Secondary 5 Business, Accounting And Financial Studies Practice Paper: Trial Balance And Income Statement, Accruals, Prepayments And Depreciation, Inventory And Cost Of Sales, Bank Reconciliation, Cost Accounting And Break-even, Financial Ratio Analysis

Secondary 5 Business, Accounting and Financial Studies Practice Paper: Trial Balance and Income Statement, Accruals, Prepayments and Depreciation, Inventory and Cost of Sales, Bank Reconciliation, Cost Accounting and Break-even, Financial Ratio Analysis

2026-11-14

BAFS – Secondary 5 – Practice Paper

S5 BAFS practice paper: trial balance, income statement, accruals and depreciation, inventory costing, bank reconciliation, break-even analysis and financial ratios.

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Paper details　S5 BAFS practice paper with 24 parts on trial balance, depreciation, inventory costing, bank reconciliation, break-even and financial ratios.

Section A: Trial Balance and Financial Statements (16 marks)

The following trial balance data relate to a sole trader for the year ended 31 December 2025: purchases 320,000 dollars, sales 560,000 dollars, opening inventory 45,000 dollars, rent 60,000 dollars, wages 85,000 dollars, bank 70,000 dollars, trade receivables 65,000 dollars, trade payables 48,000 dollars, capital 100,000 dollars, drawings 23,000 dollars, equipment 60,000 dollars and a loan of 20,000 dollars at 6 per cent per year.

#	Question	Answer and marking notes
1	(a) Compute the total of the debit column and the total of the credit column.	Total debit = 728,000 dollars; total credit = 728,000 dollars, and the two sides agree. (Marking: debit 2, credit 2)
2	(b) Closing inventory is 52,000 dollars. Compute the cost of sales and the gross profit.	Cost of sales = 45,000 + 320,000 – 52,000 = 313,000 dollars; gross profit = 560,000 – 313,000 = 247,000 dollars. (Marking: cost of sales 2, gross profit 2)
3	(c) Compute the interest expense for the year and the net profit.	Interest = 20,000 x 6 per cent = 1,200 dollars; total expenses = 60,000 + 85,000 + 1,200 = 146,200 dollars; net profit = 247,000 – 146,200 = 100,800 dollars. (Marking: interest 1, net profit 3)
4	(d) Compute the closing capital and check it by the assets less liabilities method.	Closing capital = 100,000 + 100,800 – 23,000 = 177,800 dollars; assets = 247,000 dollars, liabilities = 69,200 dollars, net assets = 177,800 dollars, which agrees. (Marking: closing capital 2, check 2)

Section B: Accruals, Prepayments and Depreciation (17 marks)

A business has a year end of 31 December. The following data relate to the year 2025.

#	Question	Answer and marking notes
5	(a) Insurance of 36,000 dollars was paid on 1 April 2025 for 12 months. Compute the insurance expense for 2025 and the prepaid insurance at the year end.	Nine months fall in 2025 (April to December): 36,000 x 9 / 12 = 27,000 dollars; prepaid for 3 months = 36,000 – 27,000 = 9,000 dollars. (Marking: expense 3, prepayment 2)
6	(b) Wages paid during the year were 150,000 dollars; wages accrued at 31 December 2025 were 12,500 dollars and at 31 December 2024 were 8,000 dollars. Compute the wages expense for 2025.	Wages expense = 150,000 + 12,500 – 8,000 = 154,500 dollars. (Marking: add accrual 2, deduct prior accrual 2)
7	(c) Equipment costing 180,000 dollars has an estimated residual value of 20,000 dollars and a useful life of 8 years. Depreciation is on the straight line basis. Compute the annual depreciation and the carrying amount after 3 years.	Annual depreciation = (180,000 – 20,000) / 8 = 20,000 dollars; accumulated for 3 years = 60,000 dollars; carrying amount = 180,000 – 60,000 = 120,000 dollars. (Marking: depreciation 2, carrying amount 2)
8	(d) A vehicle costing 240,000 dollars was bought on 1 July 2025 and is depreciated at 25 per cent per year on the reducing balance basis. Compute the depreciation for 2025 and the carrying amount at the year end.	Only six months fall in 2025: 240,000 x 25 per cent x 6 / 12 = 30,000 dollars; carrying amount = 240,000 – 30,000 = 210,000 dollars. (Marking: time apportionment 2, carrying amount 2)

Section C: Inventory and Cost of Sales (17 marks)

A trader records the following for one product: opening inventory 100 units at 20 dollars each, a March purchase of 200 units at 24 dollars each and an August purchase of 150 units at 28 dollars each. 300 units were sold during the year.

#	Question	Answer and marking notes
9	(a) Using the first in first out method, compute the cost of sales and the closing inventory cost.	Cost of sales = 100 x 20 + 200 x 24 = 6,800 dollars; closing inventory = 150 units x 28 = 4,200 dollars. (Marking: cost of sales 3, closing inventory 2)
10	(b) Using the weighted average method, compute the average unit cost, the cost of sales and the closing inventory.	Cost of goods available = 11,000 dollars for 450 units; average cost = 24.44 dollars; cost of sales = 7,333.33 dollars; closing inventory = 3,666.67 dollars. (Marking: average cost 1, cost of sales 2, closing inventory 1)
11	(c) Compare the gross profit under the two methods. What is the difference?	The weighted average cost of sales is higher by 533.33 dollars (7,333.33 – 6,800), so its gross profit is lower by 533.33 dollars. (Marking: amount 2, direction 2)
12	(d) The net realisable value of the closing inventory is 26 dollars per unit. Using the first in first out cost, compute the write down and the amount to be reported.	Net realisable value = 150 x 26 = 3,900 dollars; cost of 4,200 dollars is higher, so inventory is written down by 300 dollars and reported at 3,900 dollars. (Marking: net realisable value 2, write down 1, reported amount 1)

Section D: Bank Reconciliation (17 marks)

On 31 December 2025 the bank column of the cash book showed a debit balance of 42,600 dollars. The following were then discovered: unpresented cheques 8,400 dollars, deposits not yet credited 11,200 dollars, bank charges of 350 dollars not entered in the cash book, a standing order of 2,000 dollars paid by the bank and not entered, and dividends of 1,500 dollars collected by the bank and not entered.

#	Question	Answer and marking notes
13	(a) Compute the corrected cash book bank balance.	Corrected balance = 42,600 – 350 – 2,000 + 1,500 = 41,750 dollars. (Marking: each correct adjustment 1, total 5)
14	(b) Compute the balance shown on the bank statement on 31 December.	Bank statement balance = 41,750 + 11,200 – 8,400 = 44,550 dollars. (Marking: add deposits 2, deduct unpresented cheques 2)
15	(c) Which of the above items require entries in the cash book?	The bank charges, the standing order and the dividends collected must be entered in the cash book; the unpresented cheques and uncredited deposits are only timing differences and need no entry. (Marking: three items 3, timing difference 1)
16	(d) If the unpresented cheque is later presented, what will the bank statement balance become?	The statement balance falls by 8,400 dollars to 44,550 – 8,400 = 36,150 dollars, while the 11,200 dollars of deposits is still uncredited. (Marking: amount 3, note 1)

Section E: Cost Accounting and Break-even (17 marks)

A product has monthly fixed costs of 180,000 dollars, a unit selling price of 60 dollars and a unit variable cost of 36 dollars.

#	Question	Answer and marking notes
17	(a) Compute the unit contribution, the monthly break-even quantity and the break-even sales value.	Unit contribution = 60 – 36 = 24 dollars; break-even quantity = 180,000 / 24 = 7,500 units; break-even sales = 7,500 x 60 = 450,000 dollars. (Marking: contribution 1, quantity 2, sales 2)
18	(b) If actual sales are 9,000 units, compute the margin of safety in units and in percentage.	Margin of safety = 9,000 – 7,500 = 1,500 units; percentage = 1,500 / 9,000 x 100 per cent = 16.67 per cent. (Marking: units 2, percentage 2)
19	(c) How many units must be sold to earn a monthly profit of 60,000 dollars?	(180,000 + 60,000) / 24 = 10,000 units. (Marking: formula 2, answer 2)
20	(d) If the unit variable cost rises by 10 per cent and all else is unchanged, what is the new break-even quantity, rounded up to a whole number?	New variable cost = 36 x 1.1 = 39.60 dollars, so the new unit contribution is 20.40 dollars; 180,000 / 20.40 = 8,823.53, that is 8,824 units, an increase of 1,324 units. (Marking: new contribution 2, new quantity 1, increase 1)

Section F: Financial Ratio Analysis (16 marks)

A company reports for 2025: current assets 480,000 dollars (inventory 200,000, receivables 220,000, bank 60,000), current liabilities 240,000 dollars, total liabilities 600,000 dollars, total assets 1,200,000 dollars, turnover 1,800,000 dollars, gross profit 540,000 dollars, net profit 144,000 dollars, average inventory 180,000 dollars and average receivables 200,000 dollars.

#	Question	Answer and marking notes
21	(a) Compute the current ratio and the quick ratio.	Current ratio = 480,000 / 240,000 = 2.00; quick ratio = (480,000 – 200,000) / 240,000 = 1.17. (Marking: 2 each)
22	(b) Compute the gross profit ratio and the net profit ratio.	Gross profit ratio = 540,000 / 1,800,000 x 100 per cent = 30.00 per cent; net profit ratio = 144,000 / 1,800,000 x 100 per cent = 8.00 per cent. (Marking: 2 each)
23	(c) Compute the inventory turnover and the receivables turnover in times.	Cost of sales = 1,800,000 – 540,000 = 1,260,000 dollars; inventory turnover = 1,260,000 / 180,000 = 7 times; receivables turnover = 1,800,000 / 200,000 = 9 times. (Marking: cost of sales 1, each ratio 1.5)
24	(d) Compute the total liabilities to total assets ratio.	600,000 / 1,200,000 x 100 per cent = 50.00 per cent. (Marking: formula 2, answer 2)

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