40-Minute Accounting Test

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A 100% Saudi-owned company has the following ledger balances at 31-Dec-2025: • Paid-up Capital: SAR 5,000,000 • Retained Earnings (Opening): SAR 1,200,000 • Net Profit for the year 2025 (before Zakat): SAR 800,000 • Provisions (beginning of year, non-deductions during year): SAR 450,000 • Long-term Liabilities (used to finance fixed assets): SAR 1,500,000 • Net Book Value of Fixed Assets: SAR 3,500,000 Task: Complete the Zakat Base Calculation schedule using the Net Equity Method and compute the Zakat liability (2.5%) based on ZATCA regulations.

A junior bookkeeper prepared the unadjusted trial balance for a client at 31-Dec-2025 and made 6 critical errors. Task: Read the descriptions below, identify why each is an error under accrual accounting as per IFRS guidelines, and write the corrective Adjusting Journal Entry (AJE) on 31-Dec-2025. ERROR 1: On 1-Jul-2025, the client paid SAR 180,000 for a 3-year commercial property insurance policy starting immediately. The junior debited 'Insurance Expense' for the full SAR 180,000. (5 Marks) ERROR 2: On 15-Dec-2025, the client received a bank deposit of SAR 150,000 as an advance payment from a customer for services to be performed in Feb 2026. The junior debited 'Bank' and credited 'Revenue' for SAR 150,000. (5 Marks) ERROR 3: Dec-2025 salaries of SAR 85,000 were paid on 5-Jan-2026. No journal entry was recorded in December 2025 because 'no cash left the bank'. (5 Marks) ERROR 4: On 1-Jan-2023, the client purchased a machine for SAR 200,000 (5-year useful life, zero residual value, straight-line depreciation under IAS 16). On 1-Jul-2025 (after 2.5 years of use), the client sold the machine for SAR 120,000 cash. The junior recorded only: Dr Bank 120,000 / Cr Revenue 120,000. No depreciation was booked for 2025. (5 Marks) ERROR 5: On 15-Oct-2025, the client received a bank deposit of SAR 50,000 with no description. The junior debited 'Bank' and credited 'Other Revenue' to keep the bank reconciled. Later, it was identified that this was a refundable security deposit from a commercial tenant under IAS 1. (5 Marks) ERROR 6: During 2025, the client spent SAR 100,000 on research phase activities to develop a new mobile app. The junior capitalized the entire amount as an Intangible Asset under IAS 38 rules. (5 Marks)