See also ACCA P5 Flashcards: Set 1 | Set 2 | Set 3 | Set 4
Will a rights issue of shares appear on a Statement of Cash Flows?
It will appear under the heading Cash Flows from Financing Activities.
Will a surplus on revaluation appear on a Statement of Cash Flows?
It will not appear because there has been no cash received.
Will a bonus issue of shares appear on a Statement of Cash Flows?
It will not appear because there is no cash received – the shares are issued free.
What is the difference between the Direct and Indirect methods of arriving at the ‚cash generated from operations‘ on a Statement of Cash Flows?
The direct method shows the actual amount of cash received and cash paid in respect of operations.
The indirect method starts with the profit before tax and adjusts it to result in the cash generated.
What items appear on the Statement of Cash Flows under the heading Financing Activities?
* Proceeds from the issue of shares
* Long term borrowings made or repaid
What items appear on a Statement of Cash Flows under the heading Investing Activities?
Cash spent acquiring non-current assets
Cash received from the sale of non-current assets
Income from investments
What are the three main headings that will appear on Statement of Cash Flows?
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
According to IAS 38 – Intangible assets – how should research be treated in the financial statements?
Research costs should be expensed in the Income Statement.
What are revenue reserves?
Revenue reserves are profits that have been earned (and retained) by the company – retained earnings and general reserve.
They represent amounts owing to shareholders that can be paid out as dividend.
What does the share premium account record?
The share premium account records the excess of the amount of cash received from the issue of shares over the nominal (par) value of the shares.
What is a bonus (scrip) issue of shares?
A bonus issue of shares is an issue of new shares to existing shareholders in proportion to their existing shareholdings, free of charge. No cash is received.
What is a rights issue of shares?
A rights issue is an offer of new shares to existing shareholders in proportion to their existing shareholdings.
What are the differences between ordinary and preference shares?
Ordinary shares have voting rights – preference shares usually do not.
The dividend on ordinary shares is recommended by the directors – preference shares carry a fixed dividend.
The ordinary dividend is paid out of profits left after the preference dividend has been paid.
What does the Statement of Changes in Equity show?
The Statement of Changes in Equity shows the reasons for the changes in share capital and reserves during the accounting period.
What is meant by a gross margin?
The gross margin is the gross profit expressed as a percentage of the sales.
What is meant by mark-up?
A mark-up is the gross profit expressed as a percentage of the cost of sales.
What is the difference between the Statement of Comprehensive Income and the Statement of Profit or Loss?
The Statement of Comprehensive Income is the same as the Statement of Profit or Loss but with the addition of any surplus on revaluation.
(For later exams there are other differences, but the above is the only relevant one for this exam.).
What is an overdraft?
An overdraft is a negative balance at the bank (i.e. the company owes money to the bank).
If a bank statement is showing a debit balance for a company, does it mean that the company has money at the bank or that the company is overdrawn?
A debit balance on a bank statement means that the company is overdrawn.
What is an uncleared lodgement (or lodgement not yet credited)?
An uncleared lodgement is a receipt that has been entered in the cash book but has not yet appeared on the bank statement.
What is an outstanding (unpresented) cheque?
An outstanding cheque is one that has been entered in the cash book but has not yet appeared on the bank statement.
What is the purpose of a bank reconciliation?
The bank reconciliation is done to check the accuracy of the entries in the cash book (and the accuracy of the bank statement).
What is the general (or nominal) ledger?
The general ledger contains all the accounts necessary to produce the financial statements. The double entry is made between these accounts.
What is meant by a refund?
A refund is a repayment of cash previously paid. It can occur for various reasons – e.g. the customer overpaid by mistake; the customer returned goods for which they had already paid.
What is a credit note?
A credit note is a ‚negative invoice‘ and is prepared by the supplier to cancel a previous invoice (or part of an invoice) because of goods having been returned or because of an overcharge on the invoice.
When using the straight-line method of depreciation, what is meant by the term residual value?
The residual value of an asset is the estimated disposal value at the end of its useful life.
What is the reducing balance method of depreciation?
A reducing amount of depreciation is charged each year (a fixed percentage of the net book value).
What is the purpose of depreciation?
Depreciation is used to reflect the cost of using a non-current asset. It matches the cost of using the assets to the revenues generated by the asset over its useful life.
What is the straight-line method of depreciation?
The depreciation charge is the same each year – the cost is spread over the expected useful life.
Do we depreciate the Land and Buildings category?
Buildings will be depreciated because they have a limited useful life.
Land will not normally be depreciated because it has an unlimited life.
What is the non-current asset register?
The non-current asset register is a record of the non-current assets held by the business. It is for internal control purposes and is not part of the double entry bookkeeping.
What is the difference between tangible and intangible non-current assets?
Tangible assets can be touched (have a physical substance) e.g. machines, buildings, motor vehicles.
Intangible assets cannot be touched (do not have a physical substance) e.g. goodwill, development expenditure.
What is meant by revenue expenditure?
Revenue expenditure refers to expenses of running the business (will appear on the Income Statement).
What is meant by capital expenditure?
Capital expenditure refers to the purchase of non-current assets and expenditure that enhances the asset (will appear on the Statement of Financial Position).
What is the purpose of the allowance for receivables?
The allowance for receivables is made to recognise the possibility that some of the receivables might not be received (because they are doubtful).
What is meant by an irrecoverable debt?
An irrecoverable debt is an amount owing to the business that will not be received.
What is meant by prepaid income?
Prepaid income is income for the next year that has been received in the current year.
What is meant by accrued income?
Accrued income is income for this year that has not been received by the year end.
What is meant by a prepaid expense?
A prepaid expense occurs when some of the next years expense has been paid in the current year.
Is the net selling price the selling price including or excluding sales tax?
The net selling price is the selling price excluding sales tax.
Is the gross selling price the selling price including or excluding sales tax?
The gross selling price is the selling price including sales tax.
Is output sales tax the tax charged on purchases or the tax charged on sales?
Output tax is the tax charged on sales.
Is input sales tax the tax charged on purchases or the tax charged on sales?
Input tax is the tax charged on purchases.
Is sales tax a form of direct or indirect taxation?
Sales tax is a form of indirect taxation.
What methods of calculating the cost of inventory are allowed by the accounting standard?
FIFO (first in first out)
AVCO (average cost_
Unit cost (actual cost)
In the context of inventory valuation, what is meant by net realisable value?
Net realisable value is the expected selling price less any expected future costs there will be before sale.
Inventory is valued at the lower of ___ and ___?
Inventory is valued at the lower of cost and net realisable value (NRV).
What is the main purpose of a trial balance?
A trial balance checks that for every debit entry made, there has been an equal credit entry.
What is the double entry for the sale of goods on credit?
Debit receivables
Credit sales
What is the double entry for the purchase of goods for resale on credit?
Debit purchases
Credit payables
Will an increase in capital be a debit or a credit entry in the ledger account for capital?
An increase in capital will be a credit entry in the capital account.
Will an increase in income be a debit or a credit entry in the ledger account for the income?
An increase in income will be a credit entry in the income account.
Will an increase in a liability be a debit of a credit in the ledger account for the liability?
An increase in a liability will be a credit entry in the liability account.
Will drawings be a debit or a credit entry in the drawings account?
Drawings will be a debit entry in the drawings account.
Will an increase in an asset be a debit or a credit in the ledger account for the asset?
An increase in an asset is a debit entry in the asset account.
Will an increase in an expense be a debit or a credit in the ledger account for the expense?
An increase in an expense is a debit entry in the expense account.
What is meant by net assets?
Net assets = total assets – total liabilities
What is the accounting equation?
The increase in net assets = capital introduced + profit – drawings
What are non-current assets?
Non-current assets are assets acquired on a long-term basis, not held for resale in the normal course of trading.
What are current assets?
Current assets are assets which are expected to be realised in the normal course of trading.
What are current liabilities?
Current liabilities are liabilities payable within 12 months of the reporting date.
What are non-current liabilities?
Non-current liabilities are liabilities payable more than 12 months after the reporting date.
What is the definition of drawings (or withdrawals)?
Drawings is anything taken from the business by a sole trader, whatever he/she chooses to call it.
What is the definition of capital?
Capital is the amount due to the owner(s) of the business.
What is the separate entity concept?
The business is treated as separate from its owners.
What is the definition of gross profit?
The gross profit is the sales revenue less the cost of goods sold.
What is the definition of a liability?
A liability is an item owed by the business.
What is the definition of an asset?
An asset is an item owned by the business.
What does the Statement of Profit or Loss show?
The revenues, expenses and profit or loss of the business – the financial performance of the business over a period of time.
What does the Statement of Financial Position show?
The assets, liabilities and capital of the business – the financial position of the business at one point in time.
What user groups are interested in a company’s financial statements?
* Management
* Investors and potential investors
* Employees
* Lenders
* Government agencies
* Suppliers
* Customers
* Competitors
* The public
What is a sole trader?
A sole trader is a business owned and operated by one person
sophiechen says
Tomorrow is the exam date. and now i use the flash card to recap the knowledge hope it will be helpful////////……..
asifmalakand says
thanks
Pranz says
thank you so much opentuition for the flashcards. i wrote out all the questions and use it as a rapid round question session with my friends. very helpful during that last month of revision when you need a change of scene from all the notes and written exam questions!
vladlen says
Some answers do not fit the window, so cannot be viewed completely (e.g. question on EBITDA) or even completely empty.
admin says
Try another browser
buoben says
The flash cards are good, they help in building one’s memory faster
Every important definition is easily remembered.
But could it be possible for Open tuition to make it possible for us to download the flash cards? Some of us have poor internet services and at time the internet does not come on for several days
admin says
Like it was replied many times – these flashcards are interactive, and not for download,
you can download and print course notes – and learn from there..
and if you have internet problems, well, the best way to learn/memorise, you can create your own flashcards that suite your own needs
stevie8126 says
How come most of them looks like P3, I mean the majority of the question is for P3, but not P5, although they are inter-related. Hopefully can see more question on P5-based. Thank you admin!