HKDSE BAFS (Accounting) Paper 2A practice paper

2026-10-31

HKDSE BAFS (Accounting) Paper 2A

HKDSE BAFS (Accounting) Paper 2A mock: 23 questions, 100 marks, 135 min, covering financial statements, ratio analysis, marginal costing and standard costing variances, with question and answer PDFs.

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Paper details　Level: S6 | Subject: BAFS (Accounting) | Time: 2 hours 15 minutes | Marks: 100 | Questions: 23

Section A — Preparation of financial statements (40 marks)

Show all working. Method marks are not awarded for answers alone. Use $ and thousands separators.

#	Question	Answer and marking notes
1	Chan’s Trading, year ended 31 December 2025: opening inventory $62,000, purchases $512,000, returns outwards $12,000, closing inventory $78,000, sales $860,000. Calculate net purchases and cost of sales. (5 marks)	Net purchases = $512,000 – $12,000 = $500,000 (2 marks). Cost of sales = $62,000 + $500,000 – $78,000 = $484,000 (3 marks).
2	Using sales of $860,000 and cost of sales of $484,000 from Q1, calculate gross profit and gross profit margin. (5 marks)	Gross profit = $860,000 – $484,000 = $376,000 (2 marks). Gross profit margin = $376,000 / $860,000 x 100% = 43.7% (3 marks; must be a percentage to one decimal place).
3	Equipment cost $300,000 with accumulated depreciation of $120,000 on 1 January 2025, depreciated at 10% of cost on a straight-line basis for the full year. Calculate the depreciation charge for the year and the net book value at 31 December 2025. (4 marks)	Depreciation = $300,000 x 10% = $30,000 (2 marks). Net book value = $300,000 – $120,000 – $30,000 = $150,000 (2 marks).
4	Other expenses: wages $96,000, rent $60,000, insurance $18,000, utilities $24,000, sundry $9,000. Prepare the income statement for the year ended 31 December 2025. (12 marks)	Sales $860,000 – cost of sales $484,000 = gross profit $376,000 (2 marks). Expenses: wages $96,000 + rent $60,000 + insurance $18,000 + utilities $24,000 + sundry $9,000 + depreciation $30,000 = $237,000 (6 marks, 1 each, total must be correct). Net profit = $376,000 – $237,000 = $139,000 (4 marks).
5	At 31 December 2025: inventory $78,000, trade receivables $145,000, cash $31,000, bank $46,000, trade payables $88,000; net book value of equipment as in Q3. Capital on 1 January 2025 was $259,000 and drawings were $36,000; net profit as in Q4. Prepare the statement of financial position. (10 marks)	Non-current assets: equipment net book value $150,000 (1 mark). Current assets = $78,000 + $145,000 + $31,000 + $46,000 = $300,000 (2 marks). Total assets = $450,000 (1 mark). Less current liabilities, trade payables $88,000 (1 mark), net assets = $362,000 (1 mark). Capital: $259,000 + $139,000 – $36,000 = $362,000 (4 marks; all three components shown and agreeing with net assets).
6	The industry average gross profit margin is 38%. Using your answer to Q2, comment on the profitability of Chan’s Trading and identify one accounting item that needs further investigation. (4 marks)	43.7% is 5.7 percentage points above the industry average (1 mark), suggesting stronger pricing power or lower purchase cost (1 mark). Inventory rose from $62,000 to $78,000, which may indicate slow-moving or over-stocked goods (1 mark); the inventory ageing and post-year-end sales should be checked so that gross profit is not overstated (1 mark).

Section B — Ratio analysis (25 marks)

Unless stated otherwise, express ratios in times or days to the decimal place required.

#	Question	Answer and marking notes
7	Year 2025: cost of sales $484,000, opening inventory $62,000, closing inventory $78,000. Calculate the inventory turnover ratio in times (two decimal places). (4 marks)	Average inventory = ($62,000 + $78,000) / 2 = $70,000 (2 marks). Inventory turnover = $484,000 / $70,000 = 6.91 times (2 marks).
8	Using the turnover of 6.91 times in Q7, calculate the inventory turnover period in days (one decimal place). (3 marks)	Inventory turnover period = 365 / 6.91 = 52.8 days (3 marks; reverse calculation from 52.8 days is also accepted).
9	Trade receivables were $125,000 on 1 January 2025 and $145,000 on 31 December 2025; sales of $860,000 are all on credit. Calculate the receivables collection period (one decimal place). (4 marks)	Average receivables = ($125,000 + $145,000) / 2 = $135,000 (2 marks). Collection period = 365 x $135,000 / $860,000 = 57.3 days (2 marks).
10	Current assets total $300,000 (inventory $78,000, receivables $145,000, cash $31,000, bank $46,000) and current liabilities are $88,000. Calculate the current ratio. (3 marks)	Current ratio = $300,000 / $88,000 = 3.41:1 (3 marks; 3.4:1 scores 1 mark).
11	Using the data in Q10, calculate the quick ratio, excluding inventory. (3 marks)	Quick assets = $145,000 + $31,000 + $46,000 = $222,000 (1 mark). Quick ratio = $222,000 / $88,000 = 2.52:1 (2 marks).
12	Opening capital $259,000, closing capital $362,000, net profit for the year $139,000. Calculate the return on capital employed (one decimal place). (4 marks)	Average capital = ($259,000 + $362,000) / 2 = $310,500 (2 marks). ROCE = $139,000 / $310,500 x 100% = 44.8% (2 marks).
13	Trade payables were $76,000 on 1 January 2025 and $88,000 on 31 December 2025; net purchases were $500,000. Calculate the payables payment period and, using your answers to Q8 and Q9, the working capital cycle (one decimal place). (4 marks)	Average payables = ($76,000 + $88,000) / 2 = $82,000; payment period = 365 x $82,000 / $500,000 = 59.9 days (2 marks). Working capital cycle = 52.8 + 57.3 – 59.9 = 50.2 days (2 marks).

Section C — Marginal costing and CVP analysis (20 marks)

Units must be whole numbers; round up where necessary and explain why.

#	Question	Answer and marking notes
14	A product sells for $80 per unit, unit variable cost is $48 and annual fixed costs are $288,000. Calculate the unit contribution and the contribution margin ratio. (3 marks)	Unit contribution = $80 – $48 = $32 (2 marks). Contribution margin ratio = $32 / $80 x 100% = 40% (1 mark).
15	Using Q14, calculate the break-even quantity in units and the break-even sales value. (4 marks)	Break-even quantity = $288,000 / $32 = 9,000 units (2 marks). Break-even sales = 9,000 x $80 = $720,000 (2 marks).
16	Actual sales for the year were 12,500 units. Calculate total contribution, profit, and the margin of safety in units and as a percentage (one decimal place). (4 marks)	Total contribution = $32 x 12,500 = $400,000 (1 mark). Profit = $400,000 – $288,000 = $112,000 (1 mark). Margin of safety = 12,500 – 9,000 = 3,500 units = 3,500 / 12,500 = 28.0% (2 marks; $280,000 in value is also accepted).
17	Management wants next year’s profit to reach $160,000. Assuming selling price, unit variable cost and fixed costs are unchanged, calculate the required sales volume in units. (4 marks)	Required volume = ($288,000 + $160,000) / $32 = 14,000 units (4 marks; formula only without working scores 1 mark).
18	A supplier price rise lifts unit variable cost to $52. Calculate the new break-even quantity, rounded up to a whole unit. (5 marks)	New unit contribution = $80 – $52 = $28 (2 marks). Break-even quantity = $288,000 / $28 = 10,285.71 units (2 marks), which must be rounded up to 10,286 units because 10,285 units give only $287,980 of contribution and the firm is still not breaking even (1 mark).

Section D — Standard costing variances (15 marks)

State each variance as favourable or adverse.

#	Question	Answer and marking notes
19	Budgeted output was 10,000 units and actual output was 11,200 units. The standard usage is 3 kg per unit at a standard price of $12 per kg. Actual material used was 34,720 kg costing $423,584. Calculate the material price variance. (3 marks)	Actual price = $423,584 / 34,720 = $12.20 (1 mark). Price variance = ($12.20 – $12.00) x 34,720 = $6,944 adverse (2 marks).
20	Using Q19, calculate the material usage variance. (3 marks)	Standard usage = 11,200 x 3 = 33,600 kg (1 mark). Usage variance = (34,720 – 33,600) x $12 = $13,440 adverse (2 marks).
21	Using Q19 and Q20, calculate the total material variance and verify it by an alternative method. (2 marks)	Total variance = $6,944 + $13,440 = $20,384 adverse (1 mark). Check: actual cost $423,584 less standard cost 33,600 x $12 = $403,200, difference $20,384 (1 mark).
22	The standard time is 1.5 hours per unit at a standard rate of $90 per hour. Actual hours were 16,240 and actual wages $1,494,080 for actual output of 11,200 units. Calculate the labour rate variance. (3 marks)	Actual rate = $1,494,080 / 16,240 = $92.00 (1 mark). Rate variance = ($92.00 – $90.00) x 16,240 = $32,480 favourable (2 marks).
23	Using Q22, calculate the labour efficiency variance and state whether it is favourable or adverse. (4 marks)	Standard hours = 11,200 x 1.5 = 16,800 hours (2 marks). Efficiency variance = (16,240 – 16,800) x $90 = -$50,400, i.e. $50,400 favourable (2 marks).

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