中文（繁體）
中文（简体）
English
HKDSE BAFS Practice Paper: Financial Accounting, Costing and Financial Analysis
HKDSE BAFS: Financial Accounting and Costing
HKDSE BAFS paper: 12 original questions, 100 marks, 75 minutes on depreciation, bank reconciliation, inventory costing, CVP and relevant costing, ratios and cash flow.
Download Question paper PDF | Answer key PDF
Paper details Level: S6 | Subject: BAFS | Time: 75 minutes | Marks: 100 | Questions: 12
Section A (Q1–Q4): Accounting Principles, Adjustments and Financial Statements (32 marks)
Each question carries 8 marks. Show your working.
| # | Question | Answer and marking notes |
|---|---|---|
| 1 | A company bought a machine in January 2025 for $180,000. Its estimated useful life is 4 years and the residual value is $20,000. (a) Using the straight-line method, calculate depreciation for 2025 and 2026 and the net book value at 31 December 2026. (3 marks) (b) Repeat (a) using the reducing-balance method at 40% per year. (3 marks) (c) Explain how the two methods differ in the early years and how this affects reported profit. (2 marks) |
(a) Straight-line depreciation = ($180,000 − $20,000) ÷ 4 = $40,000 per year, so $40,000 in 2025 and $40,000 in 2026; net book value at 31 December 2026 = $180,000 − $80,000 = $100,000. [1 mark each] (b) 2025: $180,000 × 40% = $72,000, net book value $108,000; 2026: $108,000 × 40% = $43,200, net book value $64,800. [1 mark each] (c) The reducing-balance method charges more depreciation early ($72,000 against $40,000), so profit is lower in the early years and higher later; the straight-line method spreads profit more evenly. [2 marks] |
| 2 | A sole trader recorded cash receipts of $240,000 from customers and cash payments of $150,000 for expenses in 2025. Year-end data: opening receivables $18,000, closing receivables $26,000; opening prepaid expenses $6,000, closing prepaid expenses $9,000; opening accrued expenses $12,000, closing accrued expenses $15,000. (a) Calculate revenue on an accrual basis. (3 marks) (b) Calculate expenses on an accrual basis. (3 marks) (c) Calculate accrual-basis net profit. (2 marks) |
(a) Revenue = $240,000 − $18,000 + $26,000 = $248,000. [3 marks] (b) Expenses = $150,000 − $6,000 + $9,000 − $12,000 + $15,000 = $156,000. [3 marks] (c) Net profit = $248,000 − $156,000 = $92,000. [2 marks] |
| 3 | At 30 June 2025 the bank statement of ABC Ltd showed a credit balance of $86,400, while the cash book showed $79,200. You find unpaid cheques of $12,500, deposits not yet credited of $8,000, a note collected by the bank of $3,000 not yet recorded by the company, and bank charges of $300 not yet recorded. (a) Adjust the bank statement balance to the corrected cash balance. (3 marks) (b) Adjust the cash book balance to the same figure. (3 marks) (c) State which party must record each of the two unrecorded items. (2 marks) |
(a) $86,400 − $12,500 + $8,000 = $81,900. [3 marks] (b) $79,200 + $3,000 − $300 = $81,900. [3 marks] (c) The note collected and the bank charges are known only to the bank, so the company must record them in its cash book; unpresented cheques and deposits not yet credited are timing differences that the bank will clear, so the company does not adjust them. [2 marks] |
| 4 | A trading company had opening inventory of 100 units at $20 each, bought 200 units at $24 in March and 100 units at $28 in July, and sold 320 units during the year. (a) Calculate cost of goods sold and closing inventory under FIFO. (3 marks) (b) Calculate the weighted average unit cost, cost of goods sold and closing inventory. (3 marks) (c) Explain the effect of each method on profit when prices are rising. (2 marks) |
(a) FIFO: cost of goods sold = 100 × $20 + 200 × $24 + 20 × $28 = $7,360; closing inventory = 80 × $28 = $2,240. [3 marks] (b) Total cost available = $2,000 + $4,800 + $2,800 = $9,600 for 400 units, so the weighted average unit cost is $24; cost of goods sold = 320 × $24 = $7,680; closing inventory = 80 × $24 = $1,920. [3 marks] (c) When prices rise, FIFO gives the lower cost of goods sold ($7,360 against $7,680) and therefore higher profit; the weighted average method reports lower but smoother profit. [2 marks] |
Section B (Q5–Q8): Cost Accounting, Budgeting and Decision Making (36 marks)
Each question carries 9 marks. Show calculations and explanations.
| # | Question | Answer and marking notes |
|---|---|---|
| 5 | A product sells for $60. Its unit variable cost is $36 and annual fixed cost is $288,000. (a) Calculate the unit contribution margin and the contribution margin ratio. (2 marks) (b) Calculate the break-even quantity and break-even sales revenue. (3 marks) (c) How many units must be sold to earn a target profit of $96,000? (2 marks) (d) If actual sales are 15,000 units, calculate the margin of safety in units and as a percentage. (2 marks) |
(a) Unit contribution margin = $60 − $36 = $24; contribution margin ratio = 24 ÷ 60 = 40%. [2 marks] (b) Break-even quantity = $288,000 ÷ $24 = 12,000 units; break-even revenue = 12,000 × $60 = $720,000. [3 marks] (c) Target quantity = ($288,000 + $96,000) ÷ $24 = 16,000 units. [2 marks] (d) Margin of safety = 15,000 − 12,000 = 3,000 units, or 20% of actual sales. [2 marks] |
| 6 | A company produced 10,000 units and sold 8,500 units at $70 each. Unit variable manufacturing cost is $30, fixed manufacturing overhead for the year is $150,000, unit variable selling cost is $4, and fixed administrative cost is $60,000. (a) Calculate the unit fixed manufacturing overhead and the unit product cost under absorption costing. (2 marks) (b) Calculate profit under absorption costing. (3 marks) (c) Calculate profit under marginal costing. (2 marks) (d) Explain the difference in profit and verify it with figures. (2 marks) |
(a) Unit fixed manufacturing overhead = $150,000 ÷ 10,000 = $15; unit product cost = $30 + $15 = $45. [2 marks] (b) Sales = 8,500 × $70 = $595,000; cost of goods sold = 8,500 × $45 = $382,500; variable selling cost $34,000; fixed administrative cost $60,000; profit = $118,500. [3 marks] (c) Contribution = 8,500 × ($70 − $30 − $4) = $306,000; less fixed manufacturing overhead $150,000 and fixed administrative cost $60,000, profit = $96,000. [2 marks] (d) The difference is $118,500 − $96,000 = $22,500, equal to closing inventory of 1,500 units × $15 unit fixed overhead; absorption costing carries part of the fixed overhead into inventory, so profit is higher. [2 marks] |
| 7 | A factory has normal capacity of 20,000 units and currently makes and sells 16,000 units at $50 each. Unit costs are: direct materials $12, direct labour $8, variable overhead $5 and fixed overhead $10 (absorbed on normal capacity); variable selling cost is $3 per unit. A customer offers a special order of 3,000 units at $34 each, which needs a special mould costing $9,000; normal sales are unaffected. (a) Calculate the relevant unit cost of the order. (2 marks) (b) Calculate the incremental profit from accepting the order. (3 marks) (c) Compare the offer price with the full unit cost and advise. (2 marks) (d) State two non-financial factors to consider. (2 marks) |
(a) Relevant unit cost = $12 + $8 + $5 + $3 = $28; fixed overhead is an existing sunk cost and is excluded. [2 marks] (b) Incremental profit = 3,000 × ($34 − $28) − $9,000 = $18,000 − $9,000 = $9,000. [3 marks] (c) Full unit cost = $12 + $8 + $5 + $10 = $35, so the offer of $34 is below full cost; however incremental revenue exceeds incremental cost and there is spare capacity, so the order should be accepted. [2 marks] (d) For example: regular customers may demand the same price, the low price may damage the brand, the order may use up future capacity, and quality or delivery requirements may add cost. [2 marks] |
| 8 | A company budgeted manufacturing overhead of $480,000 for 24,000 direct labour hours. Actual hours were 25,000 and actual overhead was $510,000. Job A7 used materials of $18,000 and 600 direct labour hours at $45 per hour. (a) Calculate the overhead absorption rate. (2 marks) (b) Calculate overhead absorbed and the amount over- or under-absorbed. (3 marks) (c) Calculate the total cost of Job A7 and, with a 25% mark-up on cost, its quoted price. (4 marks) |
(a) Absorption rate = $480,000 ÷ 24,000 hours = $20 per hour. [2 marks] (b) Overhead absorbed = 25,000 × $20 = $500,000; actual overhead $510,000, so $10,000 is under-absorbed. [3 marks] (c) Materials $18,000; labour 600 × $45 = $27,000; overhead 600 × $20 = $12,000; total cost = $57,000; quoted price = $57,000 × 1.25 = $71,250. [4 marks] |
Section C (Q9–Q12): Ratio Analysis, Company Accounts and Financial Management (32 marks)
Each question carries 8 marks. Refer to the data given.
| # | Question | Answer and marking notes |
|---|---|---|
| 9 | At 31 December 2025 a company had current assets of $360,000, including inventory of $150,000, and current liabilities of $180,000. (a) Calculate the current ratio. (2 marks) (b) Calculate the quick ratio to two decimal places. (2 marks) (c) If the company borrows a further short-term loan of $60,000 and keeps the cash, calculate the new current ratio. (2 marks) (d) Explain why the quick ratio is a better test of short-term solvency than the current ratio. (2 marks) |
(a) Current ratio = $360,000 ÷ $180,000 = 2.00. [2 marks] (b) Quick ratio = ($360,000 − $150,000) ÷ $180,000 = 1.17. [2 marks] (c) New current ratio = ($360,000 + $60,000) ÷ ($180,000 + $60,000) = $420,000 ÷ $240,000 = 1.75. [2 marks] (d) Inventory must be sold before it becomes cash, so it is the least liquid current asset and may become obsolete; the quick ratio excludes inventory and counts only cash and receivables, so it measures the ability to meet debts immediately. [2 marks] |
| 10 | A limited company issued 200,000 ordinary shares at $5 each; the par value is $1 per share. Profit after tax for the year was $600,000 and a dividend of $0.8 per share was declared. A bonus issue of one share for every four held was then made. (a) Calculate the share capital and share premium at issue. (2 marks) (b) Calculate total dividends and the increase in retained earnings. (3 marks) (c) Calculate share capital and retained earnings after the bonus issue. (3 marks) |
(a) Share capital = 200,000 × $1 = $200,000; share premium = 200,000 × ($5 − $1) = $800,000. [2 marks] (b) Dividends = 200,000 × $0.8 = $160,000; increase in retained earnings = $600,000 − $160,000 = $440,000. [3 marks] (c) Bonus shares = 200,000 ÷ 4 = 50,000; share capital = $250,000; retained earnings = $440,000 − $50,000 = $390,000. [3 marks] |
| 11 | A company is considering equipment costing $300,000 that should generate net cash inflows of $90,000 per year for 5 years. The discount rate is 10% and the 5-year annuity factor is 3.791. (a) Calculate the net present value. (4 marks) (b) Calculate the payback period. (2 marks) (c) Advise on the investment and give one reason why NPV is preferred to the payback method. (2 marks) |
(a) Present value of inflows = $90,000 × 3.791 = $341,190; NPV = $341,190 − $300,000 = $41,190. [4 marks] (b) Payback period = $300,000 ÷ $90,000 = 3.33 years. [2 marks] (c) NPV is positive at $41,190 and payback of 3.33 years is within the 5-year life, so the investment is acceptable. NPV discounts all cash flows and reflects the time value of money, whereas payback ignores cash flows after the payback date. [2 marks] |
| 12 | Profit after tax for 2025 was $180,000 and depreciation was $45,000. Inventory rose by $18,000, receivables fell by $12,000 and payables rose by $9,000. The company bought fixed assets for $120,000, issued shares for $200,000 and paid dividends of $60,000. (a) Calculate cash flow from operating activities. (3 marks) (b) Calculate cash flows from investing and financing activities. (3 marks) (c) Calculate the net increase in cash. (2 marks) |
(a) Cash flow from operating activities = $180,000 + $45,000 − $18,000 + $12,000 + $9,000 = $228,000. [3 marks] (b) Investing activities = −$120,000; financing activities = $200,000 − $60,000 = $140,000. [3 marks] (c) Net increase in cash = $228,000 − $120,000 + $140,000 = $248,000. [2 marks] |
Find a tutor — freeTutor Registration →
A TutorZone practice paper; original questions and passages, not publisher material.