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CIMA BA3 Exam
Fundamentals of Financial Accounting (Page 13 )

Updated On: 1-Feb-2026
Page 13 of 80
PDF with 393 Questions

The purpose of charging the income statement with depreciation on non-current assets is:

  1. To set aside monies to replace the assets when required
  2. To reduce the figure shown in the statement of financial position to the true value of non- current assets
  3. To ensure that the profit is not understated
  4. To allocate the cost of the assets to the accounting periods in which they are used to earn profits

Answer(s): D



On 1 March, a company made a payment of $6,000, in respect of rent for the quarter 1 March - 31 May. The company's year end was 31 March.

What will be the amount of the prepayment shown in the accounts at the year end?

  1. $2,000
  2. $4,000
  3. $6,000
  4. Nil

Answer(s): B



The issue of a company's shares for more than their normal value results in the creation of a

  1. General reserve.
  2. Suspense account.
  3. Goodwill account.
  4. Share premium account.

Answer(s): D



A liability may best be defined as:

  1. An obligation to transfer economic benefits as a result of past transactions or events
  2. A resource which may be used to derive income in the future
  3. A person or entity owing money to the business
  4. The amount of money withdrawn from the business by the owners

Answer(s): A



Your organization owed VAT of $22,700 at the beginning of the month.
During the month, it sold standard-rated goods with a net value of $600,000. Its purchases and expenses during the same month amounted to $188,000 including VAT. It paid VAT to the Revenue and Customs, of $33,400. The VAT rate is 17.5%

At the end of the month, the balance on the VAT account was:

  1. $66,300 debit
  2. $128,200 debit
  3. $66,300 credit
  4. $128,200 credit

Answer(s): C



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