ACCA FA Practice & Revision Kit Study Questions and Answers

ACCA FA Practice & Revision Kit Study Questions and Answers 1.1 Who issues International Financial Reporting Standards? A The IFRS Advisory Committee B The stock exchange C The International Accounting Standards Board D The government - ANSWERC The role of the IASB is to develop and publish International Financial Reporting Standards. 1.2 Which groups of people are most likely to be interested in the financial statements of a sole trader? 1 Shareholders of the company 2 The business's bank manager 3 The tax authorities 4 Financial analysts ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 2/20 A 1 and 2 only B 2 and 3 only C 2, 3 and 4 only D 1, 2 and 3 only - ANSWERB A sole trader does not have any shareholders. The financial statements are unlikely to be of interest to a financial analyst, they are more usually interested in the financial statements of public -3 1.3 Identify, by indicating the relevant box in the table below, whether each of the following statements is true or false. A supplier of goods on credit is interested only in the statement of financial position, ie an indication of the current state of affairs. The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. - ANSWER(1) is false - although the supplier needs to know the current situation, the supplier also needs to be able to assess future prospects to ensure the entity has the ability to pay and to support an ongoing relationship. ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 3/20 (2) is the IASB's Conceptual Framework description of the purpose of financial statements, and is therefore true. 1.4 Which of the following are advantages of trading as a limited liability company? 1 Operating as a limited liability company makes raising finance easier because additional shares can be issued to raise additional cash. 2 Operating as a limited liability company is more risky than operating as a sole trader because the shareholders of a business are liable for all the debts of the business whereas the sole trader is only liable for the debts up to the amount he has invested. A 1 only B 2 only C Both1and2 D Neither 1 or 2 - ANSWERA (2) is incorrect - shareholders are only liable for the debts of the business up to the amount they have invested in shares, whereas sole traders are liable for all of the debts of the business. 1.5 Which of the following best describes corporate governance? A Corporate governance is the system of rules and regulations surrounding financial reporting. ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 4/20 B Corporate governance is the system by which companies and other entities are directed and controlled. C Corporate governance is carried out by the finance department in preparing the financial statements. D Corporate governance is the system by which an entity monitors its impact on the natural environment. - ANSWERB Corporate governance is the system by which companies and other entities are directed and controlled. 1.6 Identify which of the following statements are true or false. 1 The directors of a company are ultimately responsible for the preparation of financial statements, even if the majority of the work on them is performed by the finance department. 2 If financial statements are audited, then the responsibility for those financial statements instead falls on the auditors instead of the directors. 3 There are generally no laws surrounding the duties of directors in managing the affairs of a company. A 1 only B 2 only C 2 and 3 only ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 5/20 D 1 and 3 only - ANSWERA The responsibility of the financial statements rests with the directors, whether or not those financial statements are audited. Some of the duties of directors are statutory duties, laid down in law, including the duty to act within their powers, promote the success of the company and exercise reasonable skill and care. 1.7 Which ONE of the following statements correctly describes the contents of the Statement of Financial Position? A A list of ledger balances shown in debit and credit columns B A list of all the assets owned and all the liabilities owed by a business C A record of income generated and expenditure incurred over a given period D A record of the amount of cash generated and used by a company in a given period - ANSWERB The Statement of Financial Position contains a list of all the assets owned and all the liabilities owed by a business. 1.8 Which ONE of the following statements correctly describes the contents of the Statement of Profit or Loss? A A list of ledger balances shown in debit and credit columns B A list of all the assets owned and all the liabilities owed by a business C A record of income generated and expenditure incurred over a given period ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED FIRST PUBLISH OCTOBER 2024 Page 6/20 D A record of the amount of cash generated and used by a company in a given period - ANSWERC The Statement of Profit or Loss contains a record of income generated and expenditure incurred over a given period. 1.9 Which of the following are TRUE of partnerships? 1 The partners' individual exposure to debt is limited. 2 Financial statements for the partnership by law must be produced and made public. 3 A partnership is not a separate legal entity from the partners themsel