ACCA FA EXAM QUESTIONS WITH COMPLETE SOLUTIONS

Sole Trader correct answer: this is the simplest form of business entity where a business is owned and operated by one individual. With this form of entity there is no distinction in law between and owner and the business. Partnership correct answer: this is similar to a sole trader in that the owners of the partnership share all the profits and have unlimited liability for the losses and debts of the business. The key distinction is that there are at least two owners. Limited Liability Company correct answer: this type of business entity differs from sole traders and partnerships. Limited liability companies are established as separate legal entities which make them distinct from their owners. The framework correct answer: presents the main ideas, concepts and principles upon which all IFRS Standards, and therefore financial statements, are based. SPL elements correct answer: Income Expenses SFP elements correct answer: Assets Liabilities Capital Asset correct answer: A present economic resource controlled by the entity as a result of past events Liability correct answer: A present obligation of the entity to transfer an economic resource as a result of past events Capital/Equity correct answer: The residual interest in the assets of the entity after deducting all its liabilities Income correct answer: Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims Expense correct answer: Decreases in assets, or increases in liabilities, that result in a decrease in equity, other than those relating to distributions to holders of equity claims Fundamental Qualitative Characteristics correct answer: 1. Relevance 2. Faithful Representation Enhancing Qualitative Characteristics correct answer: 1. Comparability 2. Verifiability 3. Timeliness 4. Understandability Materiality correct answer: If an item's omission or misstatement is likely to change the perception or understanding of the user of that information. Substance over form correct answer: The economic substance of transactions must be accounted for, and not just their strict legal form. Going Concern correct answer: financial statements are presented on the basis that the entity will continue to trade for the foreseeable future.