FFMA Exam UPDATED QUESTIONS AND
CORRECT ANSWERS
What is accounting? - CORRECT ANSWER The process of identifying, measuring
and communicating economic information to permit informed judgements and decisions
How long has accounting been around for? - CORRECT ANSWER 7 millennia, it
predates writing (which didn't emerge for another 2,000 years). Accounting may be as old as
money and numbers themselves
Who formalised double-entry bookkeeping? - CORRECT ANSWER Luca Pacioli
(Medieval period), "Father of Accounting"
What is double-entry bookkeeping? - CORRECT ANSWER Conceptualising
transactions in terms of debit and credit
What is financial accounting? - CORRECT ANSWER Meet needs of owners and
lenders. Produce financial statements for external users (banks, Gov't, investors). There are
strict rules and regulations - standardised
What is management accounting? - CORRECT ANSWER Seek to meet needs of
managers. Accounting reports for internal users. No rules and regulations
Difference between management and financial accounting in terms of users of information? -
CORRECT ANSWER Management - managers internal to business
Financial - wide range of external users (banks, investors, Gov't)
Difference between management and financial accounting in terms level of detail? -
CORRECT ANSWER Management - specific decision making, high level of detail,
specific purpose
Financial - broad overview, less detailed, general purpose
,Difference between management and financial accounting in terms of reporting interval? -
CORRECT ANSWER Management - produced when required
Financial - determined by rules and regulations (annually or semi annually)
Difference between management and financial accounting in terms of timeliness? -
CORRECT ANSWER Management - future periods of time, past and future
Financial - prepared for past periods of time, mainly historical
Difference between management and financial accounting in terms of types of information? -
CORRECT ANSWER Management - quantitative and qualitative
Financial - quantifiable - verifiable
What are financial statements? - CORRECT ANSWER One of main mechanisms we
have in business to establish business confidence
Why is business confidence important? - CORRECT ANSWER Ensures businesses
operate efficiently, investment takes place, confidence
What are the 3 types of statements? - CORRECT ANSWER Income statement (SoPL)
- profit over a year
SoFP - financial photograph at a particular point in time, assets and liabilities, shows value of
a business
Cash flow - inflows and outflows of a business
What is an asset? - CORRECT ANSWER A resource available and controlled by a
business with the expectation to produce future economic benefits
Purpose of an asset? - CORRECT ANSWER To increase business value and benefit
operations
, Examples of assets? - CORRECT ANSWER Land, factories, raw materials, cash
balances, machinery
2 types of assets? - CORRECT ANSWER Current assets - acquired with the intention
of sale or conversion into cash within a year
Non-current assets - held for more than a year
What is a liability? - CORRECT ANSWER Present obligation of the business where
the settlement of which is expected ti result in an outflow of resources embodying economic
benefit
Examples of liabilities? - CORRECT ANSWER Bank borrowings, purchases of
inventory and utility bills (that haven't been paid for yet)
2 types of liabilities? - CORRECT ANSWER Current liability - settled within one year
after the balance sheet date
Non-current liability - settled after more than one year after the balance sheet date
What is equity? - CORRECT ANSWER The residual amount when an entity's
liabilities are deducted from an entity's assets
What is the accounting equation? - CORRECT ANSWER Equity = Assets - Liabilities
In terms of assets, what does control mean? - CORRECT ANSWER Physical
possession eg inventory
Legal title eg PPE (property, plant and equipment)
Legal right eg trade receivable
In terms of assets, what can't a business control? - CORRECT ANSWER Customers
(shop elsewhere), employees (may leave, hand in heir notice), market share (able to influence
it, but can't control it)
CORRECT ANSWERS
What is accounting? - CORRECT ANSWER The process of identifying, measuring
and communicating economic information to permit informed judgements and decisions
How long has accounting been around for? - CORRECT ANSWER 7 millennia, it
predates writing (which didn't emerge for another 2,000 years). Accounting may be as old as
money and numbers themselves
Who formalised double-entry bookkeeping? - CORRECT ANSWER Luca Pacioli
(Medieval period), "Father of Accounting"
What is double-entry bookkeeping? - CORRECT ANSWER Conceptualising
transactions in terms of debit and credit
What is financial accounting? - CORRECT ANSWER Meet needs of owners and
lenders. Produce financial statements for external users (banks, Gov't, investors). There are
strict rules and regulations - standardised
What is management accounting? - CORRECT ANSWER Seek to meet needs of
managers. Accounting reports for internal users. No rules and regulations
Difference between management and financial accounting in terms of users of information? -
CORRECT ANSWER Management - managers internal to business
Financial - wide range of external users (banks, investors, Gov't)
Difference between management and financial accounting in terms level of detail? -
CORRECT ANSWER Management - specific decision making, high level of detail,
specific purpose
Financial - broad overview, less detailed, general purpose
,Difference between management and financial accounting in terms of reporting interval? -
CORRECT ANSWER Management - produced when required
Financial - determined by rules and regulations (annually or semi annually)
Difference between management and financial accounting in terms of timeliness? -
CORRECT ANSWER Management - future periods of time, past and future
Financial - prepared for past periods of time, mainly historical
Difference between management and financial accounting in terms of types of information? -
CORRECT ANSWER Management - quantitative and qualitative
Financial - quantifiable - verifiable
What are financial statements? - CORRECT ANSWER One of main mechanisms we
have in business to establish business confidence
Why is business confidence important? - CORRECT ANSWER Ensures businesses
operate efficiently, investment takes place, confidence
What are the 3 types of statements? - CORRECT ANSWER Income statement (SoPL)
- profit over a year
SoFP - financial photograph at a particular point in time, assets and liabilities, shows value of
a business
Cash flow - inflows and outflows of a business
What is an asset? - CORRECT ANSWER A resource available and controlled by a
business with the expectation to produce future economic benefits
Purpose of an asset? - CORRECT ANSWER To increase business value and benefit
operations
, Examples of assets? - CORRECT ANSWER Land, factories, raw materials, cash
balances, machinery
2 types of assets? - CORRECT ANSWER Current assets - acquired with the intention
of sale or conversion into cash within a year
Non-current assets - held for more than a year
What is a liability? - CORRECT ANSWER Present obligation of the business where
the settlement of which is expected ti result in an outflow of resources embodying economic
benefit
Examples of liabilities? - CORRECT ANSWER Bank borrowings, purchases of
inventory and utility bills (that haven't been paid for yet)
2 types of liabilities? - CORRECT ANSWER Current liability - settled within one year
after the balance sheet date
Non-current liability - settled after more than one year after the balance sheet date
What is equity? - CORRECT ANSWER The residual amount when an entity's
liabilities are deducted from an entity's assets
What is the accounting equation? - CORRECT ANSWER Equity = Assets - Liabilities
In terms of assets, what does control mean? - CORRECT ANSWER Physical
possession eg inventory
Legal title eg PPE (property, plant and equipment)
Legal right eg trade receivable
In terms of assets, what can't a business control? - CORRECT ANSWER Customers
(shop elsewhere), employees (may leave, hand in heir notice), market share (able to influence
it, but can't control it)
