ExpertMedium1 markMultiple Choice
The Qualitative Characteristics of Financial InformationQualitative characteristicsSuspense AccountsConceptual Framework
ACCA · Question 64 · The Qualitative Characteristics of Financial Information
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6.
Issue 4: A suspense account has a $4,500 Credit balance.
If AquaHarvest decided NOT to investigate and clear the suspense account, but instead just left it in the statement of financial position, which qualitative characteristic of financial information would be most directly compromised?
Section B - Case 2: Single Entity Accounts
Scenario: AquaHarvest Marine Farms
AquaHarvest prepares its financial statements for the year ended 30 September 20X6.
Issue 4: A suspense account has a $4,500 Credit balance.
If AquaHarvest decided NOT to investigate and clear the suspense account, but instead just left it in the statement of financial position, which qualitative characteristic of financial information would be most directly compromised?
Answer options:
A.
Timeliness
B.
Faithful representation
C.
Comparability
D.
Understandability
How to approach this question
Consider what a suspense account is: it's a placeholder for an error. If an error is left uncorrected, the financial statements are not accurate or complete.
Full Answer
B.Faithful representation✓ Correct
Faithful representation requires financial information to be complete, neutral, and free from error. A suspense account represents an unresolved error. Leaving it uncorrected means the financial statements contain known errors and therefore do not faithfully represent the entity's financial position.
Common mistakes
Selecting understandability, because a suspense account is confusing.
Practice the full ACCA FA — Financial Accounting Practice Exam 5
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