINANCIAL ACCOUNTING
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1
Questions
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FFA/F3 FINANCIAL ACCOUNTING
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QUESTIONS
3
Check that you can fill in the blanks in the statements below before you attempt any questions. If in doubt, you should go back to your BPP Interactive Text and revise first.
F.. r .. is a way of recording, analysing and summarising financial data.
Businesses of whatever size or nature exist to make a .
P.. is the excess of over expenditure. When e exceeds the business is running at a l.
A s t is a business owned and run by one individual, perhaps employing one or two assistants and controlling their work.
L l status means that the business's debts and the personal debts of the business's owners (shareholders) are legally separate.
are arrangements between individuals to carry on business in common with a view to profit. Partnerships are governed by a .
Financial accounting is mainly a method of reporting the .. and .... of a business. Financial accounts provide information.
There are various groups of people who need . about the activities of a business.
Those charged with g of a company are responsible for the preparation of the financial statements.
The statement of financial position is simply a list of all the a owned and all the l owed by a business as at a particular date.
An 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.
A .... 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 benefits.
E. is the residual interest in the assets of the entity after deducting all its liabilities.
A statement of profit or loss is a record of generated and incurred over a given period.
Accounting standards were developed to try to address sy
The IASB develops .. .. ..
The main objectives of the IFRS Foundation are to:
. a single set of high quality, understandable, enforceable and globally accepted I.. through its standard-setting body, the I
promote the ... and rigours application of those standards
take account of the financial reporting needs of emerging economies and and . . entities
bring about c of national accounting standards and IFRSs to high quality solutions.
Do you know? The context and purpose of financial reporting
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FFA/F3 FINANCIAL ACCOUNTING
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Could you fill in the blanks? The answers are in bold. Use this page for revision purposes as you approach the exam.
Financial reporting is a way of recording, analysing and summarising financial data.
Businesses of whatever size or nature exist to make a profit.
Profit is the excess of income over expenditure. When expenditure exceeds revenue, the business is running at a loss.
A sole tradership is a business owned and run by one individual, perhaps employing one or two assistants and controlling their work.
Limited liability status means that the business's debts and the personal debts of the business's owners (shareholders) are legally separate.
Partnerships are arrangements between individuals to carry on business in common with a view to profit. Partnerships are governed by a partnership agreement.
Financial accounting is mainly a method of reporting the financial performance and financial position of a business. Financial accounts provide historical information.
There are various groups of people who need information about the activities of a business.
Those charged with governance of a company are responsible for the preparation of the financial statements.
The statement of financial position is simply a list of all the assets owned and all the liabilities owed by a business as at a particular date.
An asset 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.
A liability 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 benefits.
Equity is the residual interest in the assets of the entity after deducting all its liabilities.
A statement of profit or loss is a record of income generated and expenditure incurred over a given period.
Accounting standards were developed to try to address subjectivity.
The IASB develops International Financial Reporting Standards (IFRSs).
The main objectives of the IFRS Foundation are to:
develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB
promote the use and rigorous application of those standards
take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs)
bring about convergence of national accounting standards and IFRSs to high quality solutions.
Did you know? The context and purpose of financial reporting
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QUESTIONS
5
1 The context and purpose of financial reporting 34 mins
1.1 Who issues International Financial Reporting Standards?
A The IFRS Advisory Committee B The stock exchange C The International Accounting Standards Board D The government (2 marks)
1.2 Which groups of people are most likely to be interested in the financial statements of a sole trader?
1 Shareholders of the company 2 The businesss bank manager 3 The tax authorities 4 Financial analysts
A 1 and 2 only B 2 and 3 only C 2, 3 and 4 only D 1, 2 and 3 only (2 marks)
1.3 Which of the following statements is/are true?
1 The shareholder needs a statement of financial prospects, ie an indication of future progress. However, the supplier of goods on credit needs a statement of financial position, ie an indication of the current state of affairs.
2 The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.
A 1 only B 2 only C Both 1 and 2 D Neither 1 or 2 (2 marks)
1.4 Which of the following are advantages of trading as a limited liability company?
1 Operating as a limited liability company makes raising finance easier because additional shares can be issued to raise additional cash.
2 Operating as a limited liability company is more risky than operating as a sole trader because the shareholders of a business are liable for all the debts of the business whereas the sole trader is only liable for the debts up to the amount he has invested.
A 1 only B 2 only C Both 1 and 2 D Neither 1 or 2 (2 marks)
1.5 Which of the following best describes corporate governance?
A Corporate governance is the system of rules and regulations surrounding financial reporting.
B Corporate governance is the system by which companies and other entities are directed and controlled.
C Corporate governance is carried out by the finance department in preparing the financial accounts.
D Corporate governance is the system by which an entity monitors its impact on the natural environment. (2 marks)