CIPFA Professional Accountancy Qualification Exam
Question 1: Which accounting principle requires expenses to be recorded in the same period as the
revenues they help generate?
A) Revenue Recognition Principle
B) Matching Principle
C) Consistency Principle
D) Prudence Principle
Answer: B
Explanation: The Matching Principle ensures that expenses are recorded in the period in which the
associated revenues are earned.
Question 2: What is the primary objective of the double-entry bookkeeping system?
A) To record transactions in one ledger
B) To track cash receipts only
C) To ensure every debit has a corresponding credit
D) To simplify tax calculations
Answer: C
Explanation: The double-entry system maintains balance by ensuring each debit entry is matched by an
equal credit entry.
Question 3: Which of the following best describes the purpose of International Financial Reporting
Standards (IFRS)?
A) To standardize tax regulations
B) To provide a global framework for financial reporting
C) To manage internal audit processes
D) To enforce government budgeting
Answer: B
Explanation: IFRS offers a common accounting framework that enhances comparability and
transparency in financial statements across countries.
Question 4: Under IFRS 15, revenue is recognized when:
A) Payment is received
B) The customer signs a contract
C) Control of the goods or services is transferred to the customer
D) The order is placed
Answer: C
Explanation: IFRS 15 focuses on transferring control of goods or services rather than merely transferring
risks and rewards.
Question 5: Which basis of accounting records transactions when they occur, regardless of when cash
is exchanged?
A) Cash basis accounting
B) Accrual basis accounting
C) Modified cash basis accounting
D) Hybrid accounting
,Answer: B
Explanation: Accrual accounting recognizes transactions when they occur, ensuring that revenues and
expenses are recorded in the appropriate period.
Question 6: In a Balance Sheet, which of the following represents a company’s financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Statement of Changes in Equity
D) Balance Sheet
Answer: D
Explanation: The Balance Sheet shows assets, liabilities, and equity at a specific moment, reflecting the
financial position of an entity.
Question 7: What is the main purpose of the Income Statement?
A) To list assets and liabilities
B) To report cash inflows and outflows
C) To summarize revenues and expenses over a period
D) To provide detailed equity movements
Answer: C
Explanation: The Income Statement reports the financial performance by summarizing revenues and
expenses over a defined period.
Question 8: Which financial statement provides information about the cash generated and used
during an accounting period?
A) Balance Sheet
B) Statement of Cash Flows
C) Income Statement
D) Statement of Retained Earnings
Answer: B
Explanation: The Statement of Cash Flows details the cash inflows and outflows, helping assess liquidity.
Question 9: What does IPSAS stand for in the public sector context?
A) International Public Sector Accounting Standards
B) Internal Public Sector Accounting System
C) International Performance and Statistics
D) Integrated Public Sector Audit Standards
Answer: A
Explanation: IPSAS refers to International Public Sector Accounting Standards, which guide accounting in
the public sector.
Question 10: Which IFRS standard deals with the accounting for leases?
A) IFRS 9
B) IFRS 15
C) IFRS 16
D) IFRS 13
Answer: C
,Explanation: IFRS 16 specifically addresses the accounting treatment for leases, including recognition
and measurement.
Question 11: IFRS 9 primarily deals with which aspect of financial instruments?
A) Revenue recognition
B) Lease accounting
C) Classification and measurement
D) Consolidation of financial statements
Answer: C
Explanation: IFRS 9 outlines the classification, measurement, and impairment of financial instruments.
Question 12: When applying IFRS 15, which of the following is crucial for revenue recognition?
A) Payment terms
B) Transfer of control
C) Cost recovery
D) Historical cost
Answer: B
Explanation: Revenue recognition under IFRS 15 is driven by the transfer of control to the customer.
Question 13: In group accounting, consolidation involves:
A) Recording transactions twice
B) Eliminating intra-group transactions
C) Ignoring minority interests
D) Separating individual financial statements
Answer: B
Explanation: Consolidation requires the elimination of intra-group transactions to avoid double
counting.
Question 14: Which process is critical when preparing consolidated financial statements?
A) Combining similar expense categories
B) Recognizing only the parent company’s transactions
C) Eliminating intercompany transactions
D) Recording all cash transactions separately
Answer: C
Explanation: Intercompany transactions must be eliminated to prevent artificial inflation of revenues or
expenses.
Question 15: In group accounts, the concept of “control” is primarily used to determine:
A) The entity with the largest assets
B) The company responsible for preparing financial statements
C) The parent company that consolidates subsidiaries
D) The organization that issues the most debt
Answer: C
Explanation: Control indicates that the parent company can govern the financial and operating policies
of subsidiaries.
, Question 16: Which characteristic distinguishes public sector financial reporting from private sector
reporting?
A) Focus on profit maximization
B) Emphasis on accountability and stewardship
C) Prioritization of shareholder dividends
D) Use of historical cost exclusively
Answer: B
Explanation: Public sector reporting emphasizes accountability to stakeholders and stewardship of
public resources.
Question 17: What is the role of accruals in financial reporting?
A) They adjust for cash flow timing differences
B) They record only cash transactions
C) They represent deferred tax liabilities
D) They record non-cash expenses only
Answer: A
Explanation: Accruals adjust for the timing differences between when transactions occur and when cash
is exchanged.
Question 18: Why is consistency important in financial reporting?
A) It ensures compliance with taxation laws
B) It improves comparability across periods
C) It enhances marketing efforts
D) It allows for periodic restatement of historical data
Answer: B
Explanation: Consistency in applying accounting policies improves comparability and reliability over
time.
Question 19: Which step is NOT part of preparing consolidated financial statements?
A) Combining the individual financial statements
B) Eliminating intercompany balances
C) Recording intra-group profits
D) Adjusting for non-controlling interests
Answer: C
Explanation: Intra-group profits are eliminated during consolidation to avoid overstating results.
Question 20: How does the adoption of IFRS enhance transparency in financial reporting?
A) By allowing different accounting policies
B) Through consistent and comparable disclosures
C) By minimizing disclosures
D) Through increased managerial discretion
Answer: B
Explanation: IFRS adoption improves transparency by standardizing reporting methods, making
comparisons easier for users.
Question 21: What is the main difference between cash-basis and accrual-basis financial statements?
A) Cash-basis records transactions when cash is received or paid; accrual-basis records them when
Question 1: Which accounting principle requires expenses to be recorded in the same period as the
revenues they help generate?
A) Revenue Recognition Principle
B) Matching Principle
C) Consistency Principle
D) Prudence Principle
Answer: B
Explanation: The Matching Principle ensures that expenses are recorded in the period in which the
associated revenues are earned.
Question 2: What is the primary objective of the double-entry bookkeeping system?
A) To record transactions in one ledger
B) To track cash receipts only
C) To ensure every debit has a corresponding credit
D) To simplify tax calculations
Answer: C
Explanation: The double-entry system maintains balance by ensuring each debit entry is matched by an
equal credit entry.
Question 3: Which of the following best describes the purpose of International Financial Reporting
Standards (IFRS)?
A) To standardize tax regulations
B) To provide a global framework for financial reporting
C) To manage internal audit processes
D) To enforce government budgeting
Answer: B
Explanation: IFRS offers a common accounting framework that enhances comparability and
transparency in financial statements across countries.
Question 4: Under IFRS 15, revenue is recognized when:
A) Payment is received
B) The customer signs a contract
C) Control of the goods or services is transferred to the customer
D) The order is placed
Answer: C
Explanation: IFRS 15 focuses on transferring control of goods or services rather than merely transferring
risks and rewards.
Question 5: Which basis of accounting records transactions when they occur, regardless of when cash
is exchanged?
A) Cash basis accounting
B) Accrual basis accounting
C) Modified cash basis accounting
D) Hybrid accounting
,Answer: B
Explanation: Accrual accounting recognizes transactions when they occur, ensuring that revenues and
expenses are recorded in the appropriate period.
Question 6: In a Balance Sheet, which of the following represents a company’s financial position at a
specific point in time?
A) Income Statement
B) Statement of Cash Flows
C) Statement of Changes in Equity
D) Balance Sheet
Answer: D
Explanation: The Balance Sheet shows assets, liabilities, and equity at a specific moment, reflecting the
financial position of an entity.
Question 7: What is the main purpose of the Income Statement?
A) To list assets and liabilities
B) To report cash inflows and outflows
C) To summarize revenues and expenses over a period
D) To provide detailed equity movements
Answer: C
Explanation: The Income Statement reports the financial performance by summarizing revenues and
expenses over a defined period.
Question 8: Which financial statement provides information about the cash generated and used
during an accounting period?
A) Balance Sheet
B) Statement of Cash Flows
C) Income Statement
D) Statement of Retained Earnings
Answer: B
Explanation: The Statement of Cash Flows details the cash inflows and outflows, helping assess liquidity.
Question 9: What does IPSAS stand for in the public sector context?
A) International Public Sector Accounting Standards
B) Internal Public Sector Accounting System
C) International Performance and Statistics
D) Integrated Public Sector Audit Standards
Answer: A
Explanation: IPSAS refers to International Public Sector Accounting Standards, which guide accounting in
the public sector.
Question 10: Which IFRS standard deals with the accounting for leases?
A) IFRS 9
B) IFRS 15
C) IFRS 16
D) IFRS 13
Answer: C
,Explanation: IFRS 16 specifically addresses the accounting treatment for leases, including recognition
and measurement.
Question 11: IFRS 9 primarily deals with which aspect of financial instruments?
A) Revenue recognition
B) Lease accounting
C) Classification and measurement
D) Consolidation of financial statements
Answer: C
Explanation: IFRS 9 outlines the classification, measurement, and impairment of financial instruments.
Question 12: When applying IFRS 15, which of the following is crucial for revenue recognition?
A) Payment terms
B) Transfer of control
C) Cost recovery
D) Historical cost
Answer: B
Explanation: Revenue recognition under IFRS 15 is driven by the transfer of control to the customer.
Question 13: In group accounting, consolidation involves:
A) Recording transactions twice
B) Eliminating intra-group transactions
C) Ignoring minority interests
D) Separating individual financial statements
Answer: B
Explanation: Consolidation requires the elimination of intra-group transactions to avoid double
counting.
Question 14: Which process is critical when preparing consolidated financial statements?
A) Combining similar expense categories
B) Recognizing only the parent company’s transactions
C) Eliminating intercompany transactions
D) Recording all cash transactions separately
Answer: C
Explanation: Intercompany transactions must be eliminated to prevent artificial inflation of revenues or
expenses.
Question 15: In group accounts, the concept of “control” is primarily used to determine:
A) The entity with the largest assets
B) The company responsible for preparing financial statements
C) The parent company that consolidates subsidiaries
D) The organization that issues the most debt
Answer: C
Explanation: Control indicates that the parent company can govern the financial and operating policies
of subsidiaries.
, Question 16: Which characteristic distinguishes public sector financial reporting from private sector
reporting?
A) Focus on profit maximization
B) Emphasis on accountability and stewardship
C) Prioritization of shareholder dividends
D) Use of historical cost exclusively
Answer: B
Explanation: Public sector reporting emphasizes accountability to stakeholders and stewardship of
public resources.
Question 17: What is the role of accruals in financial reporting?
A) They adjust for cash flow timing differences
B) They record only cash transactions
C) They represent deferred tax liabilities
D) They record non-cash expenses only
Answer: A
Explanation: Accruals adjust for the timing differences between when transactions occur and when cash
is exchanged.
Question 18: Why is consistency important in financial reporting?
A) It ensures compliance with taxation laws
B) It improves comparability across periods
C) It enhances marketing efforts
D) It allows for periodic restatement of historical data
Answer: B
Explanation: Consistency in applying accounting policies improves comparability and reliability over
time.
Question 19: Which step is NOT part of preparing consolidated financial statements?
A) Combining the individual financial statements
B) Eliminating intercompany balances
C) Recording intra-group profits
D) Adjusting for non-controlling interests
Answer: C
Explanation: Intra-group profits are eliminated during consolidation to avoid overstating results.
Question 20: How does the adoption of IFRS enhance transparency in financial reporting?
A) By allowing different accounting policies
B) Through consistent and comparable disclosures
C) By minimizing disclosures
D) Through increased managerial discretion
Answer: B
Explanation: IFRS adoption improves transparency by standardizing reporting methods, making
comparisons easier for users.
Question 21: What is the main difference between cash-basis and accrual-basis financial statements?
A) Cash-basis records transactions when cash is received or paid; accrual-basis records them when
