FFMA Exam UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS

FFMA Exam UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
accounting - CORRECT ANSWER The process of planning, recording, analyzing, and
interpreting financial and economic information and make decisions of the data



accounts - CORRECT ANSWER financial statements that report performance and
outcomes of firms each year



annual report - CORRECT ANSWER a yearly statement of the financial condition,
progress, and expectations of an organization

- for those who want to understand the financial information

- aka corporate report



ethical behaviour - CORRECT ANSWER requires: integrity, objectivity, professional
competence and due care, confidentiality and professional behaviour



financial accounting vs management accounting - CORRECT ANSWER financial aims
to meet the needs of owners and lenders whereas management accounting is for information
within the business fir management and internal uses only , there are more specialised needs



conceptual framework - CORRECT ANSWER a statement of principles providing
generally accepted guidance for the development of new reporting practices and for
challenging and evaluating the existing practices



What makes financial information useful? - CORRECT ANSWER Relevance and
Faithful representation; these qualitative characteristics of useful financial information are
guiding concepts that apply throughout the revised conceptual framework



relevance - CORRECT ANSWER -information is relevant if it is capable of making a
difference to the decisions made by users
- has predictive value or confirmatory value

,faithful representation - CORRECT ANSWER information must faithfully represent
the substance of what it purports to represent

- to the maximum extent possible: complete, neutral and free from error

- affected by level of measurement uncertainty



enhancing qualitative characteristics - CORRECT ANSWER - comparability

- verifiability

- timeliness

- understandability



comparability - CORRECT ANSWER Ability to compare the accounting information
of different companies because they use the same accounting principles.



verfiability - CORRECT ANSWER a consensus among different measures



timeliness - CORRECT ANSWER having information available to decision-makers
before it loses its capacity to influence decisions



understandability - CORRECT ANSWER Information presented in a clear and concise
fashion so that users can interpret it and comprehend its meaning.



cost constraint - CORRECT ANSWER the benefit of providing the information needs
to justify the cost of providing and using the information



prudence - CORRECT ANSWER neutrality is supported by the exercise ofprudence

- prudence is the exercise of caution when making judgements under conditions of
uncertainty

- it does not allow for overstatement or an understatement of assets, liabilities, income or
expenses

,substance over form - CORRECT ANSWER in many circumstances, the substance of
an economic phenomenon and it legal form are the same. if they are not the same, providing
information only about the legal form would not faithfully represent the economic
phenomenon



measurement uncertainty - CORRECT ANSWER does not prevent information from
being useful

- in some cases the most relevant information may have such a high level of measurement
uncertainty that the most useful information is information that is slightly less relevant but is
subject to lower measurement uncertainty



accounting principles - CORRECT ANSWER within the companies ac t 2006:

going concern

accruals

consistency

prudence



going concern - CORRECT ANSWER financial statements are prepared with the
expectation that a business will remain in operation indefinitely

it is assumed that the entity has neither the intention nor the need to enter liquidation or to
cease trading



accrual accounting - CORRECT ANSWER depicts the effects of transactions and ither
events and circumstances on a reporting entity's economic resources and claims in the periods
in which those effects occur, even if the resulting cash receipts and payments occur in a
different period



materiality - CORRECT ANSWER - misstatements, including omissions, are
considered to be material if they, individually or in the aggregate, could reasonably be
expected to influence the economic decsions of users taken on the basis of financial
statements


whether an item is large enough to likely influence the decision of an investor or creditor

, importance of accounting - CORRECT ANSWER fpr medium and large sized
businesses accounting information will be very important for the shareholders as it shows
how well the directors have run the company



Accounting is an information and measurement system that identifies, records, and
communicates an organization's business activities.



trade receivable - CORRECT ANSWER amount owed to a business by its customers
who bought goods on credit



sales invoice - CORRECT ANSWER A document sent to customers recording a sale
on credit and requesting payment



credit purchase - CORRECT ANSWER the business takes the goods and agrees to pay
at a future date



Account / Trade Payables - CORRECT ANSWER amounts owed by the business due
to the suppliers



purchase price - CORRECT ANSWER of goods sold is one of the expenses of the
business



accrued expense - CORRECT ANSWER when an expense is incurred but not payed for
until a later time

- must be recorded as part of the accounting information relevant to the period of time in
which the expense was incurred



credit note - CORRECT ANSWER a document sent to a customer of a business
cancelling the customers debt to the business, usually because the customer has returned
defective goods or has received inadequate service