Financial Accounting Flashcards
6 cards from real ACCA AK practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Accounting flashcards as text
Under IAS 2, inventories should be measured at:
Answer: The lower of cost and net realisable value
IAS 2 requires inventories to be measured at the lower of cost and net realisable value (NRV). If NRV falls below cost, a write-down is recognised.
Which of the following is the correct accounting entry for bad debt written off?
Answer: Debit bad debt expense, Credit receivables
When a specific debt is written off: Debit bad debt expense (or allowance for doubtful debts) and Credit trade receivables, removing the irrecoverable amount from the books.
The accounting equation is:
Answer: Assets = Liabilities + Equity
The fundamental accounting equation is: Assets = Liabilities + Equity. This must always balance, reflecting double-entry bookkeeping.
Gross profit is calculated as:
Answer: Revenue − Cost of sales
Gross profit = Revenue − Cost of sales. It represents profit before deducting operating expenses such as administration, distribution and finance costs.
Which of the following is NOT a component of equity on the statement of financial position?
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.
A prepayment arises when:
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.