FA exam essay questions

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FA 20 essay questions

  • To make sure that you understand and know how to answer all of the following questions, you must to read through the textbook and lecture slides


  • The core textbook and lecture power point in attachment file





  • ANSWER approximately 200 words For EACH question

The quality of your answer, not the length, is really important





  • Some questions ask for argument type of answer then you need to to answer each question in a coherent, logical and well-argued essay style.










  1. Explain the major differences between financial accounting and management accounting (ps18-22).
  2. Name the three key financial statements and explain the fundamental differences between the types of information presented in each of the three key financial statements (ps30-31, 55-57 and 73-76).
  3. Name the different types of business entity and explain the main advantages and disadvantages of setting up a limited company as opposed to a sole trader (ps25-30).
  4. What are accruals and prepayments and in what ways do businesses adjust their accounts for accruals and prepayments. Please use examples to explain your answer (ps58-63).
  5. Critically evaluate the following statement: “surely the purchase of non-current assets is expenditure just like spending on stationery or photocopy expenses, so why should it appear as an entry in the balance sheet?” (ps71-73)
  6. What is trade receivable and what factors influence the accurate valuation of a company’s trade receivables? (ps97-104 and 139)
  7. What is depreciation and what are the problems encountered in dealing with the depreciation of non-current assets? (ps129-133)
  8. Explain how a business can make a loss during an accounting period if it has not been involved in any trading during the period (ps77-80).
  9. Briefly explain the main sources of long-term external finance available to a company (ps85-90 and 550-557).
  10. Explain why the ratio analysis is a useful tool to evaluate a company’s financial performance? (p232)
  11. What are the main limitations encountered in using the ratio analysis to review a business’s performance? (ps230-1 and 252-253)
  12. Name the major profitability ratios and explain how those profitability ratios can tell us about the accounting and financial performance of a business (ps232-240).
  13. What are financial ratios and why are they so important in commenting on the financial structure of an organisation? (p250-252 and 559-561)
  14. What is the agency problem and how may the agency problem occur between the shareholders, directors and lenders of a business? (p185-187)
  15. Explain the implications of the ‘expectation gap’ with regard to external auditors (ps207-208).
  16. What are the differences between wrongful trading and fraudulent trading? (ps217-218)
  17. Explain the obligations of directors of limited companies in terms of a duty of care and fiduciary duty (p214).
  18. What is overtrading and explain the steps which can be taken by a company to avoid the condition of overtrading? (ps651-652)
  19. What is working capital and explain the main components of working capital (ps624-626).
  20. Explain a company’s need for investment in operations in terms of the operating cycle (ps626-627).