You’re on a roll
Create a free account to save your ACCA progress, track your accuracy by topic, and pick up right where you left off.
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 211
What is the journal entry to record an accrual of £800 for electricity at year end?
Select an option first.
Correct answer: B — Debit Electricity Expense £800; Credit Accruals (liability) £800
Explanation: B is correct. Accrual: Debit Electricity Expense (P&L charge) and Credit Accruals (current liability on SFP). No cash moves. A uses bank (wrong). C reverses the entry. D credits prepayments (wrong — a prepayment is an asset, not a credit for accruals).
Question 212
A business prepays rent of £2,400 for 12 months on 1 April. Year end is 31 December. What is the rent expense for the year?
Select an option first.
Correct answer: B — £1,800
Explanation: B is correct. Months paid in advance but covering the current year (April–December) = 9 months. Rent expense = 9/12 × £2,400 = £1,800. Prepayment carried forward (January–March) = 3/12 × £2,400 = £600. A charges the full amount. C is just the prepayment. D is the monthly amount.
Question 213
What is an 'error of omission' and can the trial balance detect it?
Select an option first.
Correct answer: B — A transaction that is completely omitted from the accounting records — the trial balance CANNOT detect it because both sides are missing equally
Explanation: B is correct. Error of omission: both debit and credit are missing. Since both sides are absent equally, total debits still equal total credits — the trial balance balances. The trial balance cannot detect this error. A is error of commission. C is a duplication error. D may be detectable.
Question 214
A machine costs £40,000, useful life 5 years, residual value £5,000, straight-line. After 3 years, what is the net book value?
Select an option first.
Correct answer: A — £19,000
Explanation: A is correct. Annual SL depreciation = (£40,000 − £5,000) ÷ 5 = £7,000. After 3 years: Accumulated depreciation = 3 × £7,000 = £21,000. NBV = £40,000 − £21,000 = £19,000. B uses full cost per year × 3 / 5. C and D use wrong calculations.
Question 215
What is the double-entry to record interest received of £400 in cash?
Select an option first.
Correct answer: B — Debit Bank £400; Credit Interest Income £400
Explanation: B is correct. Interest received: Bank (asset) increases — debit; Interest Income (income) increases — credit. A reverses the entry. C records it as a credit sale receivable. D credits the wrong account.
Get the full ACCA question bank — free
Drop your email and we'll send you fresh ACCA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 216
What is a 'nominal account' in accounting?
Select an option first.
Correct answer: B — An income or expense account that is closed to retained earnings (profit or loss) at the end of each accounting period — it starts at zero each year
Explanation: B is correct. Nominal (temporary) accounts: income and expense accounts — closed to P&L/retained earnings at year end, starting at zero each period. Contrast with real (permanent) accounts: assets, liabilities, equity — carry balances forward. A is a personal/receivable account. C and D describe real accounts.
Question 217
What is a 'real account' in accounting?
Select an option first.
Correct answer: B — A permanent account — assets, liabilities, and equity — whose balance is carried forward to the next accounting period
Explanation: B is correct. Real (permanent) accounts: assets, liabilities, equity — carry closing balances forward as opening balances for the next period. Nominal (temporary) accounts (income/expenses) are reset to zero each period. A describes nominal accounts. C and D are incorrect.
Question 218
What is the effect on the accounting equation if a business buys inventory on credit for £4,000?
Select an option first.
Correct answer: B — Assets (inventory) increase £4,000; liabilities (trade payables) increase £4,000
Explanation: B is correct. Buying inventory on credit: Inventory (asset) +£4,000; Trade Payables (liability) +£4,000. The accounting equation remains balanced: both sides increase equally. A increases equity (wrong). C decreases liabilities (wrong). D reduces both equity and assets (wrong).
Question 219
What is the double-entry for returning goods to a supplier worth £600?
Select an option first.
Correct answer: B — Debit Trade Payables £600; Credit Purchase Returns £600
Explanation: B is correct. Returning goods to supplier: Trade Payables (liability) decreases — debit; Purchase Returns (reduces cost/purchases) — credit. A increases purchases (wrong direction). C and D bring in cash (wrong — no cash exchanged on a credit return).
Question 220
What is 'depletion' and to which assets does it apply?
Select an option first.
Correct answer: B — The systematic allocation of the cost of natural resources (e.g., oil, gas, coal, timber) as they are extracted or used up — similar to depreciation but driven by usage rather than time
Explanation: B is correct. Depletion: cost allocation for natural resources extracted over time — e.g., an oil field. Often calculated on a units-of-production basis rather than straight-line. A is too broad. C describes amortisation. D is financial asset impairment.
Question 221
What is a 'suspense account' balance and how is it cleared?
Select an option first.
Correct answer: B — A temporary difference in the trial balance — once the error is identified, the correct entries are posted to the relevant accounts and a corresponding entry is made to the suspense account to clear it to zero
Explanation: B is correct. Suspense account: opened when trial balance doesn't balance. Once the error is found: correct the error → post the correcting entry to the appropriate accounts AND post the opposite entry to suspense to clear it. A makes it permanent (wrong). C is incorrect. D describes an error accumulation.
Question 222
What is the correct treatment for a £500 discount received from a supplier for early payment?
Select an option first.
Correct answer: B — Debit Trade Payables £500; Credit Discount Received (income) £500
Explanation: B is correct. Discount received (settlement discount from supplier): reduces the amount owed to the supplier — Debit Trade Payables (reduces liability) £500; Credit Discount Received (income — reduces net purchases cost or is shown as other income) £500. A and C use wrong accounts. D reverses the entry.
Question 223
What is the difference between 'gross wages' and 'net wages' in payroll accounting?
Select an option first.
Correct answer: B — Gross wages are the total wages earned by employees before deductions (tax, national insurance); net wages are gross wages less deductions — what the employee actually receives
Explanation: B is correct. Gross wages: total earnings before deductions. Net wages: take-home pay after deducting income tax (PAYE) and employee national insurance contributions. The employer also records employer NIC as an additional cost. A, C and D are wrong.
Question 224
Journal entry to record issue of 10,000 shares at £2.00, nominal value £0.50?
Select an option first.
Correct answer: B — Debit Cash £20,000; Credit Share Capital £5,000; Credit Share Premium £15,000
Explanation: B is correct. Cash = 10,000 × £2.00 = £20,000. Share Capital = 10,000 × £0.50 = £5,000; Share Premium = 10,000 × £1.50 = £15,000. Debit Cash £20,000; Credit Share Capital £5,000; Credit Share Premium £15,000. A credits all to share capital. C reverses debit/credit. D omits share capital.
Question 225
Journal entries for a bonus (scrip) issue of 5,000 shares at £0.50 nominal, using share premium?
Select an option first.
Correct answer: B — Debit Share Premium £2,500; Credit Share Capital £2,500
Explanation: B is correct. Bonus issue using share premium: Dr Share Premium £2,500 (reduce reserve); Cr Share Capital £2,500 (increase issued capital). No cash received. A brings in cash (wrong). C debits retained earnings (wrong source). D reverses the entry.
Question 226
Double-entry to record a proposed final dividend of £15,000?
Select an option first.
Correct answer: B — Debit Retained Earnings £15,000; Credit Dividends Payable (liability) £15,000
Explanation: B is correct. On declaration: Dr Retained Earnings (equity decreases) £15,000; Cr Dividends Payable (current liability) £15,000. On payment: Dr Dividends Payable; Cr Bank. A records payment before declaration. C skips the payable. D creates a 'dividends expense' (dividends are not expenses).
Question 227
What is the difference between the direct and indirect method of operating cash flows under IAS 7?
Select an option first.
Correct answer: B — Direct method shows gross cash receipts and payments from operating activities; indirect method starts with profit before tax and adjusts for non-cash items and working capital changes — both produce the same total
Explanation: B is correct. Both permitted under IAS 7, producing the same total operating cash flow. Direct: more transparent (gross flows). Indirect: more commonly used (reconciles profit to cash). A is wrong. C and D are incorrect.
Question 228
Under IAS 7, where are dividends paid classified?
Select an option first.
Correct answer: B — Either under financing activities (most common) or operating activities — both permitted under IAS 7
Explanation: B is correct. IAS 7: dividends paid — financing (cost of equity) or operating. Both permitted. Dividends received — operating or investing. A, C and D are wrong.
Question 229
Double-entry for a revaluation decrease of £8,000 with no existing revaluation surplus?
Select an option first.
Correct answer: B — Debit Impairment Loss (P&L) £8,000; Credit PPE £8,000
Explanation: B is correct. No existing surplus → full decrease hits P&L. Dr Revaluation/Impairment Loss (P&L expense) £8,000; Cr PPE £8,000. A debits a surplus that doesn't exist. C increases the asset. D debits equity directly.
Question 230
Machine (cost £60,000, accumulated depreciation £25,000) revalued upward to £50,000. Journal entry?
Select an option first.
Correct answer: B — First clear accumulated depreciation: Dr Accumulated Dep £25,000; Cr PPE £25,000. Then: Dr PPE £15,000; Cr Revaluation Surplus (OCI) £15,000
Explanation: B is correct. NBV = £60,000 − £25,000 = £35,000. New value = £50,000. Gain = £15,000. Two entries: (1) Dr Accumulated Dep £25,000; Cr PPE £25,000 (eliminate accum dep). (2) Dr PPE £15,000; Cr Revaluation Surplus (OCI) £15,000. A takes gain to P&L (wrong). C skips clearing accumulated dep. D reverses.
Question 231
Initial journal entry when a lessee commences a lease under IFRS 16?
Select an option first.
Correct answer: B — Debit Right-of-Use Asset; Credit Lease Liability (both at PV of future lease payments)
Explanation: B is correct. IFRS 16 commencement: Dr ROU Asset (non-current asset); Cr Lease Liability (non-current liability) at PV of future lease payments. ROU then amortised; liability unwound using EIR. A is old operating lease treatment. C reverses direction. D is wrong.
Question 232
Double-entry to record impairment loss of £6,000 under cost model?
Select an option first.
Correct answer: B — Debit Impairment Loss (P&L) £6,000; Credit Accumulated Impairment Losses £6,000
Explanation: B is correct. Impairment under cost model: Dr Impairment Loss (P&L expense); Cr Accumulated Impairment Losses (contra to PPE on SFP). A increases the asset. C uses revaluation surplus (only if revaluation model and surplus exists). D increases asset and surplus.
Question 233
What is a 'debit note' and when is it used?
Select an option first.
Correct answer: B — A document issued by the buyer requesting a reduction in the amount owed — used when goods are returned or an overcharge is disputed, prompting the supplier to issue a credit note
Explanation: B is correct. A debit note is issued by the buyer indicating that the buyer is debiting the seller's account (reducing liability). Prompts the seller to issue a credit note. A describes an invoice. C is a bank debit. D is a delivery note.
Question 234
What is a 'credit note' and what double-entry does the seller make?
Select an option first.
Correct answer: B — A document issued by the seller reducing the amount owed — seller's entry: Debit Sales Returns; Credit Trade Receivables
Explanation: B is correct. Seller issues credit note (goods returned): Dr Sales Returns (reduces revenue); Cr Trade Receivables (reduces receivable). A is a credit check. C is delivery confirmation. D is a bank notification.
Question 235
What is a 'standing order' in bank transactions?
Select an option first.
Correct answer: B — A fixed regular payment of a fixed amount set up by the account holder — same amount, same date each period (e.g., monthly rent)
Explanation: B is correct. Standing order: payer-initiated, fixed amount, regular date. E.g., £500 rent every 1st. Differs from direct debit (payee-initiated, variable amount). A says bank-instructed (wrong). C describes direct debit. D is a one-off payment.
Question 236
What is a 'direct debit' and how does it differ from a standing order?
Select an option first.
Correct answer: B — A payment authorised by the payer but instructed by the payee — the amount can vary; the bank debits the payer's account on payee's instruction (e.g., utility bills)
Explanation: B is correct. Direct debit: payee-initiated, variable amount. E.g., utility companies collect varying amounts. Standing order: payer-initiated, fixed. A describes a standing order. C and D are wrong.
Question 237
A bank charge of £200 appears on the bank statement but not in the cash book. How is it treated?
Select an option first.
Correct answer: B — Reduce (credit) the cash book by £200 — an omission in the cash book, not a timing difference; the cash book should be updated
Explanation: B is correct. A bank charge not in the cash book is a cash book omission (not a timing difference). The cash book should be reduced (credited) by £200. A increases cash book (wrong). C treats it as timing (wrong). D adjusts the bank statement (not within the company's control).
Question 238
What is a 'dishonoured cheque' and how is it treated?
Select an option first.
Correct answer: B — A cheque refused by the bank — reverse the original receipt: Debit Trade Receivables (reinstate the debt); Credit Cash/Bank
Explanation: B is correct. Dishonoured cheque: bank refuses payment (bounced). Reverse the receipt: Dr Trade Receivables (customer still owes); Cr Bank (reduce balance). A and C are different situations. D is the payer's perspective.
Question 239
What does a 'payroll journal' typically contain?
Select an option first.
Correct answer: B — A journal recording the payroll: Debit Gross Wages (expense); Credit PAYE Payable; Credit National Insurance Payable; Credit Net Wages Payable (or Bank if paid immediately)
Explanation: B is correct. Payroll journal: Dr Gross Wages; Cr PAYE Payable (employee tax); Cr Employee NIC Payable; Cr Net Wages Payable (or Bank). Employer's NIC is an additional Dr to Wages Expense and Cr to Employer NIC Payable. A, C and D are wrong.
Question 240
What is the treatment for 'goods in transit' at year end?
Select an option first.
Correct answer: B — If title has passed to the buyer (FOB shipping point), goods in transit are in the buyer's inventory; if title remains with the seller (FOB destination), goods stay in the seller's inventory
Explanation: B is correct. Cut-off depends on title transfer: FOB shipping point — buyer owns from departure; FOB destination — seller owns until delivery. A excludes both (wrong). C and D are too absolute.
More free ACCA topics
Management Accounting401
Corporate and Business Law400
Performance Management400
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
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.