Free ACCA Financial Accounting (FA) Practice Questions

Sample Practice Questions

Try these 10 sample questions from the ACCA Financial Accounting (FA) practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1An individual operates a UK business as a sole trader. Who is personally responsible for its business debts?

   1. A.The individual who owns the businessCorrect answer: A
   2. B.The customers who buy its products
   3. C.The bank providing its current account
   4. D.The employees managing its records

   Explanation: GOV.UK states: "You are personally responsible for all of the debts of the business." Sole-trader liability rests with the owner; customers, the bank and employees do not acquire that liability merely through those relationships.

   Reference: GOV.UK — Set up a business — Sole trader versus limited company — Legal risks or liability

2. 2Which assumption underlies financial statements prepared on a going-concern basis?

   1. A.The entity will continue operating for the foreseeable future.Correct answer: A
   2. B.The entity will sell every asset at the next reporting date.
   3. C.The entity’s market value will increase each financial year.
   4. D.The entity will collect all receivables before paying any debts.

   Explanation: Going concern concerns continued operation, not guaranteed value growth, immediate liquidation or a fixed order of settlement. The source states: "will continue in operation for the foreseeable future."

   Reference: ACCA — Principles and concepts of accounting — Going concern

3. 3What does the dual aspect of a transaction mean for one entity’s accounting records?

   1. A.The buyer and seller must use the same software.
   2. B.Every transaction must be approved by two employees.
   3. C.The transaction gives rise to equal debit and credit entries.Correct answer: C
   4. D.The transaction must involve two separate legal entities.

   Explanation: Duality concerns the two-sided effect within one entity, not the number of entities, approvals or software users. The source states: "the value of the debit entries is the same as the value of the credit entries"

   Reference: ACCA — Principles and concepts of accounting — Duality

4. 4A retailer records a $1,600 purchase of goods for resale on credit. It uses a purchases account and there is no sales tax. Which journal is required?

   1. A.Debit Trade payables; credit Purchases, $1,600
   2. B.Debit Purchases; credit Trade payables, $1,600Correct answer: B
   3. C.Debit Purchases; credit Bank, $1,600
   4. D.Debit Trade receivables; credit Revenue, $1,600

   Explanation: Purchases and the supplier obligation increase. Reversal would reduce both; crediting bank falsely records payment, and the final entry records a sale. The source states: "a debit balance in purchases and a credit balance in trade payables."

   Reference: ACCA — Sales and purchases in a computerised accounting system — The purchase — general ledger journal

5. 5What is the purpose of reconciling the bank ledger balance with the bank statement?

   1. A.To ensure every bank receipt is treated as revenue
   2. B.To ensure all entries in both records have been accounted forCorrect answer: B
   3. C.To replace the bank ledger with the statement balance
   4. D.To eliminate all timing differences by recording expenses

   Explanation: Reconciliation explains differences and checks completeness. It does not classify every receipt as revenue or require the two records to match before timing differences are explained. The source states: "Its purpose is to ensure that all entries in the cash book and bank statements have been accounted for."

   Reference: HMRC Enquiry Manual — Accounting systems: cash book — EM2860 — bank reconciliation purpose

6. 6What information is listed in a trial balance at a particular date?

   1. A.Every individual cash receipt during the year
   2. B.Only the balances of customer and supplier accounts
   3. C.Closing balances of all general ledger accountsCorrect answer: C
   4. D.Only the amounts included in the bank statement

   Explanation: A trial balance assembles ledger balances, not individual transactions or a subset of ledgers. The source states: "A trial balance is a list containing the closing balances of all the accounts"

   Reference: ACCA SME financial training — Chapter 6 Trial balance — p. 119, Chapter round-up, point 1

7. 7Trade receivables total $46,000 after all specific write-offs. The closing allowance is $2,300. What receivables amount appears in current assets?

   1. A.$48,300
   2. B.$43,700Correct answer: B
   3. C.$46,000
   4. D.$2,300

   Explanation: Net receivables = $46,000 − $2,300 = $43,700. Adding the allowance overstates the asset; using gross receivables omits the allowance and $2,300 is only the deduction. The source states: "trade receivables – irrecoverable debts written off – this year’s allowance for receivables."

   Reference: ACCA — Trade receivables and revenue — Statement of financial position figure

8. 8A parent owns 75% of a subsidiary’s ordinary shares and controls it. Before consolidation adjustments, what proportion of the subsidiary’s assets and liabilities is included line by line?

   1. A.25%
   2. B.75%
   3. C.100%Correct answer: C
   4. D.Only amounts financed by the parent

   Explanation: Control requires full consolidation, with non-controlling interests presented separately. Ownership percentage does not limit line-by-line inclusion. The source states: "The assets and liabilities are then added together in full (100%)"

   Reference: ACCA — Preparing a consolidated statement of financial position — Consolidated statement — full inclusion

9. 9What aspect of an organisation do profitability ratios primarily help a user assess?

   1. A.Its ability to deliver profitsCorrect answer: A
   2. B.Its ability to meet short-term obligations
   3. C.Its efficiency in collecting trade receivables
   4. D.Its reliance on debt rather than equity

   Explanation: Profitability measures earnings performance. Short-term payment capacity is liquidity, collection efficiency is an activity measure, and the debt/equity mix concerns gearing. The source states: "measure the organisation’s ability to deliver profits."

   Reference: ACCA — Ratio analysis — Profitability

10. 10How does a limited company differ legally from the people who own it?

    1. A.It is legally the same person as each owner.
    2. B.It is legally separate from its owners.Correct answer: B
    3. C.It exists legally only through its directors.
    4. D.It becomes a separate person only when listed.

    Explanation: GOV.UK describes a limited company as "legally separate from the people who own it". Incorporation creates that distinction; it does not depend on listing, and directors do not replace the company as the legal person.

    Reference: GOV.UK — Set up a business — Limited companies