ACCA Fundamentals Level F3 (Practice and revision kit)

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For exams from 1 September 202:

to 31 August 2024

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BOCAS

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Accountancy/ACCE
Applied Knowledge

Financial
Accounting

_(FFA/FA)Practice &

Revision Kit
For exams from 1 September’ -

2023 to 31 August 2024

(BPP

|


First edition May 2011
Ä no†e about copuright

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Contents
Finding questions

Question index

iv

Helping you with your revision

vi

Using your BPP Practice & Revision Kit

vil

Passing the FFA/FA exam

vill

Essential skills areas to be successful in the Financial Accounting (FFA/FA) exam
Tackling multiple choice questions (MCQs)

xiv

Using your BPP products

xlv

x

Questions and answers

Questions
Answers

3
223

Exam Practice

Mock exam 1 (Specimen Exam)
Questions

343

Answers

361

Mock exam 2
Questions

375

Answers

393

Mack exam 3
Questions:
Answers

4O7
423


Question index

1 The context and purpose of financial
reporting

2 The qualitative characteristics of financial

information

223

34

225

60

50

[ig C¡ The use:
3 Double entry bookkeeping |

50

1

227

4 Double entry bookkeeping Il

7

20

229

cee
5 Sales tax

16

19

30

235

6 Inventory

46

55

32

236

7 Tangible non-current assets |

38

46"

39

am

8 Tangible non-current assets II

Gh

53

9 Intangible non-current assets

28

34

52

2u9

10 Accruals and prepayments

38

46

57

252

11 Receivables and payables

Gh

53

63

257

12 Provisions and contingencies

26

31

69

261

13 Capital structure and finance costs

28

3u

73

263

14 Trial balance (15 mark question)

15

18

78

267

15 Trade receivables and trade payables

uh

53

79

268

16 Bank reconciliations

30

36

88

273

17 Correction of errors

36

tt

Oe

277

18 Suspense accounts

26

31

99

280

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tự

2u5

un

ee

7.

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49 Shuswap

5

18

104

283

20 Molright

18

18

106

284%

21 Tonson

18

18

109

286

iv

Financial Accounting (FFA/FA)


allocation

i

6.)

+

22 Emma
23 Sioux

15

18

1h

289

24 Snowdrop

15

18

116

290

25 Geofrost

16

18

T18

20

26 Incomplete records

32

38

121

292

27 Company financial stertements

20

24

126

295

28 Disclosure notes

i8

22

130

298

29 Events after the reporting period

18

22

42

133

51

298

136

209

31 Swing and cat

15

18

145

303

32 Black and Bury

15

18

147

33 Prestend

15

18

150

305

34 Liverton and Everpool

15

18

152

306

35.Consolidated financial statements

Bu

65

15k

307

"36 Binky dnd Smokey (15 mark question)

15

18

166

3i4

37 Interpretation of financial statements

20

24

168

314

30 Statements of cash flows. 7

Pee etc

oo

To

_—_

304

ct cu financial stgtements

-

"38 Mixed bank 1

:

-

:

38 -

46

172

: 316

39 Mixed bank 2

40

48

179

319

40 Mixed bank 3

38

tố

18ó

322

trÌ Mixed bank tr

3u

trị

193 /

326

42 Mixed bank 5

38

&6

200

330

43 Mixed bank 6

36

h3

206

333

GU Mixed bank 7

36

#8

212

336

Mock exam 1 (Specimen Exam)

qua

gói

Mock exam.2

375

393

Moek exam 3

407

423

esc.

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a

introduction

v


Helping you with your revision
BPP Learning Media — ACCA Approved Content Provider
As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use

revision materials reviewed by the ACCA examining team. By incorporating the ACCA examining
team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the
BPP Learning Media Practice & Revision Kit provides excellent, ACCA-approved support for your
revision.
These materials are reviewed by the ACCA examining team. The objective of the review is to
ensure that the material properly covers the syllabus and study guide outcomes, used by the
examining team in setting the exams, in the appropriate breadth and depth. The review does not
ensure that every eventuality, combination or application of examinable topics is addressed by

the ACCA Approved Content. Nor does the review comprise a detailed technical check of the
content as the Approved Content Provider has its own quality assurance processes in place in this
respect.

BPP Learning Media do everything possible to ensure the material is accurate and up to date

when sending to print. In the event that any errors are found after the print date, they are
uploaded to the following website: www.bpp.com/learningmedia/Errata,

Selecting questions
We provide signposts to help you plan your revision, including a full question index.

Attempting mock exams
There are three mock exams that provide practice at coping with the pressures of the exam day.
We strongly recommend that you attempt them under exam conditions, Mock exam 1 is the ACCA
Specimen Exam. Mock exam 2 and Mock exam 3 reflect the question styles and syllabus coverage
of the exam.

vi

Financial Accounting (FFA/FA)

@

BPP


Using your BPP Practice& Revision Kit

Aim of this Practice § Revision Kit

To provide the practice to help you succeed in the examination for Financial Accounting (FFA/FA).
To pass the examination you néed a thorough understanding in all areas covered by the syllabus

and teaching guide.

Recommended approach
*

Make sure you are able to answer questions on everything specified by the syllabus and
teaching guide. You cannot make any assumptions about what questions may come up in
your exam. The examining team aims to discourage ‘question spotting’.

«All sections have a selection of OBJECTIVE QUESTIONS (including Multiple Choice Questions).

Make good use of the HELPING HANDS provided to help you answer the questions.

*

There is a mark allocation for each question. Each mark carries with it a time allocation of 1.2

»

70% of the exam consists of individual objective test questions. You should attempt each bank
of objective test questions to ensure you are familiar with their styles and to practise your
technique. Skills checkpoint 1 Approach to Objective Test Questions will provide useful
guidance on how best to approach these questions.

minutes. A 2-mark question should therefore be completed in 2.4 minutes.

*

The remaining 30% of the exam is a multi-task question, which is essentially a range of related
objective test questions. Skills checkpoint 2 Approach to Multi-Task Questions will provide
guidance on how to tackle these.

*

Once you have completed all of the questions in the body of this Practice & Revision Kit, you
should attempt the MOCK EXAMS under examination conditions. Check your answers against
our answers to find out how well you did.

Q

BPP

Introduction

vii


Passing the FFA/FA exam
Financial Accounting aims to develop your knowledge and understanding of the underlying
principles, concepts and regulations relating to financial accounting. You will need to demonstrate
technical proficiency in the use of double entry techniques, including the preparation of basic
financial statements for incorporated and unincorporated entities, as well as simple consolidated
financial statements for group entities. You also need to be able to conduct a basic interpretation
of financial statements. if you plan to progress through the ACCA qualification, the skills you
learn in FFA/FA will be built upon in the exams for Financial Reporting (FR) and SBR Strategic

Business Reporting (SBR).

To access the Foundations in Accouritancy syllabi, visit the ACCA website: www.accaglobal.com

Computer-based exams
The Financial Accounting exam is a computer-based exam (CBE).
Computer-based examinations (CBEs) are available for the Foundations in Accountancy exams.
The CBE exams for the first seven modules can be taken at any time, these are referred to as

‘exams on demand’. The Option exams can be sat in June and December of each year, these are

referred to as ‘exams on sitting’. Financial Accounting is an ‘exam on demand’, Computer-based
examinations must be taken at an ACCA CBE Licensed Centre.

How do CBEs work?
*

Questions are displayed on a monitor.

+

Candidates enter their answer directly onto the computer.

»

Candidates have two hours to complete the examination.

*

Candidates are provided with a Provisional Result Notification showing their results before

+

The CBE Licensed Centre uploads the results to the ACCA (as proof of the candidate’s

*

Candidates sitting the Option exams will receive their results approximately five weeks after
the exams sitting once they have been marked by an expert.

*

Candidates can check their exam status on the ACCA website by logging into myACCA.

leaving the examination room.

performance) within 72 hours.

Benefits
»

Flexibility as the first seven modules, exams on dernand, can be sat at any time.

+

Resits for the first seven modules can also be taken at any time and there is no restriction on
the number of times a candidate can sit a CBE.

*

Instant feedback for the exams on demand as the computer displays the results at the end of

the CBE.

-

.

Results are notified to ACCA within 72 hours.

For more information on computer-based

exams, visit the ACCA website:

www.aecaglobal.com/gb/en/student/exam-entry-and-administration/computer-basedexams.html

Approach to examining the syllabus
The exam is structured as follows:

Section A - 35 compulsory objective questions of 2 marks each

70

Section B - 2 compulsory multi-task questions of 15 marks each

30
100

viii.

Financial Accounting (FFA/FA)

©

BPP


The Findinclal Accounting syllabus is assessed by a 2 houirexam: The pass mark is 50%. All
questions in the exam are campulsory. This means you cannot dvoid any topic, but also means
that you do nét néed to dedicate time in the éxam deciding which questions to attempt.
Section A consists of 35 objective test’ (OT) questions worth two marks edch and cover a broad
range of syllabus topics, The OT questions can take the form of multiple choice; multiple response,
number entry or multiple respohse matching. This means that the examining tear is able to test
most of the syllabus at each sitting, so you neéd to have revised right across the syllabus for this

exam,

Section B consists of two multi-task questions (15 marks each) testing the candidates’
understanding and application of financial accounting skills in more depth. In Section B
candidates are required to provide answers which test their understanding and ability to draft
financial statements, Candidates may be required to prepare financial statements for a single
entity or for a group of companies, There may also be some element of ratlo
calculation/interpretation. You may not always be required to prepare the full financial statement

and may instead be asked to complete a partial statement. In this situation there will be

additional elements to the question. Candidates will be required to prepare the financial
statements using a variety of number entries, pull down menus and multiple response matching.

Revision

This Practice and Revision kit has been reviewed by the FFA/FA examining team and contains the

ACCA Specimen Exam, so if you just work through it to the end you would be very well prepared

for the exam, You must also visit the ACCA website (www.accaglobal.com) to familiarise yourself
with the CBE software. It is important to tackle questions under exam conditions. Allow yourself
Just the number of minutes shown next to the questions in the index and don’t look at the answers
until you have finished. Then correct your answer and go back to the Workbook for any topic you
are having trouble with. Try the same questions again'a week later: you will be surprised how
much better you are getting. Doing the questions like this will really show you what you know, and
will make the exam experience less worrying:
:
‘

Sitting the exam
If you have diligently done your revision you can pass this exam. There are a couple of points to

bear in mind:

*

Read the question properly.

*

Dorrt spend more than the allotted time on each question. If you-are having trouble with a
question; use the. “flag for review’ function in the exam software and carry on. You can come
back ta it at the end.

Remote invigilated exams

In certain geographical aréas it may be possible for you to take your exam remotely, This option,
which is subject to strict conditions; can offer increased flexibility and convenience tinder certain
circumstances, Further guidance, including the detailed requirements and conditions for taking
the exam by this method, is coritained on ACCA’s Website at

https:/Avww.aceaglobal.com/an/en/student/exam-entry-and-administration/about-ourexams/remote-exams/remote-session-exame.htmi.

@

BPP

Introduction

ix


Essential skills areas to be successful in the Financial
Accounting (FFA/FA) exam
We think there are three areas you should develop in order to achieve exam success in Financial
Accounting (FFA/FA):
(a)

Knowledge application: You will develop your technical knowledge as you work through the
BPP Financial Accounting Workbook and this Practice & Revision Kit.

(b)

Specific FFA/FA skills

(c)

Exam success skills

These are shown in the diagram below.
sa.

Specific FFA/FA skills
These are the skills specific to FFA/FA that we think you need to develop In order to pass the exam.
In the Workbook, there are five Skills Checkpoints which define each skill and show how it is

applied in answering a question. A brief summary of each skill is given below.

Skill 1: Approach to objective test (OT) Questions
The FFA exam contains two sections. Section A consists of 35 objective test (OT) questions worth 2
marks each and Section B contains 2 multi-task questions worth 15 marks each. The multi-task
questions are made up of OT questions and therefore being able to answer OT questions
effectively is extremely important.
This skills checkpoint will focus on Section A questions, explaining the best way to tackle these
questions and illustrating the technique through worked examples,
BPP recommends a step-by-step technique for approaching objective test questions:,
Step1

Read the requirement first!

Step 2

Apply your technical knowledge to the data in the question.

Step 3

Answer the questions you know first — flag the ones you don’t know and come hack to
them later.

Step 4

Answer all questions — there is no penalty for an incorrect answer.

Skill 1 is developed further in Skills Checkpoint 1 which Is available in the Financial Accounting
Workbook.

x

Financial Accounting (FFA/FA)

@

B PP


Skill 2: Approach to multi-task questions (MTQs)
MTQs In Section B might dsk you to prepare financial statements for a single entity or for a
group
of companies. There may also ba some élement of ratio calculatior/interprétation. You may not
always be required to prepare the full financial statement and may instead be asked to complete

G partial statement. In this situation there will be additional elements to the question.

In this skills checkpoint, we will focus on the specific skills required in a multi-task question.
We
take you through the technique you should adopt and ilfustrate that through the use of

questions,
BPP recommends a step-by-step technique for approaching multi-task questions:

Step1

Read the requirements of all tasks

Step 2

Recall any relevant technical theory

Step 3

Answer the questions you know first

Step 4

Answer all questions

Skill 2 is developed further in Skills Checkpoint 2 which is available in the Financial Accounting
Workbook.

Skill 3: Excel skills in the real world
As you move
spreadsheet
you are able
potential, for

through your ACCA examinations and your accountancy career you will need good)
skills. It is crucial that you have a good working knowledge of spreadsheets and that

to use them quickly and effectively. Many people do not use Excel to its full
example they type in totals rather than asking Excel to sum it for them. This often

leads to errors,

This is a practical skill aimed at your working life rather than being directly related to a skill that
you need to pass this exam.
Whilst this section is not exam focussed, spreadsheets will be a key part of your accountanc
y

career. Future employers will always look for good core spreadsheet skills when selecting a
candidate for a role.

Skill 3 is developed further in Skills Checkpoint 3 which is available in the Einaneial Accounting
Workbook.
.

Skill 4: Irrecoverable debts and the allowance for receivables

The 2018/2019 examiners’ report commented that the topic of ‘irrecoverable debts and allowance

for receivables’ continues to bé an Grea of the syllabus where performance is mixed with many
candidates not providing the correct response. There is often a lot of detail in these questions and
they néed to be tead Very carefully:
:
In this skills checkpoint we will recap some of the key areas and identify where students typically

struggle with this topic and how to get to grips with it.

Skill 4 is developed further in Skills Checkpoint 4 which is available in the Financial Accounting

Werkbook.

Skill 5: Correction of errors
The correction of errors area of thé éxamination often causes difficulties for candidates as
they
are required to think around the subject rather than just rote learning.

A'step-by-step technique for attempting these questions Is outlined in the checkpoint along with a
reminder of the key areas of this topic.

- Questions are'used to highlight the problems students face and how to address them: Itis sirailar
tothe structure we have'seen for our other skills.
Skill Sis developed further in Skills Checkpoint 5 which is available in the Financial Accounting
Workbook,

@ BPP

Introduction

xi


' Exam success skills
Passing the FFA/FA exam requires more than applying syllabus knowledge and demonstrating the
specific FFA/FA skills; it also requires the development of excellent exam technique through
question practice.
We consider the following six skills to be vital for exam success. The Skills Checkpoints show how

each of these skills can be applied specifically to the FFA/FA exam.

Exam success skill 1
Managing information
You will not have to deal with large amounts of information in each individual question in FFA.
Some of the questioris in the exam will present you with a short scenario, particularly in the

Section B questions, The skill is how you handle this information while working under time
pressure.

You must take an active approach to reading each
underlining/ highlighting key instructions, including
technical knowledge that is relevant before reading
means that your mind will be focussed as you read
information better.

scenario. Focus on the requirement first,
words like ‘NOT’. Then think about any
the scenario for the question. Doing this
the scenario, which means you will take in the

Exam success skill 2
Correct interpretation of the requirements
It is important to note the requirernent carefully. Look out for the number of options you have to
choose, as not all questions require only one option. Also, beware of challenges, such as the
information being presented in one particular order In the scenario, but being presented in a
different order in the options.

Exam success skill 3
Answer planning: Priorities, structure and logic
This skill is not so relevant for the Applied Knowledge exams.

Exam success skill 4
Efficient numerical analysis
An important tip in numerical questions is not to look at the options until you have completed the

calculation as you think it should be done. The reascn for this is that the ‘wrong answers’ are
chosen carefully to look very realistic, and you may be tempted to choose one of these if you
dor’t do the calculation first.

Exam success skill 5
Effective writing and presentation
This skill is not relevant for FA/FFA as all the questions are objective test and multi-task questions

so you will not have to write.

Exam success skill 6
Good time management
The exam is two hours long. You should therefore spend 1.2 minutes per mark, It is best to work
through Section A first, which should take you 84 minutes, before spending the remaining 36
minutes on Section B.
Don’t get stuck on difficult questions — if a particular question does appear difficult, move on, and
come back to It after you have answered all the easier questions.
Don’t time yourself for each question, but do check every half hour that you have answered 25
marks worth of questions.

xii

Financial Accounting (FFA/FA)

@

BPP


Two minutes before:the end of you time for Section A; go Baek and answerall outstanding
questions, even if you have to guess. Thére is no harm in guessing a8 there is Ao negative. marking
in ACCA exams, so the worst that căn happen is you don’t gain two marks for the question.

If you find that this approach doesn’t work for you, don't worry - you can develop your own
techhique.
Keep an eye on the clock

Aim to attempt all requirements, but be ready to be ruthless and move on if your answer is not

going as planned. The challenge for many is sticking to planned timings. Be aware this is difficult
to achieve in the early stages of your studies and be ready to let this skill develop over time.

Question practice
Question practice is a core part of learning new topic areas. When you practice questions, you
should focus on improving the Exam success skills — personal to your needs — by obtaining

feedback or through a process of self-assessment.

@

BPP

Introduction

xiii

Tackling multiple choice questions (MCQs)
MCQs

are part of all Foundations in Accountancy exams.

The MCQs in your exam contain four possible answers. You have to choose the option that best
answers the question, The incorrect options are called distracters. There is a skill in answering
MCQs quickly and correctly. By practising MCQs you can develop this skill, giving you a better

chance of passing the exam.

You may wish to follow the approach outlined below, or you may prefer to adapt it.
_ Stepi

Skim read all the MCQs and Identify what appear to be the easier questions.

Step 2

Atternpt each question — starting with the easier questions identified in Step 1. Read the
question thoroughly. You may prefer to work out the answer before looking at the
options, or you may prefer to look at the options at the beginning. Adopt the method
that works best for you.

Step 3

Read the options and see if one matches your own answer. Be careful with numerical
questions as the distracters are designed to match answers that incorporate common
errors, Check that your calculation is correct. Have you followed the requirement
exactly? Have you included every stage of the calculation?

Step 4

You may find that none of the options match your answer.

Step 5
Step 6

*

Re-read the question to ensure that you understand it and are answering the
requirement.

»

Eliminate any obviously wrong answers.

*

Consider which of the remaining answers Is the most likely to be correct and select
the option.

If you are still unsure make a note and continue to the next question,
Revisit unanswered questions. When you come back to a question after a break you

often find you are able to answer it correctly straight away. If you are still unsure have a
guess. You are not penalised for incorrect answers, so never leave a question
unanswered!

A note of caution

After extensive practice and revision of MCQs, you may find that you recognise a question when

you sit the exam. Be aware that the detail and/or requirement may be different. If the question

seems familiar read the requirement and options carefully —- do not assume that it is identical.

Using your BPP products
This Practice & Revision Kit gives you the question practice and guidance you need in the exam.
Our other products can also help you pass:
»

Workbook introduces and expiains the knowledge required for your exam

You can purchase this product by visiting. www.bpp.com/learning-media.

XÍv —

Financia! Accounting (FFA/FA)

@

BPP


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2

Financial Accounting (FFA/FA)


Part A: The context and purpose of financial reporting

1 The context and purpose of financial reporting
11

(41 mins)

Who issues IFRS®. Standards?
O

The IFRS Advisory Committee

©

The stock exchange

©

The International Accounting Standards Board {the Board)

O

The government

(2 marks)

Which groups of people are most likely to be interested in the financial statements of a sole

1.2

trader?
()}

Shareholders of the entity

()

The business’s bank manager

(3)

The tax authorities

(4)

Financial analysts

©

tand2 only

O

2and 3 only

©

3and4 only

©

1,2and 3 only

(2 marks)

Identify, by indicating the relevant box in the table below, whether each of the following

1.3

statements is true or false.

A supplier of goods on credit is interested only In the staternent of
financial position, ie an indication of the current state of affairs.

TRUE

FALSE

|

Ì
1

The objective of financial statements is to provide financial

information about the reporting entity’s assets, liabilities, equity,
income ‘arid expenses that Is useful to Users of the findncial
.
statements .In assessing
the prospects for future net cash flows to

the reporting entity and in accessing management's stewardship

|

TRUE

|
i
|
|

FALSE

|

of the entity’s economic resources:

(2 marks)

1.1

Which of the following are advantages of trading ds-a limited liability company?
().

(2).

@

Operating as i limited liability company makes raising finance easier because

additional shares can be issued to raise additional cash.
Operating as.a limited liability company is more risky than operating as a sole trader

because the shareholders of a business are liable for all the dabis of tha business
whereas the sole trader is only liable for the debts up to the amount he has invested,

Oo

Tonly

O-

2 only

O-

Both Tard 2

©

Neither7 or 2

BPP

(2 marks)

Questions

3


1.5

1.6

Which of the following best describes corporate governance?

O

Corporate governance is the.system of rules and regulations surrounding financial

O

Corporate governance is the system by which companies and other entities dre

©

Corporate governance is carried out by the finance department in preparing the
financial statements.

©

Corporate governance is the system by which cn entity monitors its Impact on the

reporting.

directed and controlled.

natural environment.

(2 marks)

Identify which of the following statements are true.
()

The directors of a company are ultimately responsible for the preparation of financial

statements, even if the majority of the work on them is performed by the finance
department.

(2)

If financial statements are audited, then the responsibility for those financial
statements instead falls on the auditors instead of the directors.

(3)

There are generally no laws surrounding the duties of directors in managing the affairs
of a company.

oo00

1onlu

17

1.8

tứ

2onlg
2 and 3 only
land 3 only

(

2 marks

)

Which of the following statements correctly describes the contents of the statement of
financial position?

©

Alist of ledger balances shown in debit and credit columns

©

Alist of all the assets owned and ail the liabilities owed by a business

©

Arecord of income generated and expenditure incurred over a given period

©

Arecord of the amount of cash generated and used by a company in a given period
(2 marks)

Which of the following statements correctly describes the contents of the statement of
profit or loss?

©

Alist of ledger balances shown in debit and credit columns

©

Alist of all the assets owned and all the liabilities owed by a business

©

Arecord of income generated and expenditure incurred over a given period

©

Arecord of the amount of cash generated and used by a company in a given period
(2 marks)

Financial Accounting (FFA/FA)

@

BPP


1.9

Which of the following are trué of partnarships?
(1)

The partners’ individual exposure to debt Is limited.

(2)

Financial statements for the partnership by law ‘must be produced and made public.
A partnership is not a separate legal entity from the partners themselves.

(3)

©

land 2 only

O

2only

©

Sonly

©

tand3 only
{2 marks)

Which of the following statements is/are true?

110

111

(1)

Directors of companies have a duty of care to show reasonable competence in their
management of the affairs of a company.

(2)

Directors of companies must act honestly in what they consider to be the best interest

of the company.

(8)
©

Adirector’s main dim should be to create wealth for the shareholders of the company.
1and 2 only

©

2onlu

©

1,2and3

©

1and3onlụ

" Which of the following statements is/are true?
() The IFRS Interpretations Committee is a forum for the International Accounting
@)
(3)

112

Y

(2 marks)

Standards Board (the Board) to consult with the outside world.
The IFRS Foundation produces IFRS Standards. The IFRS Foundation is overseen by the

Board.

One of the objectives of the IFRS Foundation is to bring about convergence of national
accounting standards arid IFRS Standards.

©

1tand3 only

©

2onlụ

©

2and3 only

©

only

(2 marks)

What is the role of the International Accounting Standards Board (the Board)?

©

Oversée the standard setting and regultitory process

©-

Formulate IFRS Standards

O--

Review defective accounts

©.

Control the aecountancy profession

BPP

(2 marks)

Questions — 5

ì


1.43

1.14

1.15

1.1ó

11

Which of the following is NOT an objective of the IFRS Foundation?
O

Through the International Accounting Standards Board (the Board), develop a single set

©

Promote the use and rigorous application of IFRS Standards

©

Ensure JFRS Standards focus primarily on the needs of global, multi-national
organisations

©

Bring about the convergence of national accounting standards and IFRS Standards
(2 marks)

of globally accepted IFRS Standards

Which of the following statements correctly describes how IFRS Standards should be used?
©

To provide examples of best financial reporting practice for national bodies who

©

To ensure high ethical standards are maintained by financial reporting professionals
internationally

©

To facilitate the enforcement of a single set of global financial reporting standards

©

To prevent national bodies from developing their own financial reporting standards
(2 marks)

develop their own requirements

Which of the following is a benefit of running a business as a sole trader?
©

In the event that the business generates a loss, this is shared by the partners instead of
being borne by a sole trader only.

©

Any debts of the business that cannot be met from the business assets are met from
the owners’ private resources.

©

In the event that the business generates a profit, this is due to the sole trader only.

©

The sole trader is not liable for the debts of the business.

(2 marks)

Which of the following is a benefit of incorporation?

O

The company’s shareholders are not personally liable for the debts of the business.

O

The company directors must ensure the accounts are filed at Companies House by.a

©

Companies must comply with the provisions of the Companies Act whereas
unincorporated businesses do not.

©

The company’s tax charge must be shown in the statement of profit or loss.

specified date.

(2 marks)

Identify, by indicating the relevant box in the table below, whether each of the following
statements is true or false.

Sole traders and partnerships are unincorporated businesses. This
means there is a legal distinction between the business and their

TRUE

FALSE

TRUE

FALSE

owners.

When a sole trader takes money from the business for personal
use, this is known as drawings.

(2 marks)

(Total = 34 marks)

Financial Accounting (FFA/FA)

@

BPE

Questions

7


Part B: The qualitative characteristics of financial information

2 The qualitative characteristics of financial information
21

2.2

(60 mins)

Which accounting concept should be considered if the owner of a business takes goods
from inventory for their own personal use?

©

The materiality concept

©

The accruals basis

©

The going concern concept

©

The business entity concept

(2 marks)

Sales revenue should be recognised when goods and services have been supplied to the
customer; costs are incurred when goods and services have been received.
Which accounting concept governs the above?

2.3

24

8

©

The business entity concept

©

The materiality concept

©

The accruals basis

O_

The duality concept

{2 marks)

Which accounting concept states that omitting or misstating this information could
influence users of the financial statements?
©

The consistency concept

©

The accruals basis

©

The materiality concept

©

The going concern concept

(2 marks)

According to the |ASB’s Conceptual Framework for Financial Reporting, which TWO of the
following are part of faithful representation?
(1)

Neutrality

(2)

Relevance

(3)

Fair presentation

(4)

Free from material error

O

tand2

©

2and3

©

tand4

O

3and4

Financial Accounting (FFA/FA)

(2 marks)

@

BPP


2.5

Which of the following aecounting concepts means that similar items should receive a
similar accounting treatment?

©

Conformity

©

Accruals

O

Matching

©

Consistency
(2 marks)

2.6

Listed below are some characteristics of financial information.
G)

Relevance

@)

Consistency

(3)

Faithful representation

(@)

Accuracy

Which one of these are qualitative characteristics of financial information according to the
1ASB’s Conceptual Framework?

2.7

©

liand2

O

2and4

©

3and4

©

1and8

(2 marks)

Which of the following statements describes the qualitative characteristic of faithful
representation?

O
©

2.8

Revenue earned must be matched against the expenditure incurred in earning it.
Having information available to decision makers in time to be capable of influencing
their decisions.

©

The presentation and classification of items in the financial statements should stay the
same from one period to the next.

©

Financial information should be complete, neutral and free from error.

(2 marks)

Listed below are some comments on aécounting concepts.
(1) Financial statements always treat thé business asa separate entity.

(2)
(8)

Materiality means that only items having a physical existence may be recognised as

assets,

Provisions are estimates and therefore can be altered to make the financial results of a

business more attrdctive to investors:

Which; if any, of these comments Is correct, according to the [ASB’s Conceptual
Framework?

@

Oo

Tonlg

O-

2 only

On:

Sonly

O-

None of them

BPP

(2 marks)

Questions

9