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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.

Read the first 7 Financial Accounting flashcards as text

  1. A company revalues a property upward by $120,000. The deferred tax rate is 25%. Where is the net revaluation gain reported?

    Answer: Other comprehensive income — $90,000

    Revaluation gains are recognised in other comprehensive income net of the related deferred tax: $120,000 × (1 − 0.25) = $90,000.

  2. Under IFRS for SMEs, how is goodwill arising on a business combination treated if its useful life cannot be estimated reliably?

    Answer: Goodwill is amortised over 10 years

    Under IFRS for SMEs, when the useful life of goodwill cannot be estimated reliably, it is amortised over the default maximum period of 10 years.

  3. Which of the following correctly describes a finance lease under IFRS 16 from the lessee's perspective?

    Answer: A right-of-use asset and lease liability are recognised at commencement

    IFRS 16 requires lessees to recognise a right-of-use asset and corresponding lease liability at the commencement date for virtually all leases.

  4. When preparing consolidated financial statements, an intragroup sale of inventory at a profit means the group must:

    Answer: Eliminate the unrealised profit from consolidated inventory and retained earnings

    Unrealised intragroup profits must be eliminated on consolidation so that inventory is carried at the group's original cost until sold to a third party.

  5. A company issues 1,000 shares at $5 nominal value for $8 each. Which journal entry correctly records the share premium?

    Answer: Dr Bank $8,000; Cr Share Capital $5,000; Cr Share Premium $3,000

    The nominal value ($5 × 1,000 = $5,000) goes to share capital and the excess ($3 × 1,000 = $3,000) is credited to the share premium account.

  6. The current ratio of a business is 2.5:1 and working capital is $90,000. What are the current liabilities?

    Answer: $60,000

    Working capital = Current assets − Current liabilities = $90,000; with ratio 2.5, Current assets = 2.5 × CL, so 2.5CL − CL = $90,000, giving CL = $60,000.

  7. Under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, a change in accounting policy is applied:

    Answer: Retrospectively, restating comparative periods as if the new policy had always applied

    IAS 8 requires retrospective application of a change in accounting policy so that all periods presented reflect the new policy, ensuring comparability.