Free ACCA Applied Knowledge Questions and Answers — Questions and Answers
Question 1: In a business organization, what is the primary role of management?
- Setting accounting policies
- Formulating business strategies (Correct answer)
- Ensuring compliance with tax laws
- Recording financial transactions
Correct answer: Formulating business strategies
The primary role of management is to provide direction and leadership, which includes formulating comprehensive business strategies. These strategies guide decision-making, resource allocation, and overall organizational performance to achieve the company's long-term objectives and ensure sustainable growth.
Question 2: Which financial statement shows a company’s financial position at a specific point in time?
- Income Statement
- Statement of Cash Flows
- Balance Sheet (Correct answer)
- Statement of Changes in Equity
Correct answer: Balance Sheet
The Balance Sheet provides a snapshot of a company's financial position at a specific point in time. It details the company's assets (what it owns), liabilities (what it owes), and equity (the owners' stake), adhering to the fundamental accounting equation: Assets = Liabilities + Equity.
Question 3: Which costing method allocates overheads based on activities?
- Absorption costing
- Activity-based costing (Correct answer)
- Marginal costing
- Process costing
Correct answer: Activity-based costing
Activity-based costing (ABC) is a method that identifies specific activities performed in an organization and assigns costs to products or services based on the actual consumption of resources by those activities. This approach provides a more accurate allocation of overheads compared to traditional methods, leading to better cost control and pricing decisions.
Question 4: What is the purpose of budgeting in management accounting?
- To prepare financial statements
- To forecast future financial performance (Correct answer)
- To manage daily transactions
- To record historical costs
Correct answer: To forecast future financial performance
Budgeting in management accounting is a crucial planning and control tool used to forecast future financial performance. It involves creating a detailed financial plan that projects revenues, expenses, and capital expenditures, enabling organizations to set financial targets and allocate resources effectively.
Question 5: Which of the following is an example of a current liability?
- Long-term loan
- Mortgage
- Trade payables (Correct answer)
- Equipment lease
Correct answer: Trade payables
Trade payables are current liabilities representing amounts owed by a company to its suppliers for goods or services purchased on credit. They are classified as current because they are typically due for payment within one year or the operating cycle of the business.
Free ACCA Applied Knowledge Questions and Answers
In a business organization, what is the primary role of management?