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CAF-1 Financial Accounting and Reporting · Autumn 2026

Q1: Multiple-choice questions

10 marksMCQPass rate 57%

Nine MCQs (10 marks): club subscription income, preference shares in the SOCE, produce after harvest, interest cover, impairment indicators, interim dividends, the IFRS Interpretations Committee, bearer assets and gearing effects.

Areas: (i) Not-for-profit organisations (ASNPO) (2) · (ii) Equity transactions and SOCE (1) · (iii) Agriculture (IAS 41) (1) · (iv) Ratio analysis and working capital (1) · (v) Impairment of assets (IAS 36) (1) · (vi) Equity transactions and SOCE (1) · (vii) Conceptual and regulatory framework (1) · (viii) Agriculture (IAS 41) (1) · (ix) Ratio analysis and working capital (1)

Read the question first

We don't reproduce ICAP's question. Open it in the official PDF, attempt it, then use this walkthrough.

Q1 in the official paper (p. 1) Official suggested answer Suggested answers and marking plans sit in ICAP's student area (CRN login required).Examiners' comments on Q1

How to approach it

  1. Note the marks per item: one item here carried 2 marks, so give it proportionally more time.
  2. Ratio items: write the formula, then decide whether the event touches the numerator, the denominator or neither.
  3. Classification items (IAS 16 vs IAS 41, liability vs equity): apply the definition rather than the label in the question.

Key rules to apply

  • Subscription income = cash received − arrears brought forward received − advance for next year + advance brought forward + arrears carried forward.
  • Interest cover uses total interest incurred, including interest capitalised.
  • A bonus issue moves amounts within equity; a rights issue adds cash and equity. Neither adds debt.
  • Agricultural produce is IAS 41 up to harvest and IAS 2 afterwards; bearer plants are IAS 16; bearer animals stay in IAS 41.
  • A dividend declared and properly authorised before the year-end is a liability at the year-end.

Common mistakes

Drawn from the examiners' comments for this sitting (summarised in our words) and from typical errors on this topic.

  • Treating dairy cattle as bearer plants (only plants get IAS 16 treatment).
  • Using only the expensed interest in interest cover.
  • Saying a rights issue has no effect on gearing: equity rises, so gearing falls.

Similar question with worked solution

Written by us with our own numbers; it tests the same skills as Q1 without copying it.

Original practice question

Club subscription income

A sports club had subscriptions in arrears of Rs 20,000 and received in advance of Rs 12,000 at 1 January 2025. Cash received in 2025 was Rs 500,000, including all Rs 20,000 of the opening arrears and Rs 25,000 paid in advance for 2026. Arrears at 31 December 2025 are Rs 30,000, all collectible.

Required: Calculate subscription income for 2025.

Worked solution

WorkingRs
Cash received500,000
Less opening arrears collected(20,000)
Less received in advance for 2026(25,000)
Add opening advance now earned12,000
Add closing arrears30,000
Subscription income497,000

Answer: Rs 497,000.

Keep practising

Chapter MCQsNot-for-profit organisations (ASNPO)Chapter MCQsEquity transactions and SOCEChapter MCQsAgriculture (IAS 41)Chapter MCQsImpairment of assets (IAS 36)Chapter MCQsConceptual and regulatory frameworkStandard summaryAgriculture (IAS 41)Standard summaryImpairment of assets (IAS 36)Topical indexCAF-1 topic × sitting matrixSitting analysisCAF-1 Autumn 2026

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