FFMA UPDATED EXAM QUESTIONS AND
CORRECT ANSWERS
What is accounting? - CORRECT ANSWERS the process of identifying, measuring, and
communicating information to permit informed judgements and decisions by users
What are the key differences between Financial Accounting and Management Accounting? -
CORRECT ANSWERS Users: Financial Accounting serves external users like investors, while
Management Accounting serves internal users like managers.
Detail: Financial provides broad overviews, Management provides detailed, specific reports.
Timelines: Financial is historical; Management can be forward-looking.
Rules: Financial is regulated; Management is flexible.
What are the three main financial statements? - CORRECT ANSWERS Income Statement:
Shows profits over a period.
Statement of Financial Position: Snapshots assets and liabilities.
Cash Flow Statement: Details cash inflows and outflows.
What is the accounting equation? - CORRECT ANSWERS Assets - Liabilities = Equity.
Assets and their classifications. - CORRECT ANSWERS Current Assets: Expected to convert
to cash within a year.
Non-current Assets: Held for more than a year.
Matching (Accruals) Concept in accounting - CORRECT ANSWERS Transactions are
recorded in the year they occur, not when bills are paid, ensuring expenses align with the
revenues they generate.
,Asset - CORRECT ANSWERS resource controlled by the business expected to produce
future benefits.
Types of Assets - CORRECT ANSWERS 1. Current: converted to cash within a year
2. Non-current: held for more than a year
three measurement points in the Income Statement - CORRECT ANSWERS Gross profit
Operating profit
Profit for the period (Net profit).
How is profit calculated? - CORRECT ANSWERS Total revenue - Total expenses.
Prudence Concept - CORRECT ANSWERS It ensures accounts are not over-optimistic by
preparing for worst-case scenarios.
Accruals and Prepayments. - CORRECT ANSWERS Accruals: Expenses incurred but not yet
paid.
Prepayments: Payments made in advance for future benefits.
What is the principle of double-entry bookkeeping? - CORRECT ANSWERS Every
transaction has at least two entries: one debit and one credit.
example of a double-entry transaction for a phone bill paid in cash. - CORRECT
ANSWERS Debit: Expense (phone bill).
Credit: Asset (cash).
, Elements of an income statement - CORRECT ANSWERS - Revenue
- Cost of sales
- Gross profit
- Distribution Costs
- Admin Expenses
-Operating profit
- Finance costs
- Tax Expense
- Profit after tax
Money Measurement Concept - CORRECT ANSWERS it says everything needs to have an
objective money value before it can be put into a set of accounts
Accruals (Matching) Concept - CORRECT ANSWERS it says we need to put every expense
in the year in which it occurred
Accruals Concept - CORRECT ANSWERS - moneys that's owed at the end of the year that
aren't yet paid
- figure must be included in current financial year
- it is added in as an extra expense
- Money is taken out of current year's accounts and put in into next year's accounts
Elements of Double-Entry Bookeeping - CORRECT ANSWERS - if we increase something in
our debit column, we must increase it in the credit column or decrease something else in the
debit column and vice versa
CORRECT ANSWERS
What is accounting? - CORRECT ANSWERS the process of identifying, measuring, and
communicating information to permit informed judgements and decisions by users
What are the key differences between Financial Accounting and Management Accounting? -
CORRECT ANSWERS Users: Financial Accounting serves external users like investors, while
Management Accounting serves internal users like managers.
Detail: Financial provides broad overviews, Management provides detailed, specific reports.
Timelines: Financial is historical; Management can be forward-looking.
Rules: Financial is regulated; Management is flexible.
What are the three main financial statements? - CORRECT ANSWERS Income Statement:
Shows profits over a period.
Statement of Financial Position: Snapshots assets and liabilities.
Cash Flow Statement: Details cash inflows and outflows.
What is the accounting equation? - CORRECT ANSWERS Assets - Liabilities = Equity.
Assets and their classifications. - CORRECT ANSWERS Current Assets: Expected to convert
to cash within a year.
Non-current Assets: Held for more than a year.
Matching (Accruals) Concept in accounting - CORRECT ANSWERS Transactions are
recorded in the year they occur, not when bills are paid, ensuring expenses align with the
revenues they generate.
,Asset - CORRECT ANSWERS resource controlled by the business expected to produce
future benefits.
Types of Assets - CORRECT ANSWERS 1. Current: converted to cash within a year
2. Non-current: held for more than a year
three measurement points in the Income Statement - CORRECT ANSWERS Gross profit
Operating profit
Profit for the period (Net profit).
How is profit calculated? - CORRECT ANSWERS Total revenue - Total expenses.
Prudence Concept - CORRECT ANSWERS It ensures accounts are not over-optimistic by
preparing for worst-case scenarios.
Accruals and Prepayments. - CORRECT ANSWERS Accruals: Expenses incurred but not yet
paid.
Prepayments: Payments made in advance for future benefits.
What is the principle of double-entry bookkeeping? - CORRECT ANSWERS Every
transaction has at least two entries: one debit and one credit.
example of a double-entry transaction for a phone bill paid in cash. - CORRECT
ANSWERS Debit: Expense (phone bill).
Credit: Asset (cash).
, Elements of an income statement - CORRECT ANSWERS - Revenue
- Cost of sales
- Gross profit
- Distribution Costs
- Admin Expenses
-Operating profit
- Finance costs
- Tax Expense
- Profit after tax
Money Measurement Concept - CORRECT ANSWERS it says everything needs to have an
objective money value before it can be put into a set of accounts
Accruals (Matching) Concept - CORRECT ANSWERS it says we need to put every expense
in the year in which it occurred
Accruals Concept - CORRECT ANSWERS - moneys that's owed at the end of the year that
aren't yet paid
- figure must be included in current financial year
- it is added in as an extra expense
- Money is taken out of current year's accounts and put in into next year's accounts
Elements of Double-Entry Bookeeping - CORRECT ANSWERS - if we increase something in
our debit column, we must increase it in the credit column or decrease something else in the
debit column and vice versa
