FAC1502 EXAM (QUESTIONS & ANSWERS) | GRADED
A+ PASS || 100 % GUARANTEEED FOR BETTER
GRADES
A. Planning, recording, analyzing, and interpreting financial information
Answer: Correct
Rationale: Accounting systematically processes financial data to support decision-making
and performance evaluation.
B. Using historical financial information to determine future actions
Answer: Correct
Rationale: Past financial data forms the basis for forecasting and planning future activities.
C. Evaluating the results of financial activities
Answer: Correct
Rationale: Control in accounting uses financial information to monitor whether activities
align with plans.
D. Sole traders, partnerships, close corporations, companies
Answer: Correct
Rationale: These are profit entities, which operate to generate profits for their owners.
E. Clubs, charitable organizations, churches, educational institutions, trusts
Answer: Correct
Rationale: These are non-profit entities that operate for social, educational, or charitable
purposes rather than profit.
F. Investors provide capital and assess investment risk
Answer: Correct
Rationale: Investors need financial information to decide whether to invest, hold, or
withdraw funds.
G. Statement of Financial Position reflects net worth
Answer: Correct
Rationale: It shows an entity’s assets, liabilities, and equity at a specific point in time.
H. Statement of Cash Flows indicates the ability to generate cash and meet obligations
Answer: Correct
Rationale: Cash flow statements show whether the entity can meet economic
commitments through cash generation.
I. Management and personnel are internal users
Answer: Correct
,Rationale: Internal users utilize accounting information for planning, controlling, and
decision-making.
J. Accounting policies are decisions for consistent transaction handling
Answer: Correct
Rationale: Policies ensure comparability and reliability in financial statements.
K. Going concern assumes the entity will continue operating
Answer: Correct
Rationale: Financial statements are prepared under the assumption the entity will not be
liquidated in the foreseeable future.
L. Relevance ensures financial information can influence decisions
Answer: Correct
Rationale: Relevant information helps users evaluate past, present, or future events for
decision-making.
M. Net asset value = Assets − Liabilities
Answer: Correct
Rationale: Net asset value represents what remains after deducting liabilities from total
assets.
N. Equity = Capital + Net Profit
Answer: Correct
Rationale: Equity increases with profits and capital contributions and decreases with
losses.
O. Non-profit entities operate for social, educational, or charitable purposes
Answer: Correct
Rationale: Non-profit entities do not operate to generate profit but to achieve societal
objectives.
P. Financial accounting serves external users like creditors and banks
Answer: Correct
Rationale: External stakeholders rely on financial accounting for informed decision-
making.
Q. Income increases equity; expenses decrease equity
Answer: Correct
Rationale: Profit raises the owner’s interest, while losses reduce it, reflecting the change in
equity.
R. Assets = Equity + Liabilities (Basic Accounting Equation)
Answer: Correct
Rationale: Each transaction must maintain balance in the accounting equation to ensure
accurate records.
,S. Income includes revenue and gains
Answer: Correct
Rationale: Income increases economic benefits, either through inflows of assets or
reductions in liabilities, raising equity.
T. Expenses represent outflows or decreases in economic benefits
Answer: Correct
Rationale: Expenses reduce equity because they consume resources in the process of
earning income.
U. Statement of Profit or Loss and Other Comprehensive Income shows financial
performance
Answer: Correct
Rationale: It reflects the income and expenditure accounts for a specific financial period,
indicating profit or loss.
V. Statement of Changes in Equity shows changes in capital and income
Answer: Correct
Rationale: This statement reflects changes in equity during a period, including profits,
losses, and capital contributions.
W. Accounting policies and explanatory notes provide additional information
Answer: Correct
Rationale: Notes clarify items in financial statements and explain methods used,
enhancing transparency.
X. Financial results link to financial performance and position
Answer: Correct
Rationale: Performance (profit/loss) affects financial position (assets, liabilities, equity) in
statements.
Y. The financial period determines the timeframe of statements
Answer: Correct
Rationale: Statements can cover six months or a year; internal use often uses shorter
periods.
Z. Assets = Equity + Liabilities (Basic Accounting Equation)
Answer: Correct
Rationale: Each transaction is recorded to maintain balance in the accounting equation.
AA. Net asset value = Assets − Liabilities
Answer: Correct
Rationale: It measures the residual interest in the entity’s assets after deducting liabilities.
AB. Profit = Income − Expenses
Answer: Correct
, Rationale: Profit (or loss) is the difference between total income and total expenses for a
period.
AC. Equity = Capital + Income − Expenses
Answer: Correct
Rationale: Equity increases with income and capital and decreases with expenses or
losses.
AD. Transactions affect the composition of assets, liabilities, or equity
Answer: Correct
Rationale: Each transaction changes either the amount or nature of these elements in the
Basic Accounting Equation.
AE. General ledger accounts are opened for each asset, liability, and equity item
Answer: Correct
Rationale: Each account is assigned a folio number to record all relevant transactions
separately.
AF. Financial accounting serves external users like creditors, clients, and banks
Answer: Correct
Rationale: External stakeholders require reliable financial information for investment or
lending decisions.
AG. Management accounting serves internal users
Answer: Correct
Rationale: Internal management uses information for planning, controlling, and decision-
making.
AH. Accounting principles are conceptual and theoretical
Answer: Correct
Rationale: Principles guide the practice of accounting consistently across different entities.
AI. International Financial Reporting Standards (IFRS) provide a general accounting
framework
Answer: Correct
Rationale: IFRS ensures consistency, transparency, and comparability of financial
statements globally.
AJ. Accounting standards encourage uniformity in practices
Answer: Correct
Rationale: Standards aim to eliminate alternative treatments that may mislead users.
AK. Going concern assumes the entity will remain operational
Answer: Correct
Rationale: Financial statements are prepared under the assumption the entity will
continue indefinitely.
A+ PASS || 100 % GUARANTEEED FOR BETTER
GRADES
A. Planning, recording, analyzing, and interpreting financial information
Answer: Correct
Rationale: Accounting systematically processes financial data to support decision-making
and performance evaluation.
B. Using historical financial information to determine future actions
Answer: Correct
Rationale: Past financial data forms the basis for forecasting and planning future activities.
C. Evaluating the results of financial activities
Answer: Correct
Rationale: Control in accounting uses financial information to monitor whether activities
align with plans.
D. Sole traders, partnerships, close corporations, companies
Answer: Correct
Rationale: These are profit entities, which operate to generate profits for their owners.
E. Clubs, charitable organizations, churches, educational institutions, trusts
Answer: Correct
Rationale: These are non-profit entities that operate for social, educational, or charitable
purposes rather than profit.
F. Investors provide capital and assess investment risk
Answer: Correct
Rationale: Investors need financial information to decide whether to invest, hold, or
withdraw funds.
G. Statement of Financial Position reflects net worth
Answer: Correct
Rationale: It shows an entity’s assets, liabilities, and equity at a specific point in time.
H. Statement of Cash Flows indicates the ability to generate cash and meet obligations
Answer: Correct
Rationale: Cash flow statements show whether the entity can meet economic
commitments through cash generation.
I. Management and personnel are internal users
Answer: Correct
,Rationale: Internal users utilize accounting information for planning, controlling, and
decision-making.
J. Accounting policies are decisions for consistent transaction handling
Answer: Correct
Rationale: Policies ensure comparability and reliability in financial statements.
K. Going concern assumes the entity will continue operating
Answer: Correct
Rationale: Financial statements are prepared under the assumption the entity will not be
liquidated in the foreseeable future.
L. Relevance ensures financial information can influence decisions
Answer: Correct
Rationale: Relevant information helps users evaluate past, present, or future events for
decision-making.
M. Net asset value = Assets − Liabilities
Answer: Correct
Rationale: Net asset value represents what remains after deducting liabilities from total
assets.
N. Equity = Capital + Net Profit
Answer: Correct
Rationale: Equity increases with profits and capital contributions and decreases with
losses.
O. Non-profit entities operate for social, educational, or charitable purposes
Answer: Correct
Rationale: Non-profit entities do not operate to generate profit but to achieve societal
objectives.
P. Financial accounting serves external users like creditors and banks
Answer: Correct
Rationale: External stakeholders rely on financial accounting for informed decision-
making.
Q. Income increases equity; expenses decrease equity
Answer: Correct
Rationale: Profit raises the owner’s interest, while losses reduce it, reflecting the change in
equity.
R. Assets = Equity + Liabilities (Basic Accounting Equation)
Answer: Correct
Rationale: Each transaction must maintain balance in the accounting equation to ensure
accurate records.
,S. Income includes revenue and gains
Answer: Correct
Rationale: Income increases economic benefits, either through inflows of assets or
reductions in liabilities, raising equity.
T. Expenses represent outflows or decreases in economic benefits
Answer: Correct
Rationale: Expenses reduce equity because they consume resources in the process of
earning income.
U. Statement of Profit or Loss and Other Comprehensive Income shows financial
performance
Answer: Correct
Rationale: It reflects the income and expenditure accounts for a specific financial period,
indicating profit or loss.
V. Statement of Changes in Equity shows changes in capital and income
Answer: Correct
Rationale: This statement reflects changes in equity during a period, including profits,
losses, and capital contributions.
W. Accounting policies and explanatory notes provide additional information
Answer: Correct
Rationale: Notes clarify items in financial statements and explain methods used,
enhancing transparency.
X. Financial results link to financial performance and position
Answer: Correct
Rationale: Performance (profit/loss) affects financial position (assets, liabilities, equity) in
statements.
Y. The financial period determines the timeframe of statements
Answer: Correct
Rationale: Statements can cover six months or a year; internal use often uses shorter
periods.
Z. Assets = Equity + Liabilities (Basic Accounting Equation)
Answer: Correct
Rationale: Each transaction is recorded to maintain balance in the accounting equation.
AA. Net asset value = Assets − Liabilities
Answer: Correct
Rationale: It measures the residual interest in the entity’s assets after deducting liabilities.
AB. Profit = Income − Expenses
Answer: Correct
, Rationale: Profit (or loss) is the difference between total income and total expenses for a
period.
AC. Equity = Capital + Income − Expenses
Answer: Correct
Rationale: Equity increases with income and capital and decreases with expenses or
losses.
AD. Transactions affect the composition of assets, liabilities, or equity
Answer: Correct
Rationale: Each transaction changes either the amount or nature of these elements in the
Basic Accounting Equation.
AE. General ledger accounts are opened for each asset, liability, and equity item
Answer: Correct
Rationale: Each account is assigned a folio number to record all relevant transactions
separately.
AF. Financial accounting serves external users like creditors, clients, and banks
Answer: Correct
Rationale: External stakeholders require reliable financial information for investment or
lending decisions.
AG. Management accounting serves internal users
Answer: Correct
Rationale: Internal management uses information for planning, controlling, and decision-
making.
AH. Accounting principles are conceptual and theoretical
Answer: Correct
Rationale: Principles guide the practice of accounting consistently across different entities.
AI. International Financial Reporting Standards (IFRS) provide a general accounting
framework
Answer: Correct
Rationale: IFRS ensures consistency, transparency, and comparability of financial
statements globally.
AJ. Accounting standards encourage uniformity in practices
Answer: Correct
Rationale: Standards aim to eliminate alternative treatments that may mislead users.
AK. Going concern assumes the entity will remain operational
Answer: Correct
Rationale: Financial statements are prepared under the assumption the entity will
continue indefinitely.
