ATD Level II
Financial Accounting flashcards
Read the question, say the answer to yourself, then turn the card to check. The first 10 of 50 cards are free; the rest come with the subject.
Card 1 of 50
Jump to a card
Complete Flashcard Reference
Review every card in this deck. Open any card to reveal its answer. The first 10 are free; the other 40 come with the subject.
Which qualitative characteristics of useful financial information are fundamental, and which are enhancing?
Fundamental: relevance and faithful representation. Enhancing: comparability, verifiability, timeliness and understandability. Information needs both fundamental characteristics to be useful at all; the enhancing ones make useful information more useful still.
Where does a revaluation gain go, and where does a revaluation loss go, under IAS 16?
Gain: to a revaluation surplus in other comprehensive income, accumulated in equity, unless it reverses an earlier decrease on the same asset charged to profit or loss, in which case it is credited to profit or loss to that extent. Loss: to profit or loss, unless the same asset has a credit balance in the revaluation surplus, which the loss is debited against first.
Where there is no partnership deed, what do the default rules of Kenya's Partnership Act provide?
Profits and losses are shared equally. No partner is entitled to a salary. No interest is charged on drawings or paid on capital.
What is the difference between a bonus issue and a rights issue?
Bonus issue: free shares to existing shareholders in proportion to their holdings, funded by capitalising reserves. No cash is raised and total equity is unchanged. Debit share premium (or retained earnings), credit share capital. Rights issue: new shares offered to existing shareholders in proportion to their holdings, usually below market price, for cash. Debit cash, credit share capital with nominal value and share premium with the excess.
How does a manufacturing statement build up the cost of production?
Direct materials consumed + direct labour = prime cost. Prime cost + factory overheads = total production cost. Total production cost + opening work in progress - closing work in progress = cost of production, which replaces purchases in the trading section.
A club receives KES 480,000 in subscriptions. KES 30,000 is owing at the year end and KES 20,000 was owing at the start. What is subscription income?
480,000 + 30,000 - 20,000 = KES 490,000. Add what is owing at the end (earned this year, not yet received) and deduct what was owing at the start (already counted as last year's income).
How are the current ratio and the quick (acid-test) ratio calculated, and why do they differ?
Current ratio = current assets / current liabilities. Quick ratio = (current assets - inventory) / current liabilities. The quick ratio removes inventory, the least liquid current asset, for a stricter test of immediate liquidity.
What are the three activities in a statement of cash flows, with an example of each?
Operating: the cash effect of day-to-day trading, such as cash received from customers. Investing: acquiring and disposing of long-term assets, such as buying property, plant and equipment. Financing: transactions with providers of capital, such as share issues, loan draw-downs and repayments, and dividends paid.
In incomplete records, how are missing credit sales found?
Reconstruct a total trade receivables account: opening receivables + credit sales - cash received from customers - discounts allowed and bad debts = closing receivables. Credit sales is the balancing figure. Missing credit purchases are found the same way through a total trade payables account.
What is commitment accounting, and why does it matter for budget control?
It recognises an obligation, such as a purchase order or a signed contract, when it is entered into rather than when the invoice arrives. Available budget falls as soon as the entity commits itself, so spending is tracked against the budget weeks before the goods and the invoice arrive.
What does the Accountants Act do, and what is ICPAK's role?
This answer comes with Financial Accounting. Buy the subject
What is the difference between IFRS, IASs and IPSAS?
This answer comes with Financial Accounting. Buy the subject
What is the status of the Conceptual Framework, and what is it for?
This answer comes with Financial Accounting. Buy the subject
What is the objective of general purpose financial reporting?
This answer comes with Financial Accounting. Buy the subject
What do the accrual principle and the matching principle require?
This answer comes with Financial Accounting. Buy the subject
What does the conservatism principle require where there is genuine uncertainty?
This answer comes with Financial Accounting. Buy the subject
What does the consistency principle require, and when may a policy change?
This answer comes with Financial Accounting. Buy the subject
What are the going concern principle and the economic entity principle?
This answer comes with Financial Accounting. Buy the subject
How are income, expenses and equity defined as elements of financial statements?
This answer comes with Financial Accounting. Buy the subject
What makes up a complete set of financial statements under IAS 1?
This answer comes with Financial Accounting. Buy the subject
May assets be offset against liabilities, or income against expenses?
This answer comes with Financial Accounting. Buy the subject
What are the two broad measurement bases in the Conceptual Framework?
This answer comes with Financial Accounting. Buy the subject
What is sustainability accounting, and what are its limitations?
This answer comes with Financial Accounting. Buy the subject
Under the IAS 16 revaluation model, how is property, plant and equipment carried and depreciated?
This answer comes with Financial Accounting. Buy the subject
How is goodwill recognised and treated after initial recognition?
This answer comes with Financial Accounting. Buy the subject
How are software and licences accounted for as intangible assets?
This answer comes with Financial Accounting. Buy the subject
Give examples of financial assets and financial liabilities.
This answer comes with Financial Accounting. Buy the subject
What are the three IFRS 9 measurement categories for a financial asset?
This answer comes with Financial Accounting. Buy the subject
Where do accrued expenses, prepaid expenses, accrued income and income received in advance appear at the reporting date?
This answer comes with Financial Accounting. Buy the subject
A sole trader's opening capital is KES 500,000, net profit KES 180,000 and drawings KES 60,000. What is closing capital?
This answer comes with Financial Accounting. Buy the subject
In what order does a partnership appropriation account divide net profit?
This answer comes with Financial Accounting. Buy the subject
Why does each partner have both a capital account and a current account?
This answer comes with Financial Accounting. Buy the subject
How is goodwill dealt with on a change in a partnership, such as admitting a new partner?
This answer comes with Financial Accounting. Buy the subject
What are the steps in dissolving a partnership?
This answer comes with Financial Accounting. Buy the subject
How do ordinary shares differ from preference shares?
This answer comes with Financial Accounting. Buy the subject
What is other comprehensive income, and how does it reach total comprehensive income?
This answer comes with Financial Accounting. Buy the subject
How does a manufacturer show inventory in its statement of financial position?
This answer comes with Financial Accounting. Buy the subject
What replaces capital in a not-for-profit entity's statement of financial position?
This answer comes with Financial Accounting. Buy the subject
How are return on capital employed and return on equity calculated?
This answer comes with Financial Accounting. Buy the subject
How are the gearing ratio and interest cover calculated?
This answer comes with Financial Accounting. Buy the subject
How are the inventory, receivables and payables periods calculated?
This answer comes with Financial Accounting. Buy the subject
How are EPS, the P/E ratio, dividend yield and dividend cover calculated?
This answer comes with Financial Accounting. Buy the subject
How does the direct method of presenting operating cash flows differ from the indirect method?
This answer comes with Financial Accounting. Buy the subject
How is opening capital found when it is not known?
This answer comes with Financial Accounting. Buy the subject
Sales are KES 900,000 and the mark-up on cost is 50%. What are cost of sales and gross profit?
This answer comes with Financial Accounting. Buy the subject
With incomplete records, how is closing capital derived?
This answer comes with Financial Accounting. Buy the subject
How do public sector entities differ from private sector entities in objective, funding and reporting framework?
This answer comes with Financial Accounting. Buy the subject
How is Kenya's public sector structured under the 2010 Constitution?
This answer comes with Financial Accounting. Buy the subject
What does the Public Finance Management Act, 2012 do, and who are accounting officers?
This answer comes with Financial Accounting. Buy the subject
What are fund accounting and the legal force of the budget in the public sector?
This answer comes with Financial Accounting. Buy the subject
How to revise with these cards
- Answer out loud or on paper before you turn the card: recalling is what fixes it.
- Go through the deck in short sessions of ten to fifteen minutes, every day.
- Shuffle once you know the order, so you are not answering from memory of the sequence.
- When a card catches you out, read the chapter it links to, then try the topic in a past paper.