ACCA Applied Knowledge Exam — Questions and Answers

Question 1: Which of the following best describes 'professional scepticism' in the context of accountancy?

Avoiding difficult conversations with clients
Maintaining a questioning mind and critically assessing evidence (Correct answer)
Refusing to accept any information provided by management
Assuming all management representations are false

Correct answer: Maintaining a questioning mind and critically assessing evidence

Professional scepticism means having a questioning mind, being alert to conditions that may indicate misstatement, and critically evaluating audit evidence.

Question 2: The closing inventory of a business is overstated by £4,000. What effect does this have on the financial statements?

Profit is understated by £4,000 and assets are overstated by £4,000
Profit is overstated by £4,000 and assets are overstated by £4,000 (Correct answer)
Profit is overstated by £4,000 and liabilities are overstated by £4,000
Profit is understated by £4,000 and assets are understated by £4,000

Correct answer: Profit is overstated by £4,000 and assets are overstated by £4,000

Closing inventory appears in two places: as a current asset on the statement of financial position and as a deduction from cost of sales. If overstated, cost of sales is too low (increasing profit) and the asset is too high. Both profit and net assets are overstated by £4,000.

Question 3: A company has trade receivables of £60,000 and estimates that 5% will be irrecoverable. The existing allowance for receivables is £2,000. What adjustment is needed?

Decrease the allowance by £1,000
Increase the allowance by £3,000
Increase the allowance by £1,000 (Correct answer)
No adjustment is required

Correct answer: Increase the allowance by £1,000

Required allowance = £60,000 × 5% = £3,000. Existing allowance = £2,000. Increase needed = £3,000 − £2,000 = £1,000. The irrecoverable debts expense in the income statement increases by £1,000.

Question 4: What does the acronym PESTEL stand for in the context of environmental analysis?

Price, Earnings, Sales, Tax, Equity, Liability
Production, Efficiency, Strategy, Technology, Employment, Logistics
Planning, Execution, Sourcing, Training, Evaluation, Leadership
Political, Economic, Social, Technological, Environmental, Legal (Correct answer)

Correct answer: Political, Economic, Social, Technological, Environmental, Legal

PESTEL analysis examines the macro-environmental factors affecting an organisation: Political, Economic, Social, Technological, Environmental, and Legal. It is a widely used framework in strategic analysis.

Question 5: Which of the following adjustments is made at the year-end for an 'accrued expense'?

Debit accruals, Credit bank
Debit expenses, Credit accruals (liability) (Correct answer)
Debit prepayments, Credit expenses
Debit income, Credit accruals

Correct answer: Debit expenses, Credit accruals (liability)

An accrued expense is a cost incurred but not yet paid. The year-end adjustment is: Debit expenses (to recognise the cost) and Credit accruals (a current liability).

Question 6: What is meant by 'social responsibility' in a business context?

The obligation to produce accurate financial statements
The duty of a business to consider the interests of society and the environment alongside profit (Correct answer)
The responsibility of employees to follow workplace rules
A company's legal obligation to pay corporation tax

Correct answer: The duty of a business to consider the interests of society and the environment alongside profit

Corporate social responsibility (CSR) means a business acts ethically and considers its impact on society, the environment and stakeholders beyond just shareholders.

Question 7: Under IAS 16 Property, Plant and Equipment, which of the following costs should be included in the initial measurement of a purchased machine?

Advertising costs for products made by the machine
Staff training costs for operating the machine
Costs of relocating the machine to a different factory after initial installation
Import duties and non-refundable purchase taxes (Correct answer)

Correct answer: Import duties and non-refundable purchase taxes

IAS 16 requires that the cost of an item of PPE includes its purchase price plus import duties and non-refundable taxes, plus any directly attributable costs of bringing the asset to working condition. Training, relocation after use, and advertising are not directly attributable.

Question 8: An adverse variance indicates that:

The budget was exceeded solely due to uncontrollable external factors
Actual performance was better than standard
The standard was set at an unrealistically high level
Actual costs were higher or actual revenues were lower than standard (Correct answer)

Correct answer: Actual costs were higher or actual revenues were lower than standard

An adverse variance means actual costs exceeded standard costs or actual revenue fell below standard, both of which reduce profit.

Question 9: A non-current asset cost £50,000, has a useful life of 10 years, and a residual value of £5,000. Using the straight-line method, what is the annual depreciation charge?

£50,000
£45,000
£4,500 (Correct answer)
£5,000

Correct answer: £4,500

Straight-line depreciation = (Cost − Residual value) ÷ Useful life = (£50,000 − £5,000) ÷ 10 = £4,500 per year.

Question 10: In project management, what does a Gantt chart primarily display?

The organisational hierarchy of project team members
The schedule of project activities against time (Correct answer)
The risk register for the project
The financial budget allocated to each project phase

Correct answer: The schedule of project activities against time

A Gantt chart is a horizontal bar chart that displays project tasks or activities along a timeline. It shows start dates, end dates, durations, and dependencies, making it a key tool for scheduling and tracking progress.

Question 11: What is the purpose of a flexible budget?

To remain unchanged regardless of actual activity levels
To set individual employee performance targets
To adjust budgeted costs and revenues to reflect the actual level of activity achieved (Correct answer)
To forecast sales for the next five years

Correct answer: To adjust budgeted costs and revenues to reflect the actual level of activity achieved

A flexible budget adjusts the original budget figures to reflect the actual level of activity. This provides a more meaningful basis for comparing actual costs against what should have been spent at the actual activity level, improving cost control.

Question 12: Activity-based budgeting (ABB) focuses on:

Preparing a single fixed budget for the year
Budgeting the costs of activities and the cost drivers that cause those costs (Correct answer)
Setting budgets based solely on prior year figures plus inflation
Allocating all overhead costs based on direct labour hours

Correct answer: Budgeting the costs of activities and the cost drivers that cause those costs

ABB uses the principles of activity-based costing to budget costs. It identifies activities, determines cost drivers, and budgets the cost of each activity based on expected levels of the cost driver, providing a more accurate reflection of resource consumption.

Question 13: Sustainability reporting under frameworks such as GRI (Global Reporting Initiative) requires disclosure of:

Only financial performance metrics
Environmental, social, and governance (ESG) impacts alongside financial performance (Correct answer)
Trade secrets and proprietary information
Only the company's carbon emissions

Correct answer: Environmental, social, and governance (ESG) impacts alongside financial performance

Sustainability reporting frameworks like GRI require organisations to report on their environmental, social, and governance impacts — including carbon emissions, labour practices, human rights, anti-corruption, and community engagement — alongside traditional financial metrics.

Question 14: Under the UK Bribery Act 2010, which of the following would constitute an offence?

Making a payment to a foreign official to secure a government contract (Correct answer)
Offering a discount to a long-standing customer
Giving a promotional gift worth £5 at a trade fair
Providing hospitality at a sporting event that is proportionate and reasonable

Correct answer: Making a payment to a foreign official to secure a government contract

The UK Bribery Act 2010 makes it an offence to bribe a foreign public official to obtain or retain business. Proportionate hospitality and modest promotional gifts are generally not offences.

Question 15: Which budgeting approach requires managers to justify all expenditure from a zero base each period?

Zero-based budgeting (Correct answer)
Activity-based budgeting
Incremental budgeting
Rolling budgeting

Correct answer: Zero-based budgeting

Zero-based budgeting (ZBB) starts from scratch each period — every cost must be justified afresh rather than simply adding a percentage to last year's budget.

Question 16: According to the ACCA Code of Ethics and Conduct, which of the following is one of the five fundamental principles?

Professional competence and due care (Correct answer)
Market dominance
Cost minimisation
Profit maximisation

Correct answer: Professional competence and due care

The five fundamental principles in the ACCA Code are: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Profit maximisation, cost minimisation, and market dominance are not ethical principles.

Question 17: Which of the following is a limitation of zero-based budgeting?

It is too similar to incremental budgeting
It is very time-consuming and resource-intensive to implement (Correct answer)
It prevents managers from proposing new ideas
It automatically reduces overhead costs

Correct answer: It is very time-consuming and resource-intensive to implement

ZBB requires every activity to be justified from scratch each period, which is extremely time-consuming and costly, making it impractical to apply to all areas annually.

Question 18: A prepayment arises when:

A customer has paid in advance for goods not yet delivered
A payment has been made for a benefit not yet received (Correct answer)
An expense has been incurred but not yet paid
Revenue has been earned but not yet received

Correct answer: A payment has been made for a benefit not yet received

A prepayment is an amount paid in the current period for a benefit relating to a future period (e.g., paying next year's insurance in advance). It is a current asset.

Question 19: Zero-based budgeting (ZBB) requires managers to:

Set all budgets at zero and wait for actual costs to emerge
Justify every item of expenditure from a zero base for each new period (Correct answer)
Only budget for new projects and ignore ongoing activities
Simply adjust last year's budget by an inflation percentage

Correct answer: Justify every item of expenditure from a zero base for each new period

ZBB starts from scratch each budget period. Every activity and its associated costs must be justified as if it were new, rather than simply rolling forward last year's figures. This helps identify and eliminate unnecessary spending.

Question 20: In the context of budgeting, what is budgetary slack?

The time delay in preparing the budget
An underestimate of revenues or overestimate of costs deliberately built into a budget by managers (Correct answer)
The gap between the budget period start and end dates
The variance between budgeted and actual fixed costs

Correct answer: An underestimate of revenues or overestimate of costs deliberately built into a budget by managers

Budgetary slack occurs when managers deliberately underestimate revenues or overestimate costs to make targets easier to achieve. This is a behavioural problem that undermines the accuracy and usefulness of budgets.

Question 21: Which of the following is a feature of a 'functional' organisational structure?

Geographic regions each have full operational autonomy
Each product line has its own management team
Employees are grouped by product or service
Employees are grouped by specialist activity such as finance or HR (Correct answer)

Correct answer: Employees are grouped by specialist activity such as finance or HR

In a functional structure, employees with similar skills and tasks are grouped together into departments (e.g., finance, marketing, HR).

Question 22: A suspense account is used when:

The business has excess cash that needs to be invested
Trade receivables become irrecoverable
The business wants to hide transactions from auditors
The bookkeeper cannot determine the correct account for a transaction or the trial balance does not balance (Correct answer)

Correct answer: The bookkeeper cannot determine the correct account for a transaction or the trial balance does not balance

A suspense account is a temporary account used when the bookkeeper is unsure where to post a transaction or when the trial balance does not balance and the error cannot be found immediately. It is cleared once the correct treatment is determined.

Question 23: A company has revenue of £800,000, cost of sales of £480,000, distribution costs of £60,000, administrative expenses of £80,000, and finance costs of £20,000. What is the profit before tax?

£260,000
£320,000
£160,000 (Correct answer)
£180,000

Correct answer: £160,000

Gross profit = £800,000 − £480,000 = £320,000. Operating profit = £320,000 − £60,000 − £80,000 = £180,000. Profit before tax = £180,000 − £20,000 = £160,000.

Question 24: The sales day book is used to record:

Payments received from credit customers
All credit sales invoices issued during the period (Correct answer)
All cash sales made during the period
Returns from customers

Correct answer: All credit sales invoices issued during the period

The sales day book (or sales journal) is a book of prime entry used to record credit sales invoices before they are posted to the sales ledger and general ledger. Cash sales are recorded in the cash book, and returns go in the sales returns day book.

Question 25: What is the purpose of a trial balance?

To prepare the statement of financial position
To calculate the profit or loss for the period
To verify that total debits equal total credits in the ledger (Correct answer)
To record adjustments for accruals and prepayments

Correct answer: To verify that total debits equal total credits in the ledger

A trial balance lists all ledger account balances to check that total debits equal total credits. It is an arithmetic check on the double entry system, though it will not detect all types of errors (e.g., errors of commission, compensating errors).

Question 26: The fixed overhead capacity variance measures:

The difference between actual hours worked and budgeted hours, valued at the standard rate (Correct answer)
The difference between actual fixed overheads and absorbed fixed overheads
The difference between actual and standard fixed overhead rates per unit
The difference between standard hours for actual output and actual hours worked

Correct answer: The difference between actual hours worked and budgeted hours, valued at the standard rate

Capacity variance = (Actual hours worked – Budgeted hours) × Standard fixed overhead rate per hour, reflecting whether the workforce was active for more or fewer hours than budgeted.

Question 27: The 'comply or explain' approach to corporate governance means that:

Companies must comply with every provision of the governance code without exception
Companies can ignore the code entirely without consequences
Companies should comply with the code's provisions but may depart from them if they provide a clear explanation (Correct answer)
Only financial institutions are required to follow the code

Correct answer: Companies should comply with the code's provisions but may depart from them if they provide a clear explanation

Under the UK's 'comply or explain' approach, listed companies are expected to comply with the provisions of the UK Corporate Governance Code. However, if they choose not to comply with a specific provision, they must explain to shareholders why they have departed and what alternative arrangements they have in place.

Question 28: A product has a variable cost of £8 per unit and a selling price of £12 per unit. Fixed costs are £20,000 per month. What is the breakeven point in units?

4,000 units
5,000 units (Correct answer)
1,667 units
2,500 units

Correct answer: 5,000 units

Contribution per unit = £12 − £8 = £4. Breakeven point = Fixed costs ÷ Contribution per unit = £20,000 ÷ £4 = 5,000 units.

Question 29: Which of the following is the correct sequence for preparing functional budgets?

Cash budget → Sales budget → Production budget → Materials budget
Production budget → Sales budget → Materials budget → Cash budget
Materials budget → Production budget → Sales budget → Cash budget
Sales budget → Production budget → Materials and labour budgets → Cash budget (Correct answer)

Correct answer: Sales budget → Production budget → Materials and labour budgets → Cash budget

The budgeting process typically starts with the sales budget (assuming sales is the principal budget factor), then derives the production budget, followed by materials, labour, and overhead budgets. The cash budget is one of the last to be prepared as it draws on all other budgets.

Question 30: Which of the following is an example of an 'autocratic' leadership style?

The leader delegates most decisions to team members
The leader consults widely before making decisions
The leader facilitates group consensus on all matters
The leader makes decisions alone without consulting others (Correct answer)

Correct answer: The leader makes decisions alone without consulting others

Autocratic leaders make decisions unilaterally without consulting subordinates, retaining tight control. This can be efficient in crises but may reduce motivation.

Question 31: In a standard costing operating statement, what is the typical starting point?

Actual profit for the period
Standard profit for actual output
Budgeted profit (or contribution) (Correct answer)
Actual revenue for the period

Correct answer: Budgeted profit (or contribution)

An operating statement starts with budgeted profit, then adds or deducts variances to reconcile to actual profit, bridging planned to actual performance.

Question 32: Which of the following best describes a rolling (continuous) budget?

A budget that is continuously updated by adding a new period as the most recent period expires (Correct answer)
A budget that only covers capital expenditure
A budget that is set once and never revised
A budget prepared from scratch each year with no reference to previous budgets

Correct answer: A budget that is continuously updated by adding a new period as the most recent period expires

A rolling budget is continuously updated so that it always covers a fixed future period (e.g., 12 months). As one month or quarter passes, a new month or quarter is added at the end, keeping the budget current and forward-looking.

Question 33: Which of the following is NOT a component of equity on the statement of financial position?

Share capital
Long-term bank loan (Correct answer)
Share premium
Retained earnings

Correct answer: Long-term bank loan

Long-term bank loans are non-current liabilities, not equity. Equity comprises share capital, share premium, retained earnings and other reserves.

Question 34: A flexible budget is one that:

Is adjusted to reflect the actual level of activity achieved (Correct answer)
Is set without reference to past performance
Covers a rolling 12-month period
Can be altered by any manager at any time

Correct answer: Is adjusted to reflect the actual level of activity achieved

A flexible budget is restated for the actual activity level achieved, allowing a fair comparison with actual costs and meaningful variance analysis.

Question 35: Under IAS 10 Events After the Reporting Period, which of the following is an adjusting event?

The settlement after the reporting date of a court case that confirms an obligation existed at the reporting date (Correct answer)
A decline in market value of investments after the reporting date
A major fire destroys a warehouse after the reporting date
The announcement of a major acquisition after the reporting date

Correct answer: The settlement after the reporting date of a court case that confirms an obligation existed at the reporting date

An adjusting event provides evidence of conditions that existed at the reporting date. Settlement of a court case confirms a liability that existed at year end, so the financial statements should be adjusted. The other events are non-adjusting — they relate to conditions arising after the reporting date.

Question 36: A business pays £1,200 for insurance covering the next 12 months. At the end of the first month, what adjusting entry is needed?

Debit Prepayments £100, Credit Insurance Expense £100
Debit Cash £1,200, Credit Insurance Expense £1,200
Debit Insurance Expense £1,200, Credit Prepayments £1,200
Debit Insurance Expense £100, Credit Prepayments £100 (Correct answer)

Correct answer: Debit Insurance Expense £100, Credit Prepayments £100

The £1,200 covers 12 months, so £100 per month. After one month, £100 has been used (debit Insurance Expense) and the prepaid asset reduces by £100 (credit Prepayments). The remaining £1,100 stays as a prepayment.

Question 37: Which of the following describes a 'public sector' organisation?

A partnership of professionals such as solicitors
A company listed on a stock exchange
An organisation owned and funded by the government (Correct answer)
A charity registered with the Charity Commission

Correct answer: An organisation owned and funded by the government

Public sector organisations are owned and operated by the government, funded through taxation, and aim to provide public services rather than profit.

Question 38: A business owner introduces £15,000 of personal savings into the business. What is the double entry?

Debit Drawings £15,000, Credit Cash £15,000
Debit Cash £15,000, Credit Revenue £15,000
Debit Cash £15,000, Credit Capital £15,000 (Correct answer)
Debit Capital £15,000, Credit Cash £15,000

Correct answer: Debit Cash £15,000, Credit Capital £15,000

When the owner introduces capital, the business receives cash (debit Cash to increase the asset) and the owner's claim on the business increases (credit Capital to increase equity).

Question 39: What is the primary role of the audit committee?

To prepare the annual financial statements
To oversee the financial reporting process, internal controls, and the external audit (Correct answer)
To set the strategic direction of the company
To manage the day-to-day operations of the business

Correct answer: To oversee the financial reporting process, internal controls, and the external audit

The audit committee oversees the integrity of financial reporting, reviews internal controls and risk management systems, monitors the external audit process, and ensures the independence of auditors. It does not prepare accounts or manage operations.

Question 40: Which of the following is a characteristic of an entrepreneurial structure?

Heavy reliance on technostructure for standardisation
Extensive rules and procedures governing employee behaviour
Decision-making concentrated at the top with the owner-manager (Correct answer)
A wide span of control at middle management level

Correct answer: Decision-making concentrated at the top with the owner-manager

An entrepreneurial structure is typified by centralised decision-making by the owner-manager, with few formal rules, minimal hierarchy, and direct supervision as the primary coordinating mechanism.

Question 41: In absorption costing, if actual production exceeds budgeted production, what happens to fixed overheads?

They remain the same as budgeted
They are under-absorbed
They are excluded from the cost card
They are over-absorbed (Correct answer)

Correct answer: They are over-absorbed

When actual production exceeds budget, more overhead is absorbed (actual units × OAR) than was actually incurred. This results in over-absorption — a favourable situation that increases reported profit.

Question 42: Under IAS 2 Inventories, which of the following should be included in the cost of inventory?

Selling costs
Storage costs of finished goods awaiting sale
Abnormal waste of materials
Costs of conversion including production overheads based on normal capacity (Correct answer)

Correct answer: Costs of conversion including production overheads based on normal capacity

IAS 2 states that inventory cost includes costs of purchase, costs of conversion, and other costs incurred in bringing inventories to their present location and condition. Conversion costs include production overheads allocated based on normal capacity. Selling costs, post-production storage, and abnormal waste are excluded.

Question 43: Which of the following would cause a favourable direct material price variance?

Using less material than the standard quantity allows
Buying material at a lower price than the standard price (Correct answer)
Producing more units than budgeted during the period
Using a higher grade of material than specified in the standard

Correct answer: Buying material at a lower price than the standard price

A favourable material price variance arises when the actual price paid per unit of material is less than the standard price.

Question 44: What is the correct treatment of a government grant related to an asset under IAS 20?

Either deduct the grant from the asset's carrying amount or recognise it as deferred income (Correct answer)
Ignore the grant in the financial statements
Recognise the full grant as revenue immediately on receipt
Record the grant as a liability that is never released

Correct answer: Either deduct the grant from the asset's carrying amount or recognise it as deferred income

IAS 20 permits two methods for asset-related grants: (1) deduct the grant from the carrying amount of the asset, reducing depreciation; or (2) treat it as deferred income, releasing it to profit or loss systematically over the asset's useful life.

Question 45: Which of the following best describes the role of a mission statement in an organisation?

It provides a breakdown of departmental budgets
It details the specific financial targets for the next year
It lists the names of the board of directors
It sets out the organisation's purpose and reason for existence (Correct answer)

Correct answer: It sets out the organisation's purpose and reason for existence

A mission statement defines the fundamental purpose of an organisation — why it exists and what it seeks to achieve. It is distinct from financial targets, budgets, or governance structures.

Question 46: The direct labour rate variance is calculated as:

(Standard rate – Actual rate) × Actual hours worked (Correct answer)
(Standard hours – Actual hours) × Standard rate
(Standard hours – Actual hours) × Actual rate
(Standard rate – Actual rate) × Standard hours

Correct answer: (Standard rate – Actual rate) × Actual hours worked

Labour rate variance = (Standard rate – Actual rate) × Actual hours worked, measuring the cost impact of paying more or less per hour than standard.

Question 47: What is the primary purpose of corporate governance?

To eliminate all business risk
To maximise short-term profits at all costs
To provide a framework of rules and practices by which a board ensures accountability, fairness, and transparency (Correct answer)
To reduce the number of employees in an organisation

Correct answer: To provide a framework of rules and practices by which a board ensures accountability, fairness, and transparency

Corporate governance establishes a system of rules, practices, and processes by which a company is directed and controlled. Its purpose is to balance the interests of stakeholders and ensure accountability, fairness, and transparency.

Question 48: A company's budgeted sales are £500,000. 60% of customers pay in the month of sale and 40% pay in the following month. Opening trade receivables are £80,000. What are the budgeted cash receipts for the month?

£380,000 (Correct answer)
£300,000
£340,000
£500,000

Correct answer: £380,000

Cash receipts from current month sales = £500,000 × 60% = £300,000. Cash receipts from prior month (opening receivables) = £80,000. Total cash receipts = £300,000 + £80,000 = £380,000.

Question 49: If workers complete actual output in fewer hours than the standard allows, the direct labour efficiency variance will be:

Favourable, as fewer hours were used than the standard allows (Correct answer)
Nil, because time savings have no monetary effect
Adverse, as actual hours were less than budgeted hours
Adverse, because any deviation from standard is unfavourable

Correct answer: Favourable, as fewer hours were used than the standard allows

Labour efficiency variance = (Standard hours – Actual hours) × Standard rate; when actual hours are less than standard hours allowed, the variance is favourable.

Question 50: What is a key advantage of participative (bottom-up) budgeting?

It is faster to prepare than top-down budgets
It requires no coordination between departments
It eliminates the possibility of budgetary slack
It increases motivation and ownership among managers who help set the budget (Correct answer)

Correct answer: It increases motivation and ownership among managers who help set the budget

Participative budgeting involves lower-level managers in the budget-setting process. This increases their sense of ownership and commitment to achieving budget targets, improving motivation and often leading to more realistic budgets based on operational knowledge.

Question 51: Which of the following best describes 'big data' in a business context?

A database containing only customer contact details
Financial statements prepared under IFRS
Any data stored on a company's local server
Extremely large and complex data sets that require advanced analytical methods to extract value (Correct answer)

Correct answer: Extremely large and complex data sets that require advanced analytical methods to extract value

Big data refers to extremely large, complex data sets — often characterised by volume, velocity, variety, veracity, and value — that cannot be processed effectively using traditional methods and require advanced analytics.

Question 52: Which of the following errors would be revealed by a trial balance?

An error of commission where a debit is posted to the wrong personal account
A compensating error where two errors of equal and opposite amount cancel out
A single-sided entry where only the debit has been recorded (Correct answer)
An error of omission where a transaction is completely left out

Correct answer: A single-sided entry where only the debit has been recorded

A single-sided entry means only one side of the double entry has been recorded, causing total debits to not equal total credits. The trial balance will not balance, revealing the error. The other three errors maintain equal debits and credits.

Question 53: An error of principle occurs when:

A transaction is completely omitted from the books
The wrong amount is entered on both sides of the correct accounts
A transaction is recorded in an account of the wrong class or type (Correct answer)
A transaction is recorded in the wrong account of the correct type

Correct answer: A transaction is recorded in an account of the wrong class or type

An error of principle occurs when a transaction is posted to the wrong class of account — for example, recording capital expenditure (an asset) as revenue expenditure (an expense). The account type is wrong, not just the specific account within a type.

Question 54: Corporate governance primarily refers to:

The day-to-day operational management of a company
The preparation of financial statements
The marketing strategy of a business
The system by which companies are directed and controlled (Correct answer)

Correct answer: The system by which companies are directed and controlled

Corporate governance is the system of rules, practices and processes by which a company is directed and controlled, balancing the interests of stakeholders.

Question 55: A business pays rent of £2,000 for the month. What is the double entry?

Debit Capital £2,000, Credit Cash £2,000
Debit Cash £2,000, Credit Rent Expense £2,000
Debit Rent Expense £2,000, Credit Trade Payables £2,000
Debit Rent Expense £2,000, Credit Cash £2,000 (Correct answer)

Correct answer: Debit Rent Expense £2,000, Credit Cash £2,000

Paying rent is an expense. The expense account (Rent) is debited to reflect the cost incurred, and Cash is credited to reflect the outflow of money from the business.

Question 56: Which stakeholder mapping model plots stakeholders according to their level of interest and power?

Mendelow's matrix (Correct answer)
Ansoff's matrix
Porter's Five Forces
The BCG matrix

Correct answer: Mendelow's matrix

Mendelow's matrix (also called the power/interest matrix) classifies stakeholders into four quadrants based on their level of power and level of interest, helping organisations determine appropriate engagement strategies.

Question 57: A self-interest threat to an accountant's objectivity arises when:

A colleague pressures the accountant to change a report
The accountant has a financial interest in the outcome of an engagement (Correct answer)
The accountant becomes too familiar with a long-standing client
The accountant is threatened with dismissal for reporting fraud

Correct answer: The accountant has a financial interest in the outcome of an engagement

A self-interest threat occurs when the accountant has a financial or other personal interest that could inappropriately influence their judgement — for example, owning shares in an audit client or being financially dependent on a single client's fees.

Question 58: In the context of information systems, what is the primary purpose of a Transaction Processing System (TPS)?

To generate long-term forecasting models
To manage employee performance appraisals
To record and process the organisation's routine daily transactions (Correct answer)
To support senior management strategic decisions

Correct answer: To record and process the organisation's routine daily transactions

A TPS handles the routine, day-to-day transactions of an organisation such as sales orders, payroll processing, and inventory updates. It forms the operational backbone of information systems.

ACCA Applied Knowledge Exam

The ACCA Applied Knowledge level comprises three computer-based exams: Business and Technology (BT), Management Accounting (MA), and Financial Accounting (FA), awarded by the Association of Chartered Certified Accountants. The exams introduce core knowledge in business operations and management, costing and budgeting, double entry bookkeeping, and preparation of financial statements, alongside business ethics and governance.

Questions

120 min

Time Limit

50%

To Pass

Checking for saved progress...

Exam Rules

You can skip questions and return to them later
Flag questions for review before submitting
No feedback shown until you submit the entire exam
Unanswered questions count as wrong — answer everything
10 pretest questions are mixed in and don't affect your score
Timer auto-submits when time runs out
Your progress is auto-saved every 30 seconds