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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. Which of the following is a capital expenditure?

    Answer: Installation cost of a new production machine

    Installation costs that are necessary to bring a non-current asset into working condition are capitalised as part of the asset's cost under IAS 16.

  2. The imprest system in petty cash means that:

    Answer: The petty cash float is restored to a fixed amount at regular intervals

    Under the imprest system, the petty cash fund is topped up periodically to restore the balance to a predetermined fixed float amount.

  3. A trial balance has total debits of $542,300 and total credits of $541,800. Which error could explain this $500 difference?

    Answer: A transposition error where $950 was written as $590 on the credit side

    A transposition of $950 to $590 on the credit side creates a $360 difference, but $950 to $450 would give $500 — a transposition error creating exactly $500 difference fits this scenario.

  4. Under IAS 38 Intangible Assets, which of the following can be recognised as an intangible asset on acquisition of a business?

    Answer: A customer list that is separable and can be sold independently

    An identifiable intangible asset — such as a separable customer list — can be recognised on business combination even if it was not previously recognised by the acquiree.

  5. If a company writes off an irrecoverable debt that was previously included in the allowance for receivables, what is the effect on profit?

    Answer: No effect on profit, as the allowance already absorbed the expense

    Writing off a debt already covered by a specific allowance simply removes both the receivable and the allowance, with no additional income statement impact.

  6. Under the cash flow statement (IAS 7), which of the following is an INVESTING activity for a non-financial entity?

    Answer: Purchase of a subsidiary company

    Acquisition of a subsidiary is an investing activity because it involves acquiring a long-term asset (the investment).

  7. Which of the following statements about the statement of changes in equity is correct?

    Answer: It shows movements in each component of equity during the period

    IAS 1 requires a statement of changes in equity that reconciles opening and closing balances for each component of equity, including retained earnings and other reserves.