FFMA Test Questions with Verified Solutions Latest Update 2025-2026
What is accounting? - Answers the process of identifying, measuring, and communicating
information to permit informed judgements and decisions by users
What are the key differences between Financial Accounting and Management Accounting? -
Answers Users: Financial Accounting serves external users like investors, while Management
Accounting serves internal users like managers.
Detail: Financial provides broad overviews, Management provides detailed, specific reports.
Timelines: Financial is historical; Management can be forward-looking.
Rules: Financial is regulated; Management is flexible.
What are the three main financial statements? - Answers Income Statement: Shows profits over
a period.
Statement of Financial Position: Snapshots assets and liabilities.
Cash Flow Statement: Details cash inflows and outflows.
What is the accounting equation? - Answers Assets - Liabilities = Equity.
Assets and their classifications. - Answers Current Assets: Expected to convert to cash within a
year.
Non-current Assets: Held for more than a year.
Matching (Accruals) Concept in accounting - Answers Transactions are recorded in the year
they occur, not when bills are paid, ensuring expenses align with the revenues they generate.
Asset - Answers resource controlled by the business expected to produce future benefits.
Types of Assets - Answers 1. Current: converted to cash within a year
2. Non-current: held for more than a year
three measurement points in the Income Statement - Answers Gross profit
Operating profit
Profit for the period (Net profit).
How is profit calculated? - Answers Total revenue - Total expenses.
Prudence Concept - Answers It ensures accounts are not over-optimistic by preparing for worst-
case scenarios.
, Accruals and Prepayments. - Answers Accruals: Expenses incurred but not yet paid.
Prepayments: Payments made in advance for future benefits.
What is the principle of double-entry bookkeeping? - Answers Every transaction has at least two
entries: one debit and one credit.
example of a double-entry transaction for a phone bill paid in cash. - Answers Debit: Expense
(phone bill).
Credit: Asset (cash).
Elements of an income statement - Answers - Revenue
- Cost of sales
- Gross profit
- Distribution Costs
- Admin Expenses
-Operating profit
- Finance costs
- Tax Expense
- Profit after tax
Money Measurement Concept - Answers it says everything needs to have an objective money
value before it can be put into a set of accounts
Accruals (Matching) Concept - Answers it says we need to put every expense in the year in
which it occurred
Accruals Concept - Answers - moneys that's owed at the end of the year that aren't yet paid
- figure must be included in current financial year
- it is added in as an extra expense
- Money is taken out of current year's accounts and put in into next year's accounts
Elements of Double-Entry Bookeeping - Answers - if we increase something in our debit column,
we must increase it in the credit column or decrease something else in the debit column and
vice versa
What is accounting? - Answers the process of identifying, measuring, and communicating
information to permit informed judgements and decisions by users
What are the key differences between Financial Accounting and Management Accounting? -
Answers Users: Financial Accounting serves external users like investors, while Management
Accounting serves internal users like managers.
Detail: Financial provides broad overviews, Management provides detailed, specific reports.
Timelines: Financial is historical; Management can be forward-looking.
Rules: Financial is regulated; Management is flexible.
What are the three main financial statements? - Answers Income Statement: Shows profits over
a period.
Statement of Financial Position: Snapshots assets and liabilities.
Cash Flow Statement: Details cash inflows and outflows.
What is the accounting equation? - Answers Assets - Liabilities = Equity.
Assets and their classifications. - Answers Current Assets: Expected to convert to cash within a
year.
Non-current Assets: Held for more than a year.
Matching (Accruals) Concept in accounting - Answers Transactions are recorded in the year
they occur, not when bills are paid, ensuring expenses align with the revenues they generate.
Asset - Answers resource controlled by the business expected to produce future benefits.
Types of Assets - Answers 1. Current: converted to cash within a year
2. Non-current: held for more than a year
three measurement points in the Income Statement - Answers Gross profit
Operating profit
Profit for the period (Net profit).
How is profit calculated? - Answers Total revenue - Total expenses.
Prudence Concept - Answers It ensures accounts are not over-optimistic by preparing for worst-
case scenarios.
, Accruals and Prepayments. - Answers Accruals: Expenses incurred but not yet paid.
Prepayments: Payments made in advance for future benefits.
What is the principle of double-entry bookkeeping? - Answers Every transaction has at least two
entries: one debit and one credit.
example of a double-entry transaction for a phone bill paid in cash. - Answers Debit: Expense
(phone bill).
Credit: Asset (cash).
Elements of an income statement - Answers - Revenue
- Cost of sales
- Gross profit
- Distribution Costs
- Admin Expenses
-Operating profit
- Finance costs
- Tax Expense
- Profit after tax
Money Measurement Concept - Answers it says everything needs to have an objective money
value before it can be put into a set of accounts
Accruals (Matching) Concept - Answers it says we need to put every expense in the year in
which it occurred
Accruals Concept - Answers - moneys that's owed at the end of the year that aren't yet paid
- figure must be included in current financial year
- it is added in as an extra expense
- Money is taken out of current year's accounts and put in into next year's accounts
Elements of Double-Entry Bookeeping - Answers - if we increase something in our debit column,
we must increase it in the credit column or decrease something else in the debit column and
vice versa
