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FR D Preparing single entity financial statements

Written by Fahad Mirza (ACCA)

6 ACCA Financial Reporting questions with answers and explanations.

Printable worksheet with answer key

All questions with answers
  1. In the indirect method, what is added back to profit before tax when calculating operating cash flow?

    • 1 Purchases of assets
    • 2 Depreciation
    • 3 Dividends paid
    • 4 Interest received
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    Correct answer: Depreciation

    Depreciation is a non-cash charge.

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  2. In a statement of cash flows, dividends paid are classified as:

    • 1 Operating activities
    • 2 Not included
    • 3 Investing activities
    • 4 Financing activities
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    Correct answer: Financing activities

    Dividends are a return to the providers of finance.

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  3. An increase in inventories during the year has what effect on operating cash flow?

    • 1 It is shown as investing
    • 2 It reduces operating cash flow
    • 3 It has no effect
    • 4 It increases operating cash flow
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    Correct answer: It reduces operating cash flow

    More cash is tied up in inventories.

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  4. Which statement reconciles opening and closing equity?

    • 1 The statement of cash flows
    • 2 The statement of changes in equity
    • 3 The notes
    • 4 The statement of financial position
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    Correct answer: The statement of changes in equity

    It shows profit, other comprehensive income, share issues and dividends.

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  5. A statement of financial position does not balance. What is the best first step?

    • 1 Look for items posted to only one side
    • 2 Adjust equity
    • 3 Delete the largest balance
    • 4 Change the closing inventory
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    Correct answer: Look for items posted to only one side

    One-sided entries are a common cause.

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  6. Which item appears in investing activities?

    • 1 Payment of dividends
    • 2 Purchase of property, plant and equipment
    • 3 Issue of shares
    • 4 Repayment of a loan
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    Correct answer: Purchase of property, plant and equipment

    Investing activities relate to non-current assets.

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