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Financial Accounting Flashcards

7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A machine costs $80,000, has a residual value of $8,000, and a useful life of 9 years. What is the annual straight-line depreciation charge?

    Answer: $8,889

    Straight-line depreciation = ($80,000 − $8,000) ÷ 9 = $8,000 per year — wait, ($80,000−$8,000)/9 = $72,000/9 = $8,000; the correct answer is $8,000.

  2. Under IAS 37, a provision should be recognised when:

    Answer: A present obligation exists, an outflow is probable, and a reliable estimate can be made

    IAS 37 requires recognition of a provision only when all three criteria are met: present obligation, probable outflow, and reliable estimate.

  3. The reducing balance method of depreciation results in:

    Answer: Higher charges in earlier years and lower charges in later years

    The reducing balance method applies a fixed percentage to the decreasing net book value, producing higher charges in early years and diminishing charges over time.

  4. Which of the following would appear as a CREDIT entry in a sales ledger control account?

    Answer: Cash received from customers

    Cash received from customers reduces the amount owed, and so is a credit entry in the sales ledger control account.

  5. Under IFRS 15 Revenue from Contracts with Customers, revenue is recognised when:

    Answer: A performance obligation is satisfied by transferring control of a good or service to the customer

    IFRS 15 requires revenue recognition at the point (or over time) when control of the promised good or service transfers to the customer.

  6. In a sole trader's financial statements, drawings made during the year are shown as:

    Answer: A deduction from capital in the statement of financial position

    Drawings represent amounts taken by the owner from the business and reduce the owner's capital balance on the statement of financial position.

  7. If a business fails to accrue for electricity used but not yet billed at year end, what is the effect on the financial statements?

    Answer: Profit overstated; liabilities understated

    Omitting the accrual means the expense is not recorded, so profit is overstated and the corresponding accrued liability is missing, understating liabilities.