ACCA AK Financial Accounting 1 — Questions and Answers
Question 1: The double-entry bookkeeping principle states that:
- Every transaction is recorded once in the ledger
- Every debit entry must have a corresponding equal credit entry (Correct answer)
- All transactions are recorded in the cash book
- Revenues are always credited and expenses debited
Correct answer: Every debit entry must have a corresponding equal credit entry
Double-entry bookkeeping requires every transaction to be recorded as both a debit and a credit of equal amount, maintaining the accounting equation: Assets = Liabilities + Equity.
Question 2: Which of the following accounts would normally have a credit balance?
- Trade receivables
- Motor vehicles
- Bank overdraft (Correct answer)
- Prepaid expenses
Correct answer: Bank overdraft
A bank overdraft is a liability — the business owes money to the bank. Liabilities carry credit balances; assets normally carry debit balances.
Question 3: A trial balance is used to:
- Prove that no errors have been made in the ledger
- Check that total debits equal total credits in the ledger (Correct answer)
- Prepare the cash flow statement
- Calculate the profit for the period
Correct answer: Check that total debits equal total credits in the ledger
A trial balance lists all ledger account balances and confirms that the total of debit balances equals the total of credit balances, verifying mathematical accuracy.
Question 4: Which accounting concept states that similar items should be treated consistently from one period to the next?
- Accruals concept
- Going concern
- Consistency concept (Correct answer)
- Prudence concept
Correct answer: Consistency concept
The consistency concept requires that accounting methods and policies are applied consistently from period to period, enabling meaningful comparison of financial statements.
Question 5: Depreciation is an application of which accounting concept?
- Going concern
- Matching (accruals) concept (Correct answer)
- Prudence
- Consistency
Correct answer: Matching (accruals) concept
Depreciation applies the matching (accruals) concept by allocating the cost of a non-current asset over the periods that benefit from its use, matching cost to related revenue.
Question 6: Which of the following is a capital expenditure?
- Repainting the office walls
- Replacing a broken window
- Purchasing a new delivery vehicle (Correct answer)
- Paying the annual insurance premium
Correct answer: Purchasing a new delivery vehicle
Capital expenditure creates or enhances a non-current asset (the delivery vehicle) which provides economic benefit over more than one period. The others are revenue expenditure.
ACCA AK Financial Accounting 1
The double-entry bookkeeping principle states that: