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
Which of the following would be found in a statement of cash flows under 'operating activities' using the indirect method?
Answer: Depreciation added back to profit
Under the indirect method, operating cash flows start with profit and adjust for non-cash items. Depreciation is a non-cash charge, so it is added back to profit.
Which concept requires that assets should not be overstated, and liabilities should not be understated?
Answer: Prudence
The prudence concept (also known as conservatism) requires caution: recognise losses as soon as they are probable, but only recognise gains when they are virtually certain.
The allowance for doubtful debts is:
Answer: An estimate of trade receivables that may not be collected
The allowance for doubtful debts is an estimate (provision) against receivables that management believes may not be collectable, reducing receivables to NRV.
Which of the following is an intangible non-current asset?
Answer: Goodwill
Goodwill is an intangible non-current asset arising from business combinations. Intangible assets lack physical substance but have future economic benefits.
The reducing balance method of depreciation results in:
Answer: Higher depreciation in early years and lower in later years
The reducing balance method applies a fixed percentage to the net book value each year. Since NBV falls, the depreciation charge is higher early on and declines over time.
Which of the following is a source document in the purchase cycle?
Answer: Supplier invoice
A supplier invoice is the primary source document evidencing a purchase transaction, triggering the accounting entries and forming the basis for payment.