ACCA Financial Accounting 2

Question 1

Under IAS 2 Inventories, which cost formula is NOT permitted for measuring inventory?

Accepted Answer

Last-In First-Out (LIFO)

Answer

IAS 2 prohibits the LIFO cost formula; only FIFO, weighted average, and specific identification are allowed.

Question 2

A company receives a government grant of $50,000 related to the purchase of equipment costing $200,000. Under the deferred income approach in IAS 20, how should the grant be recognized?

Accepted Answer

Released to income over the useful life of the asset

Answer

Under the deferred income approach, the grant is initially recorded as deferred income and released to profit or loss over the asset's useful life.

Question 3

Which of the following best describes 'accruals' in financial accounting?

Accepted Answer

Expenses incurred but not yet paid or recorded

Answer

Accruals are expenses that have been incurred in the current period but have not yet been paid or recorded by the period end.

Question 4

Under IAS 10 Events After the Reporting Period, which event is classified as an ADJUSTING event?

Accepted Answer

Discovery of a fraud that existed at the reporting date

Answer

A fraud that existed at the reporting date provides evidence of conditions that existed then, making it an adjusting event under IAS 10.

Question 5

When preparing a bank reconciliation, a lodgment recorded in the cash book but not yet shown on the bank statement is called:

Accepted Answer

An outstanding deposit (timing difference)

Answer

A deposit recorded by the company but not yet processed by the bank is an outstanding deposit, representing a timing difference in the reconciliation.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Financial Accounting 2