ACCA FA Practice Test

ACCA FA Context, Regulation & Accounting Concepts Practice Questions

Context, Regulation & Accounting Concepts makes up 4 of every 50 questions on a Tigertest ACCA FA practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on ACCA's FA syllabus and study guide for 2026-27, with IFRS 18 formats. Original Section A style questions; Section B not included. Not affiliated with ACCA.

1. 1. Which type of business entity is a separate legal person from its owners?

   • A.A trader's registered business name
   • B.A limited liability company
   • C.A sole trader
   • D.A partnership

   Answer: B. A company is incorporated, so it can own assets and enter contracts in its own name, and its shareholders' liability is limited. A sole trader and a partnership have no legal identity separate from their owners.

2. 2. Compared with trading as a sole trader, a disadvantage of trading as a limited liability company is:

   • A.Difficulty in raising share capital
   • B.No separate legal identity
   • C.Unlimited liability for business debts
   • D.More regulation and public disclosure

   Answer: D. Companies must file and publish financial statements and follow company law, which costs time and money. Unlimited liability and no separate identity are features of a sole trader, not a company.

3. 3. Which body develops and issues IFRS Accounting Standards?

   • A.The IASB
   • B.The IFRS Advisory Council
   • C.The IFRS Foundation trustees
   • D.The IFRS Interpretations Committee

   Answer: A. The International Accounting Standards Board sets IFRS Accounting Standards. The IFRS Foundation oversees and funds the standard-setting boards, and the Advisory Council advises them.

4. 4. The main role of the IFRS Interpretations Committee is to:

   • A.Advise the IASB on its work plan
   • B.Set sustainability disclosure standards
   • C.Give guidance where standards are unclear
   • D.Fund and oversee the IASB's work

   Answer: C. The Interpretations Committee issues interpretations on issues not specifically covered or open to differing treatment. Sustainability disclosure standards are set by the ISSB, and the Advisory Council gives the boards strategic advice.

5. 5. Who is responsible for preparing a company's financial statements?

   • A.The shareholders
   • B.The tax authorities
   • C.The directors
   • D.The external auditors

   Answer: C. Directors are responsible for preparing financial statements that give a true and fair view and for keeping adequate accounting records. Auditors report on the statements; they do not prepare them.

6. 6. Which user group is mainly interested in whether a business will pay amounts it owes within the agreed credit period?

   • A.Suppliers
   • B.Government agencies
   • C.Equity investors
   • D.Employees

   Answer: A. Suppliers who give credit want to know whether invoices will be paid when due. Employees focus on job security and pay, and investors on returns and the value of their shares.

7. 7. Under the Conceptual Framework, an asset is a present economic resource that the entity:

   • A.Has paid for in full in cash
   • B.Owns legally at the reporting date
   • C.Expects to buy in the next year
   • D.Controls as a result of past events

   Answer: D. The definition rests on control, not legal ownership or payment. An item bought on credit is still an asset, and an item to be bought next year is not yet one.

8. 8. Equity is the residual interest in an entity's assets after deducting:

   • A.Its non-current assets
   • B.All of its liabilities
   • C.Its current liabilities only
   • D.Dividends paid in the year

   Answer: B. Equity equals assets less all liabilities, current and non-current. This is the accounting equation rearranged.

9. 9. Financial statements are normally prepared on the basis that the entity will continue to trade for the foreseeable future. This is the:

   • A.Prudence concept
   • B.Going concern basis
   • C.Accrual basis
   • D.Consistency concept

   Answer: B. Going concern justifies carrying assets at cost less depreciation rather than at break-up values. If the entity were to close, the statements would be prepared on a different basis.

10. 10. A business charges December's electricity to this year's profit, although the bill will not arrive or be paid until February. Which basis is it applying?

    • A.The going concern basis
    • B.The historical cost basis
    • C.The cash basis
    • D.The accrual basis

    Answer: D. Under the accrual basis, transactions are recorded in the period they occur, not when cash is paid or received. The cash basis would leave December's electricity out of this year's expenses.