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CIMA

CERTIFICATE IN BUSINESS ACCOUNTING


PAPER C2
FUNDAMENTALS OF FINANCIAL ACCOUNTING

COURSE TEST 1
QUESTION PAPER

Answer all questions

CMC2CT10(N) CT1 Questions

CC210 C2 CT (1)

CMC2CT10(N) CT1 Questions

You must attempt all questions.


Each correct answer will score two marks. No deduction will be made for wrong answers.
An answer sheet is provided on the last page of this test. You must indicate your answer in the box provided.
No workings should be submitted on the answer sheet
1

The net assets of Walter's business decreased by $11,025 over the year to 31 October 20X8. During that
year he had paid in additional capital of $14,000, drawn $875 in cash each month and, on one occasion,
taken goods costing $2,625 for his own use.
The

made by the business for the year ended 31 October 20X8 was profit/loss

$
2

The following are all current assets; trade receivables, inventories, prepaid expenses and bank deposit
account.
If they are placed in order of decreasing liquidity, their order will be:

inventories, trade receivables, prepaid expenses, bank deposit account

trade receivables, bank deposit account, prepaid expenses, inventories

bank deposit account, prepaid expenses, trade receivables, inventories

prepaid expenses, bank deposit account, trade receivables, inventories

Which of the following best explains the imprest system of petty cash control?
A

Each month an equal amount of cash is transferred into petty cash

the petty cash total must never fall below the imprest amount

Petty cash must be kept under lock and key

The exact amount of expenditure is reimbursed at intervals to maintain a fixed float

A business has net assets of $286,400 on 31 January 2009 and had net assets of $266,800 on 31
January 2008. During the year the proprietor of the business
(1)

took goods for his own use which cost $10,000 and had a market value of $14,000

(2)

introduced capital of $50,000

(3)

withdrew $30,000 as salary.

The profit for the year was $


5

Which of the following would not be classified as a current asset?


A

Cash

Prepayments

Land

Receivables

CMC2CT10(N) CT1 Questions

Which of the following statements is incorrect?


A

If the trial balance does not balance an error must have been made

The closing inventories balance is included in the trial balance

Proprietors drawings are shown on the trial balance

The opening inventories balance is included in the trial balance

The purpose of a balance sheet is to show:


A

a clear and definite estimate of what a business is really worth

the amount the business could be sold for in liquidation

the amount the business could be sold for as a going concern

the assets of the business and the claims against those assets

True or false?
A van for sale on a motor dealer's forecourt is shown as a non-current asset in the motor dealer's balance
sheet.
True
False

10

What transaction is represented by the entries: debit rent, credit landlord?


A

The receipt of rental income by the business

The issue of an invoice for rent to a tenant

The payment of rent by the business

The receipt of a bill for rent payable by the business

The accounting equation can be rewritten as:


A

Assets + profits drawings liabilities = closing capital

Assets liabilities drawings = opening capital + profit

Assets liabilities opening capital + drawings = profit

Opening capital + profit drawings liabilities = assets

CMC2CT10(N) CT1 Questions

FUNDAMENTALS OF FINANCIAL ACCOUNTING COURSE


TEST 1
Answer Sheet
Name: ..........................................................................
Student number: ....................................................

was
Profit/loss

2
3
4
5
6
7
8
9
10

CMC2CT10(N) CT1 Questions

Date: ..........................................................................

CMC2CT10(N) CT1 Questions

BPP House, Aldine Place, London W12 8AA


Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia

CIMA
CERTIFICATE IN BUSINESS ACCOUNTING
PAPER C2
FUNDAMENTALS OF FINANCIAL ACCOUNTING
COURSE TEST 1
SOLUTIONS

CMC2CT10(N) CT1 Solutions

CC210 C2 CT (1)

CMC2CT10(N) CT1 Solutions

SOLUTIONS TO COURSE TEST 1


1

Loss was $11,900

$9,600

False

10

CMC2CT10(N) CT1 Solutions

WORKINGS
1

$11,900 loss
Change in net assets

change in capital + profit - drawings

-11,025
-11,025
-11,900

=
=
=

14,000 + profit (875 X 12) 2,625


875 + profit
profit

Change in net assets

change in capital + profit - drawings

286,400 - 266,800
19,600
19,600 10,000
Profit

=
=
=
=

50,000 + profit 10,000 30,000


10,000 + profit
profit
9,600

ie a loss of 11,900
2

$9,600

False It would be shown as a current asset ie inventory.

10

The balance sheet contains assets at historic cost (e.g. non current assets) and assets at less
than market value (e.g. inventory) together with all known liabilities at a certain date. It will not
reflect, therefore, the real worth of the business or what it would realise on sale. The going
concern concept implies that, unless explicitly stated to the contrary, the business will continue for
the foreseeable future. No account need be taken, therefore, of a sale in liquidation.

Rent is an expense, therefore a debit to rent indicates an increase in the expense.

BPP House, Aldine Place, London W12 8AA


Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
4
www.bpp.com/learningmedia

TEST 1

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