fia&acca fia -...

FFA FIN

AN

CIA

L AC

CO

UN

TIN

GPA

PER F3 FIN

AN

CIA

L AC

CO

UN

TIN

GFIA

& A

CC

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

FO

R E

XA

MS

FR

OM

FE

BR

UA

RY

20

14

FI32RK14 (POL & HO)_Layout 1 18/11/2013 11:58 Page 1

File Attachment9781445370699.jpg

PR A C T I C E

&

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.

FFA/F3 FINANCIAL ACCOUNTING

ii

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

Dear Customer

What does the little mean and why does it matter?

Your market-leading BPP books, course materials and elearning materials do not write and update themselves. People write them: on their own behalf or as employees of an organisation that invests in this activity. Copyright law protects their livelihoods. It does so by creating rights over the use of the content.

Breach of copyright is a form of theft as well being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics.

With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media:

Photocopying our materials is a breach of copyright

Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to facebook or emailing them to your friends is a breach of copyright

You can, of course, sell your books, in the form in which you have bought them once you have finished with them. (Is this fair to your fellow students? We update for a reason.) But the e-products are sold on a single user licence basis: we do not supply unlock codes to people who have bought them second hand.

And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website. A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that do. If they act illegally and unethically in one area, can you really trust them?

CONTENTS

iii

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


iv

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


vi

Time allocation

Page


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

QUESTION INDEX

vii

Time allocation

Page


Mixed banks

Mixed bank 1: Questions 27.1 to 27.20 40 48 133 226







Mock exams

Mock exam 1 (Specimen exam) 100 120 243 257

Mock exam 2 100 120 271 287


viii

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.

USING YOUR BPP PRACTICE AND REVISION KIT

ix

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.


x

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

THE COMPUTER BASED EXAMINATION

xi

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


xii

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.

USING YOUR BPP PRODUCTS

xiii

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


xiv

1

Questions


2

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


4

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

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)

fia&acca fia -...

Documents