F3 ACCA PRACTICE QUESTIONS (SECTION A)

Financial reporting is the name given to the actual transactions carried out by a business.

• True

• False

Which of the owner’s might be personally liable for business liability?

• • Sole trader & Partners

• • Partners & Shareholders

• • No one needs to bear business liability personally

• • Sole trader & Shareholders

Which of the business may have more than one owner?

• • Partnerships

• • Sole proprietorship

• • All of the business should consist more than one owner

Which of the following statements are TRUE about limited liability companies?

(1) The company exposure to debt and liability is limited
(2) Financial statements must be produced
(3) A company continues to exist regardless of the identity of its owners

• • 2 and 3 only

• • 1 and 3 only

• • 1, 2 and 3

• • 1 and 2 only

A sole trader's financial statements are private, whereas a company's financial statements are publicly filed

• TRUE

• FALSE

Answer explanation

Explanation

A sole trader is fully and personally liable for any losses that the business might make, a company's shareholders are not personally liable for any losses that the company might make.

Both sole traders and companies have capital invested into their business.

Both sole traders and shareholders of companies are not personally liable for any losses that the business might make

• TRUE

• FALSE

Answer explanation

Explanation

A sole trader is fully and personally liable for any losses that the business might make, a company's shareholders are not personally liable for any losses that the company might make.

Both sole traders and companies have capital invested into their business.

Only companies, not sole traders have capital invested into the business

• TRUE

• FALSE

Answer explanation

Explanation

A sole trader is fully and personally liable for any losses that the business might make, a company's shareholders are not personally liable for any losses that the company might make.

Both sole traders and companies have capital invested into their business.

Which of the following are differences between sole traders and limited liability companies?
1. A sole traders’ financial statements are private; a company’s financial statements are sent to shareholders and may be publicly filed
2. Only companies have capital invested into the business

3. A sole trader is fully and personally liable for any losses that the business might make; a company’s shareholders are not personally liable for any losses that the company might make

• • 1 and 2 only

• • 2 and 3 only

• • 1 and 3 only

• • 1, 2 and 3

What are the advantages of a limited company?
1.More capital can be raised as no limit on number of shareholders
2.Profits have to be shared out amongst a potentially larger number of people
3.limited liability

4.Control of company can not be lost to outsiders – shares only sold if all shareholders agree

• • 1&4 only

• • 2 only

• • 3 only

• • all except 2

Which TWO of the following are differences between sole traders and limited liability companies?

Pick 2 options

• • A sole trader's financial statements are private; a company's financial statements are sent to shareholders and may be publicly filed

• • Only companies have capital invested into the business

• • A sole trader is fully and personally liable for any losses that the business might make

• • Revaluations can be carried out in the financial statements of a company, but not in the financial statements of a sole trader