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ZIMSEC A Level · 6001/1 · N2023

Accounting Paper 1 November 2023

Questions
40
Time allowed
80 min
Syllabus code
6001/1

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Questions
40
Pass mark
24
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 1

Introduction to accounting
The four branches of accounting are
  1. Acost accounting, company accounting, financial accounting and management accounting.
  2. Bcost accounting, departmental accounting, financial accounting and management accounting.
  3. Ccost accounting, company accounting, financial reporting and management accounting.
  4. Dcost accounting, financial accounting, financial reporting and management accounting.

Question 2

Reserves
Leaving reserves in their most flexible form means
  1. Autilising both the capital and revenue reserves.
  2. Butilising capital reserves first before revenue reserves.
  3. Cutilising distributable reserves first before any other reserves.
  4. Dutilising revenue reserves first before capital reserves.

Question 3

Ratio analysis
The current ratio considered to be acceptable should be in the range
  1. A0,5:1 to 1:1.
  2. B0,9:1 to 1:1.
  3. C1:1 to 2:1.
  4. D1,5:1 to 2:1.

Question 4

Ratio analysis
Working capital management can be assessed by
  1. Agross profit ratio.
  2. Binterest cover.
  3. Cinventory turnover ratio.
  4. Dreturn on capital employed.

Question 5

Statement of cash flows
According to IAS7, Statement of cashflows are prepared under the following three headings:
  1. Afinancing, direct and investing activities.
  2. Boperating, direct and financing activities.
  3. Coperating, financing and investing activities.
  4. Doperating, investing and direct activities.

Question 6

Limited companies
A company makes a rights issue to
  1. Aimprove liquidity.
  2. Bincrease gearing.
  3. Creduce capital.
  4. Dreduce reserves.

Question 7

Ratio analysis
A reduction in gross profit percentage can be caused by
  1. Aadopting price wars.
  2. Ba decrease in cost of sales.
  3. Ca decrease in purchase price.
  4. Dan increase in selling price.

Question 8

Conceptual framework
Which of the following are elements of financial statements?
  1. AAssets, liabilities, equity, expenses and income
  2. BAssets, liabilities and statement of financial position
  3. CGross profit / loss, expenses and income statement
  4. DStatement of financial position, expenses and net profit

Question 9

Conceptual framework
According to IAS1, the qualitative characteristics of financial statements include:
  1. Afair presentation, relevance, accruals and consistency.
  2. Bprofitability, relevance, reliability and fair presentation.
  3. Cprudence, understandability, materiality and fair presentation.
  4. Dunderstandability, relevance, reliability and comparability.

Question 10

Limited companies
In the statement of financial position, redeemable preference shares are included as
  1. Acurrent assets.
  2. Bequity.
  3. Cnon-current assets.
  4. Dnon-current liabilities.

Question 11

Limited companies
A bonus issue can be offered by a company in order to
  1. Aincrease liquidity.
  2. Bincrease profitability.
  3. Creduce gearing.
  4. Dreduce reserves.

Question 12

Business ethics
A business can apply business ethics in their day to day operations by
  1. Aconstructing a factory on wet lands.
  2. Bdoing deceptive advertising.
  3. Cnot polluting the environment.
  4. Dwindow dressing.

Question 13

Sources of finance
Which of the following is an internal short-term source of finance?
  1. ABank loan
  2. BBank overdraft
  3. CCash management
  4. DDebt factoring

Question 14

Control accounts
Which of the following items appear in the receivables control account?
  1. ADiscount received
  2. BIrrecoverable debts
  3. CPurchases
  4. DReturns outwards

Question 15

Control accounts

The following information is provided.

1 January $31 December $
Trade receivables71 39061 665
Provision for doubtful debts2 000
Receipts from receivables158 725

What is the value of sales?

  1. A$147 000
  2. B$149 000
  3. C$151 000
  4. D$168 450

Question 16

Accounting concepts
Ben started operating his business in 2021 and expects it to run for the foreseeable future. This is in line with the
  1. Aconsistency principle.
  2. Bgoing concern principle.
  3. Cmatching principle.
  4. Dprudence concept.

Question 17

Partnerships
On partnership change, what is the treatment of goodwill if it is to be retained in the books?
  1. ADr Goodwill, Cr Partner's capital account in the new profit sharing ratio.
  2. BDr Goodwill, Cr Partner's capital account in the old profit sharing ratio.
  3. CDr Partner's capital account in the new profit sharing ratio, Cr Goodwill.
  4. DDr Partner's capital account in the old profit sharing ratio, Cr Goodwill.

Question 18

Ratio analysis

The following information was extracted from the financial statements of Ruzivo Ltd.

$
Profit from Operations80 000
Debenture interest12 000
Equity480 000
10% Debentures120 000

What is the income gearing?

  1. A15%
  2. B16,67%
  3. C20 %
  4. D25 %

Question 19

Clubs and societies

The following information relates to Tamitami sports club for the year.

The book values and fair values of the sole trader are shown below.

1 January $31 December $
Subscriptions owing20 00015 000
Subscriptions in advance50 00060 000
Subscriptions received300 000

How much should be credited to the Income and Expenditure account?

  1. A$260 000
  2. B$285 000
  3. C$315 000
  4. D$375 000

Question 20

Correction of errors
A payment for petrol for a vehicle has been debited to Motor Vehicles account. This is an example of an error of
  1. Acommission.
  2. Bomission.
  3. Coriginal entry.
  4. Dprinciple.

Question 21

Irrecoverable debts and allowances
An increase in the allowance for doubtful debts will result in
  1. Aan increase in gross profit.
  2. Ba reduction in gross profit.
  3. Can increase in net profit.
  4. Da reduction in net profit.

Question 22

Reserves
Which of the following is a capital reserve?
  1. AAsset replacement reserve
  2. BGeneral reserve
  3. CRetained earnings
  4. DRevaluation reserve

Question 23

Ratio analysis

The following is an extract from the Statement of Financial Position of Max Ltd.

$$
Current assets
Inventory60 000
Trade receivables90 000
Bank30 000
180 000
Less current liabilities
Trade payables60 000120 000

What is the acid test ratio?

  1. A1:2
  2. B1:3
  3. C2:1
  4. D3:1

Question 24

Manufacturing accounts

Taya Ltd provides the following information at 31 December 2020.

$
Sales revenue600 000
Factory cost of finished goods375 000
Closing inventory of finished goods (transfer value)75 000

Goods are transferred to the warehouse at a mark up of 15%.

What is the transfer value to the Income Statement?

  1. A$ 56 250
  2. B$225 000
  3. C$431 250
  4. D$453 261

Question 25

Depreciation

A machine cost $186 000. Its disposal value in 5 years is expected to be $6 000.

What is the annual depreciation using straight line method?

  1. A$36 000
  2. B$37 200
  3. C$38 400
  4. D$43 200

Question 26

Impairment of assets

The following table shows information on Non-current asset X.

AssetCarrying amount $Fair value cost to sell $Recoverable amount $
X450 000425 000430 000

According to IAS36, what is the impairment loss?

  1. ANIL
  2. B$5 000
  3. C$20 000
  4. D$25 000

Question 27

Purchase of a business

Mayo Ltd took over Dube's assets and liabilities at the following valuations:

$
Plant and machinery300 000
Motor vehicles170 000
Inventory50 000
Trade receivables30 000
Trade payables20 000

Mayo Ltd did not take over Bank account amounting to $20 000. The purchase consideration was $600 000.

What is the value of goodwill?

  1. A$30 000
  2. B$40 000
  3. C$50 000
  4. D$70 000

Question 28

Partnerships

Blessed and Blessing were sharing profits and losses in the ratio 2:1 respectively. They revalued their assets on 1 September 2021 in order to share profits equally.

Premises increased by $100 000
Plant and machinery decreased by $50 000
Inventory decreased by $10 000
Receivables decreased by $10 000

What is the correct entry to record the effect of the revaluation?

DebitCredit
ACapital: Blessed$15 000Revaluation$30 000
Blessing$15 000
BCapital: Blessed$20 000Revaluation$30 000
Blessing$10 000
CRevaluation$30 000Capital: Blessed$15 000
Blessing$15 000
DRevaluation$30 000Capital: Blessed$20 000
Blessing$10 000
  1. ADebit Capital: Blessed $15 000 and Blessing $15 000, Credit Revaluation $30 000
  2. BDebit Capital: Blessed $20 000 and Blessing $10 000, Credit Revaluation $30 000
  3. CDebit Revaluation $30 000, Credit Capital: Blessed $15 000 and Blessing $15 000
  4. DDebit Revaluation $30 000, Credit Capital: Blessed $20 000 and Blessing $10 000

Question 29

Partnerships

X, Y and Z are partners sharing profits and losses in the ratio 3:2:1 respectively.

Profit for the year $21 000.

What was X's share of profit?

  1. A$8 000
  2. B$9 600
  3. C$10 500
  4. D$12 600

Question 30

Investment appraisal
Which investment appraisal technique is based on profits?
  1. AAccounting rate of return
  2. BInternal rate of return
  3. CNet present value
  4. DPayback period

Question 31

Investment appraisal
Time value of money means
  1. Aa sum of money today is worth more than money received in the future.
  2. Ba sum of money invested at compound interest will remain the same.
  3. Cthe timing of cashflows in the near future.
  4. Dthe value of a $1 received now is less than the value of a $1 received in a year's time.

Question 32

Budgeting
The term budget refers to
  1. Aanything which acts as a constraint on level of activity.
  2. Ba plan that you seek to achieve in future.
  3. Ca plan usually quantified in monetary terms.
  4. Da statement of cash to be spent sparingly.

Question 33

Overhead absorption
Over-absorption of overheads occurs when
  1. Aactual expenditure is more than the budget.
  2. Bactual production is less than the budget.
  3. Cactual expenditure is less than the budget.
  4. Dactual expenditure is equal to the budgeted expenditure.

Question 34

Costing
A sunk cost is
  1. Aa cost that has already been incurred.
  2. Ba cost to be incurred in future.
  3. Ca cost which is relevant for decision making.
  4. Da value of a benefit foregone.

Question 35

Costing
The elements of job costing are
  1. Adirect materials, direct labour and overheads.
  2. Bdirect materials, sunk cost, direct labour.
  3. Cfixed cost, sunk cost and direct expenses.
  4. Dopportunity cost, direct cost and irrelevant cost.

Question 36

Break-even analysis

The following diagram shows the break-even chart.

(Diagram: a Cost/Revenue vs Output chart. The Total Revenue line rises from the origin O. The Total Costs line rises from point D on the Cost/Revenue axis (the fixed costs level) and runs parallel below the Total Revenue line at first. The Fixed Costs line is horizontal at the level of D. The Total Revenue and Total Costs lines cross at point B. The Total Revenue line crosses the horizontal Fixed Costs line at point C. Point A is marked between the Total Revenue and Total Costs lines, to the right of B.)

Which point A, B, C or D on the diagram shows the break-even point?

  1. AA
  2. BB
  3. CC
  4. DD

Question 37

Investment appraisal

A project requires an initial investment of $500 000 and additional working capital of $100 000.

What is the average investment?

  1. A$200 000
  2. B$250 000
  3. C$300 000
  4. D$350 000

Question 38

Standard costing

The following information is provided on materials.

StandardActual
Price per kg$6$5,50
Usage (kgs)3 3503 000

What is the material price variance?

  1. A$1 500 (A)
  2. B$1 500 (F)
  3. C$1 675 (A)
  4. D$1 675 (F)

Question 39

Standard costing

Rashid Limited's budget for the production and sale of 20 000 units showed direct material cost of $100 000. The actual output and sales for the period ending 31 March 2021 were 30 000 units. Direct material was $5,30 per unit.

What is the flexed budget for direct material?

  1. A$100 000
  2. B$106 000
  3. C$150 000
  4. D$159 000

Question 40

Control accounts
A credit balance in the receivables ledger account may occur when a customer has
  1. Abeen allowed a trade discount.
  2. Bmade an over payment.
  3. Cmade an under payment.
  4. Dpurchased goods on credit.

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