ACCA Applied Knowledge (BT, MA, FA) · Financial Accounting (FA)

Context and purpose of financial reporting

13 practice questions, each with the answer and an explanation.

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All 13 questions

  1. Which statement correctly describes a limited liability company as a type of business entity?
  2. A sole trader's business assets and liabilities are treated in the accounting records as separate from the owner's personal affairs. Which accounting concept is this?
  3. Which of the following is a user of financial statements who needs information mainly to decide whether to lend money to the entity and expects to be repaid with interest?
  4. Under IAS 1 Presentation of Financial Statements, which statement is part of a complete set of financial statements for a company?
  5. Which body issues International Financial Reporting Standards (IFRS)?
  6. Which of the following is the best description of the purpose of the directors' responsibility for a company's financial statements?
  7. A partnership is formed by three people. Which statement about their legal position is correct?
  8. What is the main advantage of operating as a sole trader rather than as a limited liability company?
  9. Which of the following is the main reason why the statement of cash flows is prepared in addition to the statement of profit or loss?
  10. Which of the following would normally be classified as a non-current asset in the statement of financial position of a retailer?
  11. Which of the following is the most accurate description of 'equity' in the accounting equation of a company?
  12. The accounting equation shows: assets £92,000; liabilities £37,500. A further £8,000 of equipment is purchased on credit. What is the effect on equity?
  13. Which of the following correctly identifies a difference between financial accounting and management accounting?

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