DSE Business, Accounting And Financial Studies (Accounting) Practice Paper (12 Questions, 50 Marks, 75 Minutes)

DSE Business, Accounting and Financial Studies (Accounting) Practice Paper (12 Questions, 50 Marks, 75 Minutes)

2026-11-02

DSE BAFS Accounting Full Paper

DSE BAFS (Accounting) practice paper: 12 original questions, 50 marks, 75 minutes on contribution, break-even, depreciation, cash budgets and NPV, with worked solutions.

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Paper details　Level: S6 | Subject: Business, Accounting and Financial Studies | Time: 75 minutes | Marks: 50 | Questions: 12

Section A (Short Questions, 2 marks each, 12 marks in total)

Write the formula, substitute the numbers and give the units (dollars, units, times, days).

#	Question	Answer and marking notes
1	A business has sales of $480,000 and variable costs of $288,000 for the period. Find the contribution margin ratio as a percentage, correct to 1 decimal place.	Contribution = 480,000 – 288,000 = $192,000; contribution margin ratio = 192,000 / 480,000 x 100% = 40.0%.
2	A product has a contribution of $24 per unit and total fixed costs of $96,000. Find the break-even sales volume in units.	Break-even volume = 96,000 / 24 = 4,000 units.
3	A machine costs $180,000, has an estimated residual value of $20,000 and a useful life of 5 years. Using the straight-line method, find the annual depreciation expense.	Annual depreciation = (180,000 – 20,000) / 5 = $32,000.
4	The closing balance of accounts receivable is $250,000 and the allowance for doubtful debts is set at 4% of receivables. Find the allowance for the period.	Allowance = 250,000 x 4% = $10,000.
5	A company has current assets of $600,000 and current liabilities of $250,000. Find the current ratio, correct to 2 decimal places.	Current ratio = 600,000 / 250,000 = 2.4 times.
6	Opening and closing inventories are $130,000 and $170,000 respectively, and cost of goods sold is $900,000. Using average inventory, find the inventory turnover in times, correct to 2 decimal places.	Average inventory = (130,000 + 170,000) / 2 = $150,000; turnover = 900,000 / 150,000 = 6.00 times.

Section B (Application Questions, 4 marks each, 12 marks in total)

Show every step; an answer without working earns at most half the marks.

#	Question	Answer and marking notes
7	Credit sales for the year are $320,000; opening receivables are $60,000 and closing receivables are $80,000. Find (a) the receivables turnover in times, correct to 2 decimal places, and (b) the average collection period in days, using 365 days a year, correct to 1 decimal place.	(a) Average receivables = (60,000 + 80,000) / 2 = $70,000; turnover = 320,000 / 70,000 = 4.57 times. (b) Average collection period = 365 / 4.57 = 79.8 days.
8	A product sells for $150, has a unit variable cost of $90 and fixed costs of $180,000. Find (a) the unit contribution, (b) the contribution margin ratio, (c) the break-even sales volume, and (d) the sales volume needed to earn a target profit of $60,000.	(a) Unit contribution = 150 – 90 = $60. (b) Contribution margin ratio = 60 / 150 x 100% = 40%. (c) Break-even volume = 180,000 / 60 = 3,000 units. (d) Required volume = (180,000 + 60,000) / 60 = 4,000 units.
9	Equipment costs $500,000, has an estimated life of 4 years and a residual value of $40,000, and is depreciated at 40% per year on the reducing-balance method. Find (a) the year 1 depreciation, (b) the year 2 depreciation, and (c) the net book value at the end of year 2.	(a) Year 1 depreciation = 500,000 x 40% = $200,000. (b) Book value at end of year 1 is $300,000, so year 2 depreciation = 300,000 x 40% = $120,000. (c) Net book value at end of year 2 = 300,000 – 120,000 = $180,000, still above the $40,000 residual value.

Section C (Case and Extended Questions, 26 marks in total)

Calculate first, then explain in full sentences, referring to the figures given.

#	Question	Answer and marking notes
10	A company reports: sales $2,400,000, cost of goods sold $1,440,000, operating expenses $600,000, current assets $800,000 (including inventory $300,000), current liabilities $400,000, total liabilities $900,000 and total assets $2,000,000. (a) Find the gross profit margin. (b) Find the net profit margin. (c) Find the quick ratio. (d) Find the gearing ratio. (e) State two ways to improve profitability.	(a) Gross profit = 2,400,000 – 1,440,000 = $960,000; gross profit margin = 960,000 / 2,400,000 x 100% = 40.0%. (b) Net profit = 960,000 – 600,000 = $360,000; net profit margin = 360,000 / 2,400,000 x 100% = 15.0%. (c) Quick ratio = (800,000 – 300,000) / 400,000 = 1.25 times. (d) Gearing = 900,000 / 2,000,000 x 100% = 45.0%. (e) Raise prices or improve the sales mix, cut purchasing and operating costs, speed up inventory turnover, and reduce interest expense (any two).
11	Cash budget data: March sales were $500,000 and budgeted April sales are $600,000; 60% of each month sales are for cash and 40% are on credit, collected in the following month. March purchases were $300,000 and budgeted April purchases are $360,000; 30% of purchases are paid in the month of purchase and 70% in the following month. April operating expenses are $120,000, paid in April. (a) Find April cash receipts. (b) Find April cash payments. (c) Find the April net cash flow.	(a) Cash receipts = 600,000 x 60% + 500,000 x 40% = 360,000 + 200,000 = $560,000. (b) Cash payments = 360,000 x 30% + 300,000 x 70% + 120,000 = 108,000 + 210,000 + 120,000 = $438,000. (c) Net cash flow = 560,000 – 438,000 = $122,000 net inflow.
12	A company is considering equipment costing $400,000 that is expected to generate net cash inflows of $120,000 a year for 5 years. The cost of capital is 10% and the 5-year annuity present value factor is 3.791. (a) Find the payback period in years, correct to 1 decimal place. (b) Find the net present value. (c) Should the company invest? Give one reason.	(a) Payback = 400,000 / 120,000 = 3.3 years. (b) NPV = 120,000 x 3.791 – 400,000 = 454,920 – 400,000 = $54,920. (c) Invest: the NPV is positive and the 3.3-year payback is shorter than the 5-year project life.

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