[GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
**Question 1.** Which body is responsible for developing International Financial Reporting
Standards (IFRS)?
A) Financial Accounting Standards Board (FASB)
B) International Accounting Standards Board (IASB)
C) International Monetary Fund (IMF)
D) World Bank
Answer: B
Explanation: The IASB, an independent standard‑setting body, issues IFRS for use worldwide.
**Question 2.** Under IFRS, the primary purpose of the Conceptual Framework is to:
A) Provide detailed accounting rules for every transaction
B) Guide the IASB in developing standards and assist preparers in applying them
C) Replace national GAAPs entirely
D) Set tax rates for multinational corporations
Answer: B
Explanation: The Conceptual Framework outlines objectives and concepts that underpin
standard‑setting and aid users in interpretation.
**Question 3.** Which of the following is NOT a component of the Statement of Financial
Position?
A) Assets
B) Liabilities
C) Revenue
D) Equity
Answer: C
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
Explanation: Revenue appears on the profit or loss statement, not on the balance sheet
(Statement of Financial Position).
**Question 4.** In the indirect method of preparing a cash flow statement, the first adjustment
to net profit is to:
A) Add depreciation expense
B) Subtract cash sales
C) Add cash received from customers
D) Subtract interest paid
Answer: A
Explanation: The indirect method starts with net profit and adjusts for non‑cash items such as
depreciation.
**Question 5.** When a parent company acquires a subsidiary, goodwill is measured as:
A) Fair value of consideration transferred minus the fair value of identifiable net assets
B) Historical cost of the subsidiary’s assets
C) The excess of the subsidiary’s book value over purchase price
D) The amount of cash paid at closing only
Answer: A
Explanation: IFRS 3 defines goodwill as the excess of the purchase consideration over the fair
value of identifiable assets and liabilities.
**Question 6.** Under IFRS 15, revenue is recognized when:
A) Cash is received from the customer
B) The entity has transferred control of the promised goods or services to the customer
C) The contract is signed
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
D) The entity obtains a bill of exchange
Answer: B
Explanation: IFRS 15 requires revenue recognition upon transfer of control, not merely receipt
of cash.
**Question 7.** IFRS 16 requires lessees to:
A) Record operating leases off‑balance sheet
B) Recognize a right‑of‑use asset and a lease liability for all leases except short‑term and
low‑value leases
C) Only disclose lease commitments in the notes
D) Capitalize leases only if the term exceeds five years
Answer: B
Explanation: IFRS 16 brings most leases onto the balance sheet by recognizing a right‑of‑use
asset and a corresponding liability.
**Question 8.** Which measurement basis is used for financial instruments classified as “fair
value through profit or loss” (FVTPL)?
A) Amortized cost
B) Historical cost
C) Fair value with changes recognized in profit or loss
D) Fair value with changes recognized in other comprehensive income
Answer: C
Explanation: FVTPL instruments are measured at fair value, and all changes flow through profit
or loss.
**Question 9.** Professional skepticism in financial reporting primarily means:
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
A) Accepting management’s representations without question
B) Maintaining a questioning mindset and critically assessing audit evidence
C) Relying solely on internal controls to prevent misstatement
D) Avoiding any communication with audit committees
Answer: B
Explanation: Professional skepticism requires auditors to be alert to conditions that may
indicate possible misstatement.
**Question 10.** Activity‑Based Costing (ABC) differs from traditional absorption costing by:
A) Allocating overhead based solely on direct labor hours
B) Tracing costs to activities and then to products based on consumption of those activities
C) Ignoring indirect costs altogether
D) Using only variable costs for product costing
Answer: B
Explanation: ABC assigns overhead to activities first, then to products based on each product’s
use of those activities.
**Question 11.** A flexible budget:
A) Is prepared for a single, fixed level of activity
B) Adjusts for changes in activity levels and shows expected costs at each level
C) Cannot be used for variance analysis
D) Is identical to a static budget
Answer: B
Explanation: Flexible budgets are revised for actual activity levels, allowing meaningful variance
analysis.
Finance Certification Exam Guide
**Question 1.** Which body is responsible for developing International Financial Reporting
Standards (IFRS)?
A) Financial Accounting Standards Board (FASB)
B) International Accounting Standards Board (IASB)
C) International Monetary Fund (IMF)
D) World Bank
Answer: B
Explanation: The IASB, an independent standard‑setting body, issues IFRS for use worldwide.
**Question 2.** Under IFRS, the primary purpose of the Conceptual Framework is to:
A) Provide detailed accounting rules for every transaction
B) Guide the IASB in developing standards and assist preparers in applying them
C) Replace national GAAPs entirely
D) Set tax rates for multinational corporations
Answer: B
Explanation: The Conceptual Framework outlines objectives and concepts that underpin
standard‑setting and aid users in interpretation.
**Question 3.** Which of the following is NOT a component of the Statement of Financial
Position?
A) Assets
B) Liabilities
C) Revenue
D) Equity
Answer: C
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
Explanation: Revenue appears on the profit or loss statement, not on the balance sheet
(Statement of Financial Position).
**Question 4.** In the indirect method of preparing a cash flow statement, the first adjustment
to net profit is to:
A) Add depreciation expense
B) Subtract cash sales
C) Add cash received from customers
D) Subtract interest paid
Answer: A
Explanation: The indirect method starts with net profit and adjusts for non‑cash items such as
depreciation.
**Question 5.** When a parent company acquires a subsidiary, goodwill is measured as:
A) Fair value of consideration transferred minus the fair value of identifiable net assets
B) Historical cost of the subsidiary’s assets
C) The excess of the subsidiary’s book value over purchase price
D) The amount of cash paid at closing only
Answer: A
Explanation: IFRS 3 defines goodwill as the excess of the purchase consideration over the fair
value of identifiable assets and liabilities.
**Question 6.** Under IFRS 15, revenue is recognized when:
A) Cash is received from the customer
B) The entity has transferred control of the promised goods or services to the customer
C) The contract is signed
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
D) The entity obtains a bill of exchange
Answer: B
Explanation: IFRS 15 requires revenue recognition upon transfer of control, not merely receipt
of cash.
**Question 7.** IFRS 16 requires lessees to:
A) Record operating leases off‑balance sheet
B) Recognize a right‑of‑use asset and a lease liability for all leases except short‑term and
low‑value leases
C) Only disclose lease commitments in the notes
D) Capitalize leases only if the term exceeds five years
Answer: B
Explanation: IFRS 16 brings most leases onto the balance sheet by recognizing a right‑of‑use
asset and a corresponding liability.
**Question 8.** Which measurement basis is used for financial instruments classified as “fair
value through profit or loss” (FVTPL)?
A) Amortized cost
B) Historical cost
C) Fair value with changes recognized in profit or loss
D) Fair value with changes recognized in other comprehensive income
Answer: C
Explanation: FVTPL instruments are measured at fair value, and all changes flow through profit
or loss.
**Question 9.** Professional skepticism in financial reporting primarily means:
, [GDAF] Graduate Diploma in Accounting
Finance Certification Exam Guide
A) Accepting management’s representations without question
B) Maintaining a questioning mindset and critically assessing audit evidence
C) Relying solely on internal controls to prevent misstatement
D) Avoiding any communication with audit committees
Answer: B
Explanation: Professional skepticism requires auditors to be alert to conditions that may
indicate possible misstatement.
**Question 10.** Activity‑Based Costing (ABC) differs from traditional absorption costing by:
A) Allocating overhead based solely on direct labor hours
B) Tracing costs to activities and then to products based on consumption of those activities
C) Ignoring indirect costs altogether
D) Using only variable costs for product costing
Answer: B
Explanation: ABC assigns overhead to activities first, then to products based on each product’s
use of those activities.
**Question 11.** A flexible budget:
A) Is prepared for a single, fixed level of activity
B) Adjusts for changes in activity levels and shows expected costs at each level
C) Cannot be used for variance analysis
D) Is identical to a static budget
Answer: B
Explanation: Flexible budgets are revised for actual activity levels, allowing meaningful variance
analysis.
