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B Accounting principles, concepts and qualitative characteristics
4 ACCA Financial Accounting questions with answers and explanations.
Printable worksheet with answer key
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The going concern assumption means that the financial statements are prepared on the basis that the entity:
- 1 Is making a profit in every period
- 2 Will be sold within a year
- 3 Will continue to operate for the foreseeable future
- 4 Has no debts
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Correct answer: Will continue to operate for the foreseeable future
Going concern assumes there is no intention or need to liquidate or stop trading.
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Which of these is a fundamental qualitative characteristic of useful financial information?
- 1 Understandability
- 2 Comparability
- 3 Relevance
- 4 Timeliness
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Correct answer: Relevance
Relevance and faithful representation are fundamental. Comparability, verifiability, timeliness and understandability are enhancing.
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A business with annual revenue of $80 million buys a stapler for $12 and records it as an expense, not as a non-current asset. Which concept does this show?
- 1 Prudence
- 2 Going concern
- 3 Duality
- 4 Materiality
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Correct answer: Materiality
The amount is too small to influence a user's decision, so it is treated as an expense.
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Recording a transaction according to its economic reality, and not just its legal form, is an example of:
- 1 Offsetting
- 2 Historical cost
- 3 Substance over form
- 4 Consistency
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Correct answer: Substance over form
Substance over form means showing what really happened.