ACA Accounting (Certificate Level) — Questions and Answers
Question 1: Under FRS 102, which of the following is NOT a component of the statement of financial position?
- Assets
- Liabilities
- Revenue (Correct answer)
- Equity
Correct answer: Revenue
Revenue is reported in the statement of comprehensive income (profit or loss), not the statement of financial position. The statement of financial position comprises assets, liabilities, and equity as defined by FRS 102 Section 2.
Question 2: A UK company purchases inventory for £12,000 plus VAT at 20%. The company is VAT-registered. At what value should the inventory be initially recorded?
- £14,400
- £12,000 (Correct answer)
- £12,400
- £10,000
Correct answer: £12,000
For a VAT-registered business, input VAT is recoverable from HMRC and therefore is not included in the cost of inventory. The inventory is recorded at £12,000, with the £2,400 VAT recorded as a receivable from HMRC.
Question 3: Which of the following errors would cause the trial balance NOT to balance?
- Recording a purchase twice in both the debit and credit entries
- Omitting a transaction entirely from the books
- Posting £500 to the correct debit account but £50 to the correct credit account (Correct answer)
- Recording a sale in the wrong revenue account
Correct answer: Posting £500 to the correct debit account but £50 to the correct credit account
A transposition or amount error where the debit entry (£500) differs from the credit entry (£50) would cause the trial balance totals to disagree. The other errors maintain equal debits and credits despite being incorrect.
Question 4: Under the UK Companies Act 2006, what is the minimum number of directors required for a private limited company?
- Two
- One (Correct answer)
- Three
- None
Correct answer: One
Under section 154 of the Companies Act 2006, a private company must have at least one director, and at least one director must be a natural person (section 155).
Question 5: A business has opening capital of £50,000, makes a profit of £15,000, and the owner withdraws £8,000 in drawings. What is the closing capital?
- £57,000 (Correct answer)
- £65,000
- £42,000
- £73,000
Correct answer: £57,000
Closing capital = Opening capital + Profit − Drawings = £50,000 + £15,000 − £8,000 = £57,000. The accounting equation requires that drawings reduce the owner's equity.
Question 6: Which accounting concept requires a business to be treated as a separate entity from its owners for accounting purposes?
- Going concern
- Accruals
- Business entity (Correct answer)
- Materiality
Correct answer: Business entity
The business entity concept (also called the separate entity concept) states that the financial affairs of the business must be kept separate from those of its owner(s). This is fundamental to preparing meaningful financial statements.
ACA Accounting (Certificate Level)
Under FRS 102, which of the following is NOT a component of the statement of financial position?