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ACCA Knowledge Level Financial Statements — practice questions

Explore 7 free Financial Statements questions in ACCA Knowledge Level Financial Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Financial Statements questions and exercises with answers

Showing questions 1–7 of 7.

A statement of profit or loss shows Fees Earned of $30,000 and total operating expenses of $17,000. What is net income?Read the answer and worked solution →On a statement of profit or loss, how is a net loss conventionally presented?Read the answer and worked solution →When are closing entries prepared in the accounting cycle?Read the answer and worked solution →Into which account are the balances of revenue and expense accounts transferred during closing?Read the answer and worked solution →Match the Statement (ACCA FA)Read the answer and worked solution →P&L or Position? (ACCA FA)Read the answer and worked solution →Finish the Term (ACCA FA)Read the answer and worked solution →

Worked practice questions

A statement of profit or loss shows Fees Earned of $30,000 and total operating expenses of $17,000. What is net income?

  1. $13,000
  2. $47,000
  3. $17,000
  4. $30,000
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Correct answer: A. $13,000

1. Net income equals $\text{Revenue} - \text{Expenses}$. 2. Substitute: $30{,}000 - 17{,}000 = 13{,}000$. 3. Option A wrongly adds revenue and expenses; options C and D simply repeat input figures. 4. Therefore net income is $13,000. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.1 "Income Statement", p.22_

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On a statement of profit or loss, how is a net loss conventionally presented?

  1. As a positive number in bold
  2. Omitted from the statement entirely
  3. As a negative number in parentheses
  4. Added to total revenue
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Correct answer: C. As a negative number in parentheses

1. If revenue minus expenses is negative, the result is a net loss. 2. A net loss is typically presented in parentheses as a negative number. 3. It is not shown as a positive figure (A) and is never omitted (C). 4. A loss reduces, rather than adds to, results, so option D is wrong. 5. Therefore a net loss appears in parentheses. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.1 "Income Statement", p.22_

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When are closing entries prepared in the accounting cycle?

  1. Before any transactions are journalized
  2. Daily, as each transaction occurs
  3. Only when the business is dissolved
  4. After the financial statements are prepared
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Correct answer: D. After the financial statements are prepared

1. Closing entries set income statement account balances back to zero for a fresh start. 2. They are made at period end, after the financial statements are prepared but before the next period's first transaction. 3. They are not done before transactions (A) or daily (B), which describe journalizing and posting. 4. They occur every period end, not only at dissolution, ruling out D. 5. Therefore closing entries follow the financial statements. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.4 "Closing Entries", p.24_

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