FFMA 2025/2026 ACTUAL EXAM QUESTIONS
AND CORRECT ANSWERS
What is accounting? - CORRECT ANSWERS The process of identifying, measuring and
communicating economic information to permit informed judgements and decisions
How long has accounting been around for? - CORRECT ANSWERS 7 millennia, it predates
writing (which didn't emerge for another 2,000 years). Accounting may be as old as money and
numbers themselves
Who formalised double-entry bookkeeping? - CORRECT ANSWERS Luca Pacioli (Medieval
period), "Father of Accounting"
What is double-entry bookkeeping? - CORRECT ANSWERS Conceptualising transactions in
terms of debit and credit
What is financial accounting? - CORRECT ANSWERS Meet needs of owners and lenders.
Produce financial statements for external users (banks, Gov't, investors). There are strict rules
and regulations - standardised
What is management accounting? - CORRECT ANSWERS Seek to meet needs of managers.
Accounting reports for internal users. No rules and regulations
Difference between management and financial accounting in terms of users of information? -
CORRECT ANSWERS Management - managers internal to business
Financial - wide range of external users (banks, investors, Gov't)
,Difference between management and financial accounting in terms level of detail? - CORRECT
ANSWERS Management - specific decision making, high level of detail, specific purpose
Financial - broad overview, less detailed, general purpose
Difference between management and financial accounting in terms of reporting interval? -
CORRECT ANSWERS Management - produced when required
Financial - determined by rules and regulations (annually or semi annually)
Difference between management and financial accounting in terms of timeliness? - CORRECT
ANSWERS Management - future periods of time, past and future
Financial - prepared for past periods of time, mainly historical
Difference between management and financial accounting in terms of types of information? -
CORRECT ANSWERS Management - quantitative and qualitative
Financial - quantifiable - verifiable
What are financial statements? - CORRECT ANSWERS One of main mechanisms we have
in business to establish business confidence
Why is business confidence important? - CORRECT ANSWERS Ensures businesses operate
efficiently, investment takes place, confidence
What are the 3 types of statements? - CORRECT ANSWERS Income statement (SoPL) -
profit over a year
SoFP - financial photograph at a particular point in time, assets and liabilities, shows value of a
business
Cash flow - inflows and outflows of a business
,What is an asset? - CORRECT ANSWERS A resource available and controlled by a business
with the expectation to produce future economic benefits
Purpose of an asset? - CORRECT ANSWERS To increase business value and benefit
operations
Examples of assets? - CORRECT ANSWERS Land, factories, raw materials, cash balances,
machinery
2 types of assets? - CORRECT ANSWERS Current assets - acquired with the intention of
sale or conversion into cash within a year
Non-current assets - held for more than a year
What is a liability? - CORRECT ANSWERS Present obligation of the business where the
settlement of which is expected ti result in an outflow of resources embodying economic
benefit
Examples of liabilities? - CORRECT ANSWERS Bank borrowings, purchases of inventory and
utility bills (that haven't been paid for yet)
2 types of liabilities? - CORRECT ANSWERS Current liability - settled within one year after
the balance sheet date
Non-current liability - settled after more than one year after the balance sheet date
What is equity? - CORRECT ANSWERS The residual amount when an entity's liabilities are
deducted from an entity's assets
What is the accounting equation? - CORRECT ANSWERS Equity = Assets - Liabilities
, In terms of assets, what does control mean? - CORRECT ANSWERS Physical possession eg
inventory
Legal title eg PPE (property, plant and equipment)
Legal right eg trade receivable
In terms of assets, what can't a business control? - CORRECT ANSWERS Customers (shop
elsewhere), employees (may leave, hand in heir notice), market share (able to influence it, but
can't control it)
In terms of assets, what does future economic benefits mean? - CORRECT ANSWERS Cash
inflows eg trade receivables
Use in the business eg cash, PPE
Future services eg prepayments
In terms of liabilities, what are obligations? - CORRECT ANSWERS Pay cash eg trade
payables, tax payables
Re-pay cash eg bank loan, other loan
Provide goods or services eg customer payment in advance
Components of equity? - CORRECT ANSWERS Share capital
Share premium
Retained earnings
Other reserves
SC and SC is the capital invested by the owners of the company
RE and OR is the reserves value generated by the company, belonging to the owners
AND CORRECT ANSWERS
What is accounting? - CORRECT ANSWERS The process of identifying, measuring and
communicating economic information to permit informed judgements and decisions
How long has accounting been around for? - CORRECT ANSWERS 7 millennia, it predates
writing (which didn't emerge for another 2,000 years). Accounting may be as old as money and
numbers themselves
Who formalised double-entry bookkeeping? - CORRECT ANSWERS Luca Pacioli (Medieval
period), "Father of Accounting"
What is double-entry bookkeeping? - CORRECT ANSWERS Conceptualising transactions in
terms of debit and credit
What is financial accounting? - CORRECT ANSWERS Meet needs of owners and lenders.
Produce financial statements for external users (banks, Gov't, investors). There are strict rules
and regulations - standardised
What is management accounting? - CORRECT ANSWERS Seek to meet needs of managers.
Accounting reports for internal users. No rules and regulations
Difference between management and financial accounting in terms of users of information? -
CORRECT ANSWERS Management - managers internal to business
Financial - wide range of external users (banks, investors, Gov't)
,Difference between management and financial accounting in terms level of detail? - CORRECT
ANSWERS Management - specific decision making, high level of detail, specific purpose
Financial - broad overview, less detailed, general purpose
Difference between management and financial accounting in terms of reporting interval? -
CORRECT ANSWERS Management - produced when required
Financial - determined by rules and regulations (annually or semi annually)
Difference between management and financial accounting in terms of timeliness? - CORRECT
ANSWERS Management - future periods of time, past and future
Financial - prepared for past periods of time, mainly historical
Difference between management and financial accounting in terms of types of information? -
CORRECT ANSWERS Management - quantitative and qualitative
Financial - quantifiable - verifiable
What are financial statements? - CORRECT ANSWERS One of main mechanisms we have
in business to establish business confidence
Why is business confidence important? - CORRECT ANSWERS Ensures businesses operate
efficiently, investment takes place, confidence
What are the 3 types of statements? - CORRECT ANSWERS Income statement (SoPL) -
profit over a year
SoFP - financial photograph at a particular point in time, assets and liabilities, shows value of a
business
Cash flow - inflows and outflows of a business
,What is an asset? - CORRECT ANSWERS A resource available and controlled by a business
with the expectation to produce future economic benefits
Purpose of an asset? - CORRECT ANSWERS To increase business value and benefit
operations
Examples of assets? - CORRECT ANSWERS Land, factories, raw materials, cash balances,
machinery
2 types of assets? - CORRECT ANSWERS Current assets - acquired with the intention of
sale or conversion into cash within a year
Non-current assets - held for more than a year
What is a liability? - CORRECT ANSWERS Present obligation of the business where the
settlement of which is expected ti result in an outflow of resources embodying economic
benefit
Examples of liabilities? - CORRECT ANSWERS Bank borrowings, purchases of inventory and
utility bills (that haven't been paid for yet)
2 types of liabilities? - CORRECT ANSWERS Current liability - settled within one year after
the balance sheet date
Non-current liability - settled after more than one year after the balance sheet date
What is equity? - CORRECT ANSWERS The residual amount when an entity's liabilities are
deducted from an entity's assets
What is the accounting equation? - CORRECT ANSWERS Equity = Assets - Liabilities
, In terms of assets, what does control mean? - CORRECT ANSWERS Physical possession eg
inventory
Legal title eg PPE (property, plant and equipment)
Legal right eg trade receivable
In terms of assets, what can't a business control? - CORRECT ANSWERS Customers (shop
elsewhere), employees (may leave, hand in heir notice), market share (able to influence it, but
can't control it)
In terms of assets, what does future economic benefits mean? - CORRECT ANSWERS Cash
inflows eg trade receivables
Use in the business eg cash, PPE
Future services eg prepayments
In terms of liabilities, what are obligations? - CORRECT ANSWERS Pay cash eg trade
payables, tax payables
Re-pay cash eg bank loan, other loan
Provide goods or services eg customer payment in advance
Components of equity? - CORRECT ANSWERS Share capital
Share premium
Retained earnings
Other reserves
SC and SC is the capital invested by the owners of the company
RE and OR is the reserves value generated by the company, belonging to the owners
