AQA A-Level Accounting: Limited company accounts (7127) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 3.7, Limited company accounts, of the AQA A-level Accounting (7127) specification (version 1.1, October 2026, A-level exams June 2019 onwards). The qualification is not tiered and the specification places section 3.7 in the content assessed by Paper 1. Use a calculator throughout. All businesses and figures are invented.

Learn the content with the study guide and the revision notes. See also the AQA A-level Accounting hub, the 7127 checklist and the free diagnostics.

Questions

1. State the three profit figures that an internal income statement of a limited company must distinguish below gross profit. [3]

2. Pellow Robotics Ltd issues 150,000 ordinary shares of £0.20 each at £0.65 per share. All money is received.

(a) Calculate the amounts debited to bank and credited to share capital and to share premium. [3] (b) State the sub-heading under which share premium appears in the statement of financial position. [1]

3. Explain why dividends paid are not shown as an expense in a company’s income statement. [2]

4. State the statement of financial position sub-heading for each item: share premium; 7% debentures repayable 2035; tax payable; insurance prepaid; delivery vehicles. [5]

5. Morven Tiles Ltd’s year ends 31 December 2025. Revenue £420,000; cost of sales £238,000; operating expenses £109,500. It issued 4% debentures of £120,000 on 1 April 2025. Tax for the year is £15,900. Calculate profit from operations, profit for the year before tax and profit for the year after tax. [5]

6. Fenmore Ltd has had 7.5% debentures of £80,000 in issue all year. Debenture interest paid during the year was £3,000.

(a) Calculate the debenture interest charge for the year and the amount accrued. [2] (b) State where each amount appears in the financial statements. [2]

7. Tarrow Brewing Ltd’s year ends 30 June 2026. At 1 July 2025: ordinary shares of £1 each £300,000; share premium £45,000; retained earnings £118,600.

• August 2025: final dividend of 5p per share paid for the previous year.
• 1 October 2025: 100,000 ordinary shares issued at £1.40 each.
• December 2025: interim dividend of 6p per share paid on all shares then in issue.
• Profit for the year after tax: £61,250.

Prepare the statement of changes in equity for the year ended 30 June 2026. [8]

8. Ridley Glass Ltd’s retained earnings were £52,400 at the start of the year and £47,900 at the end. Dividends paid in the year were £18,000 and tax for the year was £4,500. There were no other movements. Calculate profit for the year after tax and profit for the year before tax. [4]

9. Trial balance of Calder Print Ltd at 31 March 2026:

	Dr £	Cr £
Revenue		486,000
Purchases	254,300
Inventory 1 April 2025	31,700
Wages	72,800
Directors’ remuneration	38,000
Insurance	5,400
General expenses	11,250
Irrecoverable debts	1,150
Debenture interest	1,750
Rent received		6,000
Provision for doubtful debts 1 April 2025		1,100
Premises at cost / provision for depreciation	300,000	36,000
Equipment at cost / provision for depreciation	84,000	34,000
Trade receivables / trade payables	42,000	29,600
Bank	12,180
Dividends paid	16,000
Ordinary shares of £0.50 each		150,000
Share premium		20,000
Retained earnings 1 April 2025		37,830
5% debentures (repayable 2033)		70,000
Totals	870,530	870,530

Notes: closing inventory £35,900; wages accrued £2,200; insurance prepaid £900; rent received includes £1,000 for April 2026; provision for doubtful debts 3% of trade receivables; depreciate premises at 2% on cost and equipment at 20% reducing balance; the debentures were in issue all year; tax for the year £14,400.

Prepare the income statement for the year ended 31 March 2026. [12]

10. Using Question 9, prepare the statement of financial position of Calder Print Ltd at 31 March 2026. [10]

11. A shareholder in Calder Print Ltd says: “Profit for the year after tax is the only profit figure that matters to me. The other two lines are clutter.” Evaluate this view. [6]

Answers

1. Profit from operations [1]; profit for the year before tax [1]; profit for the year after tax [1]. [3] Examiner insight: Use the specification’s labels; “net profit” alone does not identify which level you mean.

2. (a) Bank 150,000 x £0.65 = £97,500 [1]; share capital 150,000 x £0.20 = £30,000 [1]; share premium 150,000 x £0.45 = £67,500 [1]. (b) Equity [1]. [4] Examiner insight: Crediting all £97,500 to share capital ignores the premium; work the split per share first.

3. Dividends are a distribution of profit to the owners (shareholders), not a cost of earning revenue [1]. They are deducted from retained earnings in the statement of changes in equity [1]. [2] Examiner insight: Say where dividends do go, as well as why they are not an expense.

4. Share premium: equity [1]. Debentures repayable 2035: non-current liabilities [1]. Tax payable: current liabilities [1]. Insurance prepaid: current assets [1]. Delivery vehicles: non-current assets [1]. [5] Examiner insight: Check repayment dates: debentures repayable years after the year end are non-current, not current.

5. Gross profit 420,000 - 238,000 = £182,000 [1]. Profit from operations 182,000 - 109,500 = £72,500 [1]. Interest for 9 months 4% x 120,000 x 9/12 = £3,600 [1]. Profit before tax 72,500 - 3,600 = £68,900 [1]. Profit after tax 68,900 - 15,900 = £53,000 [1]. [5] Examiner insight: Check the issue date: debentures issued on 1 April carry only 9 months’ interest to a December year end, not £4,800.

6. (a) Charge 7.5% x 80,000 = £6,000 [1]; accrued 6,000 - 3,000 = £3,000 [1]. (b) £6,000: income statement, finance costs, after profit from operations [1]. £3,000: statement of financial position, current liabilities (other payables) [1]. [4] Examiner insight: The charge goes below profit from operations; listing it among operating expenses misplaces it.

7.

Tarrow Brewing Ltd: Statement of changes in equity
for the year ended 30 June 2026
                      Share      Share   Retained
                    capital    premium   earnings      Total
                          £          £          £          £
At 1 July 2025      300,000     45,000    118,600    463,600
Share issue         100,000     40,000               140,000
Profit for the year                        61,250     61,250
Dividends paid                            (39,000)   (39,000)
At 30 June 2026     400,000     85,000    140,850    625,850

Opening balances [1]; share capital 100,000 x £1 = £100,000 [1]; premium 100,000 x £0.40 = £40,000 [1]; profit £61,250 [1]; final dividend 300,000 x 5p = £15,000 [1]; interim 400,000 x 6p = £24,000, total £39,000 [1]; closing share capital and premium [1]; closing retained earnings £140,850 and total £625,850 [1]. [8] Examiner insight: The interim dividend is paid on 400,000 shares because the issue came first; check dates before multiplying.

8. Closing = opening + profit after tax - dividends, so profit after tax = 47,900 - 52,400 + 18,000 [1] = £13,500 [1]. Profit before tax = profit after tax + tax [1] = 13,500 + 4,500 = £18,000 [1]. [4] Examiner insight: Retained earnings fell, but that does not mean a loss; write the relationship before rearranging it.

9.

Calder Print Ltd: Income statement for the year ended 31 March 2026
                                             £          £
Revenue                                           486,000
Less cost of sales (31,700 + 254,300 - 35,900)    250,100
Gross profit                                      235,900
Add rent received (6,000 - 1,000)                   5,000
                                                  240,900
Less operating expenses
  Wages (72,800 + 2,200)                  75,000
  Directors' remuneration                 38,000
  Insurance (5,400 - 900)                  4,500
  General expenses                        11,250
  Irrecoverable debts                      1,150
  Increase in provision (1,260 - 1,100)      160
  Depreciation: premises                   6,000
  Depreciation: equipment                 10,000
                                                  146,060
Profit from operations                             94,840
Less finance costs: debenture interest              3,500
Profit for the year before tax                     91,340
Less tax                                           14,400
Profit for the year after tax                      76,940

Cost of sales £250,100 [1]; gross profit £235,900 [1]; rent received £5,000 [1]; wages £75,000 [1]; insurance £4,500 [1]; provision 3% x 42,000 = £1,260, increase £160 [1]; premises 2% x 300,000 = £6,000 [1]; equipment 20% x 50,000 = £10,000 [1]; profit from operations £94,840 [1]; interest 5% x 70,000 = £3,500 [1]; profit before tax £91,340 [1]; profit after tax £76,940 [1]. [12] Examiner insight: Dividends paid of £16,000 do not belong here; they reduce retained earnings in Question 10.

10.

Calder Print Ltd: Statement of financial position at 31 March 2026
                              Cost   Acc. dep.  Carrying
Non-current assets               £          £          £
  Premises                 300,000     42,000    258,000
  Equipment                 84,000     44,000     40,000
                                                 298,000
Current assets
  Inventory                                       35,900
  Trade receivables (42,000 - 1,260)              40,740
  Other receivables                                  900
  Cash and cash equivalents                       12,180
                                                  89,720
Total assets                                     387,720
Equity
  Ordinary share capital                         150,000
  Share premium                                   20,000
  Retained earnings                               98,770
                                                 268,770
Non-current liabilities: 5% debentures            70,000
Current liabilities
  Trade payables                                  29,600
  Other payables (2,200 + 1,750 + 1,000)           4,950
  Tax payable                                     14,400
                                                  48,950
Total equity and liabilities                     387,720

Premises £258,000 [1]; equipment £40,000 [1]; inventory and prepayment [1]; receivables net £40,740 [1]; bank and total assets £387,720 [1]; retained earnings 37,830 + 76,940 - 16,000 = £98,770 [1]; share capital and premium [1]; debentures as non-current [1]; other payables £4,950 [1]; tax payable and total £387,720 [1]. [10] Examiner insight: Show the retained earnings working, so a profit carried from Question 9 can be followed even if it is wrong.

11. For: profit after tax is the figure added to retained earnings, and dividends can only come out of it [1]; it is the return that belongs to shareholders [1]. Against: profit from operations (£94,840) shows how well the trading activity performed before financing decisions [1]; the gap to profit before tax (£3,500 interest) shows the cost of debenture finance, which ranks before shareholders [1]; the tax line shows how much profit is lost to tax, which managers cannot easily control [1]. Judgement: profit after tax matters most for dividends, but the other lines explain why it changed, so they are useful, not clutter [1]. [6] Examiner insight: Evaluate needs arguments on both sides and a supported conclusion; use the company’s own figures as evidence.

Where marks are usually lost

• Dividends paid shown in the income statement.
• Debenture interest charged for the amount paid, or for twelve months when the debentures were issued part-way through the year.
• Finance costs deducted before profit from operations.
• Share issue proceeds credited wholly to share capital.
• Interim dividends calculated on the share total before a mid-year issue when the issue came first.
• Profit before tax, not after tax, added to retained earnings.
• Income received in advance and accrued interest left out of other payables.
• Totals in the statement of financial position that do not agree, with no working shown.

Next steps

• Recap with the revision notes.
• Re-read the study guide for any area you found weak.
• Revisit sole trader adjustments if adjustments cost you marks.
• AQA A-level Accounting hub and 7127 checklist.
• Try all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

AQA A-level Accounting (7127) specification, version 1.1, October 2026, for A-level exams June 2019 onwards, published by AQA – section 3.7, Limited company accounts.