S4 BAFS Practice Paper: Trial Balance, Depreciation, Financial Statements And Ratios (100 Marks)

S4 BAFS Practice Paper: Trial Balance, Depreciation, Financial Statements and Ratios (100 marks)

2026-11-12

S4 BAFS – Accounting and Reporting

S4 BAFS paper: 6 questions, 100 marks, 60 minutes. Trial balance errors, depreciation, income statement, bank reconciliation, ratio analysis. Full answers.

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Paper details　

Part 1: Trial Balance Difference and Error Correction (18 marks)

Alpha Ltd trial balance at 31 March 2026 (dollars). Debit: cash 12,400; trade receivables 28,600; inventory 31,500; equipment 96,000; rent 21,000; wages 54,000; purchases 168,000; insurance 9,600; drawings 18,000. Credit: trade payables 32,400; bank loan 60,000; capital 100,000; sales 252,700. Rent of 27,000 was actually paid but only 21,000 was entered on the debit side.

#	Question	Answer and marking notes
1	(a) Calculate the total of the debit column.	Answer: 12,400 + 28,600 + 31,500 + 96,000 + 21,000 + 54,000 + 168,000 + 9,600 + 18,000 = 439,100.
2	(b) Calculate the total of the credit column.	Answer: 32,400 + 60,000 + 100,000 + 252,700 = 445,100.
3	(c) Find the difference and state which side it falls on.	Answer: Credit 445,100 less debit 439,100 gives a difference of 6,000 on the debit side.
4	(d) Explain the cause of the error and compute the corrected totals.	Answer: Rent was credited at 27,000 but debited at 21,000, so the debit side is short by 6,000. After posting the missing 6,000, both sides total 445,100.
5	(e) Give two types of error that a balanced trial balance cannot reveal.	Answer: Errors of principle such as reversed entries or a wrong account, and errors of omission, duplication or equal wrong amounts on both sides.

Part 2: Comparison of Depreciation Methods (16 marks)

Beta Ltd bought a machine on 1 January 2026 for 480,000 with an estimated life of 5 years and residual value of 30,000. The company may use the straight-line method or the reducing-balance method at 25 per cent of carrying amount. Year end is 31 December.

#	Question	Answer and marking notes
6	(a) Compute the annual depreciation under the straight-line method.	Answer: (480,000 – 30,000) / 5 = 90,000.
7	(b) Under the straight-line method, compute the accumulated depreciation and carrying amount at the end of year 3.	Answer: Accumulated depreciation 90,000 x 3 = 270,000; carrying amount 480,000 – 270,000 = 210,000.
8	(c) Under the reducing-balance method, compute the depreciation for years 1 to 3 and the carrying amount at the end of year 3.	Answer: Year 1 120,000; year 2 90,000; year 3 67,500; carrying amount at the end of year 3 is 202,500.
9	(d) Compute the difference in year 3 depreciation and explain why it arises.	Answer: 90,000 – 67,500 = 22,500 higher under straight line. Reducing balance applies a fixed rate to a falling carrying amount, so the charge falls each year, while straight line is constant.

Part 3: Preparing the Income Statement (17 marks)

Gamma Ltd data for the year 2026 (dollars): sales 820,000; sales returns 20,000; opening inventory 60,000; purchases 520,000; carriage inwards 8,000; closing inventory 72,000; wages 96,000; rent 48,000; utilities 12,000; depreciation 25,000. There are no other income or expenses.

#	Question	Answer and marking notes
10	(a) Compute net sales.	Answer: 820,000 – 20,000 = 800,000.
11	(b) Compute the cost of goods sold.	Answer: Goods available 60,000 + 520,000 + 8,000 = 588,000; cost of goods sold 588,000 – 72,000 = 516,000.
12	(c) Compute the gross profit.	Answer: 800,000 – 516,000 = 284,000.
13	(d) Compute total operating expenses and net profit.	Answer: Operating expenses 96,000 + 48,000 + 12,000 + 25,000 = 181,000; net profit 284,000 – 181,000 = 103,000.
14	(e) Compute the gross profit margin as a percentage to one decimal place.	Answer: 284,000 / 800,000 x 100 = 35.5 per cent.

Part 4: Bank Reconciliation Statement (16 marks)

Delta Ltd cash book bank column shows a debit balance of 42,300 at 30 June 2026 while the bank statement shows 51,700. Items found: unpresented cheques 12,400; uncredited deposits 6,800; a note collected by the bank 3,200 not yet recorded; bank charges 150; a dishonoured customer cheque 1,250; the bank wrongly credited our account twice for a 2,000 deposit.

#	Question	Answer and marking notes
15	(a) Starting from the bank statement balance, compute the adjusted bank balance.	Answer: 51,700 + 6,800 – 12,400 – 2,000 = 44,100.
16	(b) Starting from the cash book balance, compute the adjusted cash book balance.	Answer: 42,300 + 3,200 – 150 – 1,250 = 44,100.
17	(c) Explain why the two adjusted balances agree.	Answer: Each side is corrected for items the other had not recorded, so both state the same true bank balance.
18	(d) List the items the company must enter in its cash book.	Answer: Debit the note collected 3,200; credit bank charges 150 and the dishonoured cheque 1,250.

Part 5: Ratio Analysis (17 marks)

Epsilon Ltd data for 2026 (dollars): sales 800,000; cost of goods sold 516,000; average inventory 66,000; current assets 210,000 including inventory 72,000; current liabilities 140,000; net profit 103,000; total assets 640,000. Give ratios to two decimal places and percentages to one decimal place.

#	Question	Answer and marking notes
19	(a) Compute the gross profit margin.	Answer: (800,000 – 516,000) / 800,000 x 100 = 35.5 per cent.
20	(b) Compute the inventory turnover rate.	Answer: 516,000 / 66,000 = 7.82 times.
21	(c) Compute the current ratio.	Answer: 210,000 / 140,000 = 1.50.
22	(d) Compute the quick ratio.	Answer: (210,000 – 72,000) / 140,000 = 0.99.
23	(e) Compute the net profit margin.	Answer: 103,000 / 800,000 x 100 = 12.9 per cent.
24	(f) Compute the return on total assets.	Answer: 103,000 / 640,000 x 100 = 16.1 per cent.

Part 6: Accrual Adjustments and Error Correction (16 marks)

Zeta Ltd has a year end of 31 December 2026 and has not yet adjusted: (1) December wages of 18,000 paid in January 2027; (2) insurance of 24,000 paid on 1 October 2026 for 12 months, all charged to expense; (3) a service already provided but not yet billed, 4,500 receivable; (4) purchases of 3,600 wrongly debited to equipment, with the goods still in the warehouse.

#	Question	Answer and marking notes
25	(a) Give the adjusting entry for accrued wages and state its effect on this year profit.	Answer: Debit wages expense 18,000, credit wages payable 18,000; the extra expense reduces this year profit by 18,000.
26	(b) Compute the prepaid insurance and the insurance expense for the year.	Answer: Prepaid 24,000 x 9/12 = 18,000; expense for the year 24,000 – 18,000 = 6,000.
27	(c) Give the adjusting entry for the accrued revenue.	Answer: Debit trade receivables 4,500, credit service revenue 4,500.
28	(d) Analyse the effect of item (4) on gross profit and total assets, and give the correcting entry.	Answer: Purchases are understated by 3,600, so cost of goods sold is understated and gross profit overstated by 3,600. Equipment is overstated by 3,600 and inventory understated by the same amount, so total assets do not change. Correcting entry: debit purchases 3,600, credit equipment 3,600.

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