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Free Questions › ACCA › Financial Accounting
Free ACCA Financial Accounting Practice Questions & Answers
400 exam-style Financial Accounting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 181
Asset (carrying amount £40,000) revalued upward to £55,000. Double-entry for the revaluation?
Select an option first.
Correct answer: B — Debit PPE £15,000; Credit Revaluation Surplus (OCI) £15,000
Explanation: B is correct. Upward revaluation: Debit PPE £15,000 (increase asset); Credit Revaluation Surplus £15,000 (OCI — not P&L for first upward revaluation). A reverses the entry. C takes gain to P&L incorrectly. D is wrong on both sides.
Question 182
What is 'impairment' of an asset?
Select an option first.
Correct answer: B — An unexpected fall in an asset's recoverable amount below its carrying amount — the asset is written down with the loss recognised in profit or loss
Explanation: B is correct. Impairment (IAS 36): carrying amount > recoverable amount (higher of value in use and FVLCTS) → write down to recoverable amount → impairment loss in P&L. A is depreciation. C is the annual depreciation charge. D is not a recognised accounting concept.
Question 183
Journal entry for a provision of £12,000 for a warranty claim?
Select an option first.
Correct answer: B — Debit Warranty Expense £12,000; Credit Warranty Provision (Liability) £12,000
Explanation: B is correct. Creating a provision: Debit expense (P&L) and Credit provision (liability on SFP). No cash moves. A uses Bank incorrectly. C debits equity directly. D reverses cash and provision.
Question 184
Journal entry for recording depreciation of £3,000 for the year?
Select an option first.
Correct answer: B — Debit Depreciation Expense £3,000; Credit Accumulated Depreciation £3,000
Explanation: B is correct. Depreciation journal: Debit Depreciation Expense (P&L) and Credit Accumulated Depreciation (contra-asset on SFP, reducing NBV). A debits the wrong account and credits bank. C increases the asset. D is the reverse.
Question 185
Double-entry for purchasing goods on credit?
Select an option first.
Correct answer: B — Debit Purchases; Credit Trade Payables
Explanation: B is correct. Buying goods on credit: Debit Purchases (cost increases) and Credit Trade Payables (liability increases). A and D are cash purchases. C reverses the entry.
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Question 186
Double-entry when paying a trade payable?
Select an option first.
Correct answer: B — Debit Trade Payables; Credit Bank
Explanation: B is correct. Paying a creditor: Trade Payables (liability) decreases — debit; Bank (asset) decreases — credit. A reverses the entry. C debits wrong account. D credits purchases.
Question 187
Double-entry for collecting cash from a trade receivable?
Select an option first.
Correct answer: C — Debit Bank; Credit Trade Receivables
Explanation: C is correct. Collecting from a customer: Bank (asset) increases — debit; Trade Receivables (asset) decreases — credit. A records a new cash sale. B reverses the entry. D reduces revenue.
Question 188
An error of principle occurs when:
Select an option first.
Correct answer: B — A transaction is recorded correctly in amount and on the correct side, but to an incorrect type of account (e.g., capital expenditure recorded as revenue expenditure)
Explanation: B is correct. Error of principle: correct amount, correct arithmetic, but fundamentally wrong account type. A is error of original entry. C is error of omission. D is incomplete entry.
Question 189
What is a compensating error?
Select an option first.
Correct answer: B — Two or more errors that cancel each other out — their combined effect is zero so the trial balance still balances despite errors existing
Explanation: B is correct. Compensating errors cancel out — e.g., overcast of £200 on one debit AND undercast of £200 on another debit. Trial balance balances but both accounts are wrong. A is an audit concept. C and D are different.
Question 190
What is the purchase ledger control account (PLCA)?
Select an option first.
Correct answer: B — A total account summarising all credit supplier transactions — its balance equals the total of all individual supplier balances (total trade payables)
Explanation: B is correct. PLCA aggregates: credit purchases (Cr), payments (Dr), discounts received (Dr), purchase returns (Dr). Closing balance = total trade payables. Comparing to individual balances is a key control check. A, C and D are partial or wrong.
Question 191
£10,000 asset, 10-year life, nil residual value, straight-line, bought 1 July, year end 31 December. Depreciation for the period?
Select an option first.
Correct answer: B — £500
Explanation: B is correct. Full-year depreciation = £10,000 ÷ 10 = £1,000. Only 6 months elapsed (1 July to 31 December) → 6/12 × £1,000 = £500. A is the full year charge. C doubles it. D is the full cost.
Question 192
What is a contra entry in a bank reconciliation?
Select an option first.
Correct answer: B — An item where the same amount appears as both a receipt and a payment — e.g., balance transferred between two accounts at the same bank
Explanation: B is correct. Contra entry: same amount both debited and credited — e.g., transferring funds between two accounts at the same bank. A is error correction. C is a journal reversal. D is a bank charge.
Question 193
What is a petty cash imprest system?
Select an option first.
Correct answer: B — A fixed float maintained — at period end, expenditure is reimbursed so the float is restored to its original fixed amount
Explanation: B is correct. Imprest: fixed float (e.g., £200). After spending (say) £145, a cheque for £145 restores the float. A replenishes ad hoc (not imprest). C and D are other controls.
Question 194
Research expenditure must be:
Select an option first.
Correct answer: B — Expensed immediately in the period incurred — future benefits from research cannot be reliably measured
Explanation: B is correct. IAS 38: research costs MUST be expensed — future economic benefits cannot be reliably demonstrated at the research stage. Only development costs meeting all six criteria can be capitalised. A and C allow inappropriate capitalisation. D incorrectly defers.
Question 195
What is an extended trial balance (ETB)?
Select an option first.
Correct answer: B — A working paper extending the trial balance with adjustment columns (accruals, prepayments, depreciation, provisions), producing adjusted figures split into P&L and SFP columns
Explanation: B is correct. The ETB is a key preparation tool: unadjusted trial balance + adjustments + adjusted totals → income statement column and SFP column. Ensures all adjustments captured systematically. A is vague. C and D are incorrect.
Question 196
What is the difference between an irrecoverable debt and an allowance for doubtful debts?
Select an option first.
Correct answer: B — An irrecoverable debt is a specific confirmed loss (written off immediately); an allowance is a general estimate applied to receivables that may not all be collected
Explanation: B is correct. Irrecoverable: specific customer, confirmed loss. Allowance: general estimate, uncertainty remains. Both are P&L charges but different certainty levels. A, C and D are wrong.
Question 197
What happens to accumulated depreciation when a non-current asset is disposed of?
Select an option first.
Correct answer: B — Accumulated depreciation on the disposed asset is cleared (debited) to the disposal account — removing it from the books
Explanation: B is correct. Disposal: (1) Dr Disposal, Cr Asset Cost — transfer cost. (2) Dr Accumulated Dep, Cr Disposal — clear accumulated dep. (3) Dr Cash, Cr Disposal — proceeds. Remaining balance = profit/loss. A leaves ghost amounts. C and D are wrong.
Question 198
Trade receivables £80,000, estimate 4% uncollectable. What allowance is required?
Select an option first.
Correct answer: A — £3,200
Explanation: A is correct. Allowance = 4% × £80,000 = £3,200. Net receivables = £76,800 (on SFP). B is the net receivables (not the allowance). C is total receivables. D doubles the calculation.
Question 199
What is an aged receivables analysis and why is it useful?
Select an option first.
Correct answer: B — A report categorising trade receivable balances by how long they have been outstanding — used to identify slow-paying customers and set appropriate bad debt allowances
Explanation: B is correct. Aged analysis groups invoices by age: current, 30-60, 60-90, 90+ days. Older balances are more likely to be irrecoverable. Informs credit control actions and bad debt allowance calculations. A, C and D are other reports.
Question 200
What is a sales return (return inward) and how is it recorded?
Select an option first.
Correct answer: B — Goods returned to the business by a customer — Debit Sales Returns (reduces revenue); Credit Trade Receivables
Explanation: B is correct. Sales return: customer returns goods, credit note issued. Entry: Debit Sales Returns/Revenue (reduces revenue) and Credit Trade Receivables (reduces amount owed). A is a purchase return. C is a VAT refund. D is vague.
Question 201
If capital expenditure is incorrectly treated as revenue expenditure, what is the effect?
Select an option first.
Correct answer: B — Understates assets (not capitalised) and overstates expenses (full cost expensed) — reducing current profit and understating net assets
Explanation: B is correct. Wrong: capex expensed → too much expense now (profit ↓), asset not recognised (NBV understated). Future periods: no depreciation (profit overstated). A reverses the effect. C is wrong. D incorrect direction.
Question 202
What is a purchase return (return outward) and how is it recorded?
Select an option first.
Correct answer: B — Goods returned by the business to its supplier — Debit Trade Payables; Credit Purchase Returns (or Purchases)
Explanation: B is correct. Purchase return: business returns goods to supplier. Credit note received. Entry: Debit Trade Payables (reduces liability) and Credit Purchase Returns/Purchases (reduces cost). A is a sales return. C and D are different situations.
Question 203
What is an opening balance in a ledger account?
Select an option first.
Correct answer: B — The balance brought forward from the end of the previous period to the start of the new period
Explanation: B is correct. Opening balance (b/f): closing balance carried forward from the prior period. Assets/liabilities carry their closing balance forward. Income/expense accounts start at zero each period (closed to retained earnings). A, C and D are incorrect.
Question 204
What is inventory cut-off testing and why is it important?
Select an option first.
Correct answer: B — Ensuring purchases and sales are recorded in the correct period around year end — prevents overstatement or understatement of inventory and profit
Explanation: B is correct. Cut-off: goods received before year-end must be in closing inventory and purchases; goods dispatched before year-end excluded from inventory and included in sales. Errors distort inventory, cost of sales, and profit. A is valuation. C is reconciliation. D is insurance.
Question 205
What is the drawings account and how does it affect capital?
Select an option first.
Correct answer: B — Personal withdrawals by the owner — reduces the owner's capital (equity) and is not an expense
Explanation: B is correct. Drawings: Dr Drawings, Cr Cash/Bank. At year end: Dr Capital, Cr Drawings. Not an expense — a reduction of equity. A implies a loan. C applies to director-employees. D applies to companies.
Question 206
Sole trader net profit £28,000. Drawings £9,000. Net increase in capital?
Select an option first.
Correct answer: C — £19,000
Explanation: C is correct. Capital change = Profit − Drawings = £28,000 − £9,000 = £19,000. A adds profit and drawings. B ignores drawings. D is just drawings.
Question 207
What is the double-entry to record a cash sale of £500?
Select an option first.
Correct answer: B — Debit Cash £500; Credit Sales Revenue £500
Explanation: B is correct. Cash sale: Cash (asset) increases — debit; Sales Revenue (income) increases — credit. A reverses the entry. C records a credit sale (not a cash sale). D credits the wrong account.
Question 208
What is the double-entry to record wages expense of £8,000 paid by bank?
Select an option first.
Correct answer: B — Debit Wages Expense £8,000; Credit Bank £8,000
Explanation: B is correct. Wages paid: Wages Expense (expense increases — debit) £8,000; Bank (asset decreases — credit) £8,000. A credits trade payables (not yet paid). C reverses the entry. D is used if wages were previously accrued.
Question 209
Opening balance of trade receivables is £15,000. Credit sales during the year: £90,000. Cash collected: £82,000. Bad debts written off: £1,000. What is the closing balance of trade receivables?
Select an option first.
Correct answer: A — £22,000
Explanation: A is correct. Closing balance = Opening + Credit sales − Cash collected − Bad debts = £15,000 + £90,000 − £82,000 − £1,000 = £22,000. B omits bad debts. C is wrong. D adds all inflows.
Question 210
A business has an allowance for doubtful debts of £2,000 brought forward. At year end it is estimated the allowance should be £3,500. What is the income statement charge?
Select an option first.
Correct answer: C — £1,500
Explanation: C is correct. The income statement charge is only the INCREASE in the allowance: £3,500 − £2,000 = £1,500. A would be the charge if creating the allowance for the first time. B is the opening allowance. D adds the two figures.
More free ACCA topics
Management Accounting401
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Financial Reporting400
Financial Management400
Strategic Business Reporting400
Advanced Financial Management400
Advanced Performance Management400
Advanced Taxation400
Business and Technology300
Taxation300
Audit and Assurance300
Strategic Business Leader300
Advanced Audit and Assurance296
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