ACA [ICAEW] – ACCOUNTING EXAM QUESTIONS AND ANSWERS

ACA [ICAEW] – ACCOUNTING EXAM QUESTIONS AND ANSWERS Books of Original Entry - Answer- 1. Cash Book 2. Sales Day Book (Credit Sales) 3. Purchases Day Book (Credit Purchases) 4. Petty Cash Book 5. Journal Book 6. The Payroll Statement of Financial Position - Answer- SOFP - Snapshot of assets controlled, liabilities owned and capital at a point in time Statement of Profit and Loss - Answer- Income and expenses over a period of time The Business entity concept - Answer- Business transactions should be kept separate from the personal transaction of the owner Qualitative characteristics of financial information - Answer- Two fundamental concepts 1. Relevance [Assists users in evaluating past and predicting future events + Materiality] 2. Faithful Representation [Neutral; Free from Error; Complete] Four Enhancing Characteristics 1. Verifiability [Can be proven] 2. Timeliness [In time to influence decisions of users] 3. Understandability [Readily understandable by people with reasonable knowledge] 4. Comparability [Consistency] Accrual basis of accounting - Answer- - Items recognized as assets, liabilities, equity, income and expenses (elements of FS) when they satisfy definitions and recognition criteria for those elements in conceptual framework - Transactions recognized when they occur !! Income earned must be matched against the expenditure incurred in earning it Accrual Concept - Answer- Effects of transactions reognized when they occur - not when cash received/paid IFAC Code of Ethics - Answer- 1. Integrity 2. Objectivity 3. Professional Competence and Due Care 4. Confidentiality 5. Professional Behavior Accounting Equation - Answer- Assets = Capital + Liabilities same: Assets - Liabilities = Capital + Profit - Drawings ICAEW Code of Ethics - Answer- - Demonstrate highest standards of professional conduct and take public interest into consideration - Maintain reputation of accounting profession Payroll cost - Answer- Total Payroll cost = Gross Pay + Employer NI + Employer Pension Net Pay by Employer - Answer- Gross Pay - Employees NI - PAYE = Net Pay Trial Balance Definition - Answer- A list of balances from each ledger account split into debits and credits Cost of sales [function] - Answer- Opening inventory + Purchases + Carriage Inwards - Closing Inventory Carriage Inwards vs. Outwards - Answer- Carriage inwards: added to cost of purchases therefore included in COS and Gross Profit Carriage outwards: distribution cost deducted from gross profit in Statement of Profit and Loss Net Realizable Value - Answer- NRV of an item is net selling proceeds after all cost needing to be incurred to sell item have been deducted Closing and Opening Inventory Entries - Answer- Closin