Accounting Key Principles and Concepts Quiz
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Questions and Answers

What is the focus of learning outcome A1 from the FA2 syllabus?

  • The calculation-based questions in accounting
  • The narrative style questions in accounting
  • The key principles, concepts, and characteristics of accounting (correct)
  • The practical application of accounting principles

    • Why might some candidates find learning outcome A1 difficult?

  • It requires practical experience in accounting
  • It involves complex calculations
  • It is more theoretical than other parts of the syllabus (correct)
  • It focuses on narrative style questions

    • What distinguishes the principles and concepts of accounting from the qualitative accounting characteristics?

  • They are examined differently in the FA2 exam
  • They are interchangeable terms in accounting
  • The study guide provides clear differentiation between them (correct)
  • One is theoretical while the other is practical

    • Where can the list of principles and concepts of accounting be found for the FA2 exam?

    <p>Learning outcome A1(a) in the study guide</p> Signup and view all the answers

    Which part of the syllabus tends to be examined in narrative style questions?

    <p>Learning outcome A1</p> Signup and view all the answers

    What does learning outcome A1 focus on?

    <p>Principles and concepts of accounting</p> Signup and view all the answers

    What is the purpose of preparing financial statements using consistent methods across each year?

    <p>To facilitate comparison of a business's performance over time.</p> Signup and view all the answers

    How would you define the prudence principle in accounting?

    <p>The exercise of caution when making judgments under conditions of uncertainty.</p> Signup and view all the answers

    Why is there often uncertainty about the eventual outcome of certain events and transactions when preparing financial statements?

    <p>Because estimates need to be made.</p> Signup and view all the answers

    What is the biggest risk associated with uncertainty in financial statement preparation?

    <p>Overstating assets and income.</p> Signup and view all the answers

    What does the duality principle ('dual aspect') refer to in accounting?

    <p>It requires the use of 'double entry' accounting.</p> Signup and view all the answers

    What does 'double entry' accounting involve?

    <p>Making both a debit entry and a credit entry for each transaction.</p> Signup and view all the answers

    What is the basis of the accounting equation?

    <p>The total value of debit entries equals the total value of credit entries.</p> Signup and view all the answers

    What is the significance of 'dual aspect' in a transaction?

    <p>'Double entry' ensures that each party in a transaction is affected in two ways.</p> Signup and view all the answers

    Why do we use 'double entry' accounting for transactions?

    <p>'Double entry' accounting maintains accuracy and completeness in recording transactions.</p> Signup and view all the answers

    What is the purpose of exercising prudence in financial statements?

    <p>'Prudence' principle aims to avoid overstatement or understatement of assets, income, liabilities, or expenses.</p> Signup and view all the answers

    How can 'dual aspect' be explained in the context of asset increase?

    <p>Asset increase debit</p> Signup and view all the answers

    What does the term 'going concern' mean in financial reporting?

    <p>Financial statements are prepared on the assumption that the entity will continue to operate for the foreseeable future.</p> Signup and view all the answers

    What is the main idea behind accrual accounting?

    <p>Transactions are recorded when the sale/purchase takes place, regardless of when cash changes hands.</p> Signup and view all the answers

    What is the key difference between materiality and complete accuracy in financial reporting?

    <p>Materiality focuses on providing information for decision making, while complete accuracy focuses on exact values in financial reports.</p> Signup and view all the answers

    What is the purpose of consistency in financial reporting?

    <p>To enhance financial reporting by making comparisons more meaningful</p> Signup and view all the answers

    According to the Conceptual Framework, what is assumed about the entity's operations when preparing financial statements?

    <p>The entity has no intention or need to enter liquidation or cease trading.</p> Signup and view all the answers

    In accrual accounting, when is a transaction recorded?

    <p>When the sale/purchase takes place, regardless of when cash changes hands</p> Signup and view all the answers

    Why is materiality important in financial reporting?

    <p>To provide information that influences decisions made based on financial reports</p> Signup and view all the answers

    What is the primary role of consistency in financial reporting?

    <p>To enhance financial reporting by making comparisons more meaningful</p> Signup and view all the answers

    What does the going concern principle assume about the entity's future operations?

    <p>The entity has no intention or need to enter liquidation or cease trading.</p> Signup and view all the answers

    Why is materiality different from complete accuracy in financial reporting?

    <p>Materiality focuses on providing information for decision making, while complete accuracy focuses on exact values in financial reports.</p> Signup and view all the answers

    What does consistency aim to achieve in financial reporting?

    <p>To enhance financial reporting by making comparisons more meaningful</p> Signup and view all the answers

    When preparing financial statements, what does the going concern principle assume about the entity's operations?

    <p>The entity has no intention or need to enter liquidation or cease trading.</p> Signup and view all the answers

    In accrual accounting, when is a transaction recorded?

    <p>When the sale/purchase takes place, regardless of when cash changes hands</p> Signup and view all the answers

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