level 4 exams financial performance practice questions

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Try these level 4 exams financial performance practice questions. Practice is essential if you are to succeed at the Advanced Diploma in Accounting.

Question 1

You are employed as an accounting trainee and you are studying level 4 exams financial performance practice questions.

Your boss tells you that the company’s gross profit as a percentage of sales increased from 24% in the year ended 31 December 2015 to 27% in the year ended 31 December 2016.

Which of the following events is most likely to have caused the increase?
A. An increase in sales volume
B. A purchase in December 2015 mistakenly being recorded as happening in January 2016
C. Overstatement of the closing inventory at 31 December 2015
D. Understatement of the closing inventory at 31 December 2015

Question 2

You are looking at some level 4 exams financial performance when a fellow student asks you:

Which of the following material events after the reporting date and before the financial statements are approved are adjusting events?

(1). Sale of inventory held at the reporting date for less than cost.
(2). A valuation of property providing evidence of impairment in value at the reporting date
(3). The insolvency of a customer with a debt owing at the reporting date which is still outstanding.
(4). Discovery of fraud or error affecting the financial statements.

A. 1, 2 and 4 only
B. 1, 2, 3 and 4
C. 1 and 4 only
D. 2 and 3 only

Question 3

Prior to the financial year end of 31 March 2016, CAN Ltd has received a claim of £100,000 from a customer for providing poor quality goods which have damaged the customer’s plant and equipment. CAN Ltd’s solicitors have stated that there is a 20% chance that CAN Ltd will successfully defend the claim.

Which of the following is the correct accounting treatment for the claim in the financial statements for the year ended 31 March 2016?

A. CAN Ltd should neither provide for nor disclose the claim
B. CAN Ltd should disclose a contingent liability of £100,000
C. CAN Ltd should provide for the expected cost of the claim of £100,000
D. CAN Ltd should provide for an expected cost of £20,000

Question 4

The following extracts are from Harry’s financial statements:

Profit before interest and tax 10,200
Interest (1,600)
Tax (3,300)
Profit after tax 5,300
Share capital 20,000
Reserves 15,600
Loan liability 6,900

What is Harry’s return on capital employed?

Question 5

Which of the following should appear in a company’s statement of changes in equity?
(1) Surplus on revaluation of non-current assets
(2) Amortisation of capitalised development costs
(3) Total comprehensive income for the year

A. 1, 2 and 3
B. 2 and 3 only
C. 1 and 3 only
D. 1 and 2 only