IFA CMA Exam Question Solution

Topics: Accounting Principles (Theory)

CMA MAY-2022, 4(a)/DECEMBER-2018, 1(b)

Solution-4(a)/1(b):

CMA MAY-2022, 5(a)

Solution-5(a):

A Sukuk Bond is a sharia-compliant bond like instruments used in Islamic finance.

Sukuk bonds distribute periodic coupon payments (either at a fixed or floating rate).
At the end of this period, known as maturity date, issuers pay back the money raised
from investors, known as the principal.

Similarities:

 Both provide investors with payment streams.

 Both are issued to investors and may be used to raise capital for a firm.
 Both are considered to be safer investments than equities.
 Sukuk Bond investors receive profit generated by the underlying asset on a periodic
basis while Traditional Bond investors receive periodic interest payments.

Dissimilarities:

 Sukuk Bond involves asset ownership while Traditional Bonds are debt obligations.
 If the asset backing a Sukuk Bond appreciates then the sukuk bond can appreciate
whereas Traditional Bond yield is strictly due to its interest rate.
 Assets that back sukuk bond are halal whereas traditional bonds are often riba and
may finance non sharia compliant businesses or fuel speculation.
 Sukuk Bond valuation is based on the value of the assets backing them while a
Traditional Bonds price is largely determined by its credit rating.

Page 1 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA MAY-2022, 7(a)

Solution- 7(a):

CMA JANUARY-2022, 4(a)/JUNE-2021, 1(d)

Page 2 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution- 4(a)/1(d):

CMA NOVEMBER-2021, 3(a)

Solution- 3(a):

CMA NOVEMBER-2021, 4(a)

Solution- 4(a):

CMA NOVEMBER-2021, 5(a)/Keiso Q-5(P-630)

Page 3 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-5(a):

CMA JUNE-2021, 1(a)

Solution-1(a):

CMA JUNE-2021, 1(b)/DECEMBER-2018, 1(d)

Page 4 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-1(b)/1(d):

CMA JUNE-2021, 3(a)

Solution-3(a):

CMA JUNE-2021, 5(a)

Solution-5(a):

CMA DECEMBER-2020, 4(a)/JUNE-2019, 4(a)

Solution-4(a):

Page 5 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2020, 1(a)/DECEMBER-2017, 1(b)

Solution-1(a)/1(b):

CMA JUNE-2020, 1(b)

Page 6 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-1(b):

CMA JUNE-2020, 1(c)

Solution-1(c):

Page 7 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2020, 2(a)

Solution-2(a):

CMA JUNE-2020, 2(b)

Solution-2(b):

CMA JUNE-2020, 3(a)

Page 8 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-3(a):

CMA JUNE-2020, 3(c)

Solution-3(c):

Page 9 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2020, 4(a)

Solution-4(a):

CMA JUNE-2020, 4(b)

Solution-4(b):

Page 10 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA APRIL-2020, 1(a)

Solution-1(a):
The core financial statements are the cash flow statement, the income statement, and the balance
sheet.
The income statement is not prepared on a cash basis – that means accounting principles such as
revenue recognition, matching, and accruals can make the income statement very different from the
cash flow statement of the business. If a company prepared its income statement entirely on a cash
basis (i.e., no accounts receivable, nothing capitalized, etc.) it would have no balance sheet other
than shareholders’ equity and cash.
It’s the creation of the balance sheet through accounting principles that leads to the rise of the cash
flow statement.
Net income from the bottom of the income statement links to the balance sheet and cash flow
statement. On the balance sheet, it feeds into retained earnings and on the cash flow statement, it is
the starting point for the cash from operations section.
CMA APRIL-2020, 2(a)

Solution-2(a):

CMA APRIL-2019, 1(a)

Solution-1(a):

Page 11 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA APRIL-2019, 1(b)

Solution-1(b):

CMA APRIL-2019, 1(c)

Solution-1(c):

Page 12 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA DECEMBER-2019, 2(a)

Solution-2(a):

CMA DECEMBER-2019, 2(b)(iii)

Solution-2(b)(iii):

CMA DECEMBER-2019, 4(a)

Solution-4(a):

Page 13 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2019, 1(a)/DECEMBER-2017, 1(a)

Solution-1(a):

CMA JUNE-2019, 1(b)

Solution-1(b):

CMA JUNE-2019, 1(c)/JUNE-2018, 1(a)

Page 14 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-1(c)/1(a):

CMA JUNE-2019, 1(d)

Page 15 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-1(d):

CMA JUNE-2019, 2(a)

Solution-2(a):

Cash equivalents are short-term, highly liquid investments that are readily convertible to
known amounts of cash and that are subject to an insignificant risk of changes in value.

Such as Treasury bills, Commercial paper, Money market funds etc.

Examples of non-cash transactions are: (a) the acquisition of assets either by assuming
directly related liabilities or by means of a lease; (b) the acquisition of an entity by means of
an equity issue; and. (c) the conversion of debt to equity.

In business accounting, non-cash transactions include any items that do not directly involve
the transfer of money. When preparing a cash-flow statement, the only way to adjust for
non-cash transactions is through the indirect method, which subtracts rule items from the
company's net income.

Usefulness of the Statement of Cash Flows are:

 Enables investors to use the information about historic cash flows of a company for
projections of future cash flows on which to base their investment decisions.
 Shows the changes in the balance sheet, and helps in analysing the operating,
investing and financing activities.
 Provides insights about the liquidity and solvency of a firm, which is vital for the
survival and growth of any organization.
 Shows the financial position of an entity during a period of time.
 Helps in providing information regarding the cash-generating abilities of the entity’s
core activities.

Page 16 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

 Shareholders and investors tend to compare the Cash Flow Statements of different
companies as it helps them to reveal the quality of their earnings. This helps in making
them the right decision.
 Assuming the company has some long-term debt obligations, a Cash Flow Statement
helps the investors and shareholders to determine the possibility of repayment. It can
be used to easily predict the timing, amounts, and uncertainty of future cash flows.
CMA JUNE-2019, 5(a)

Solution-5(a):

CMA APRIL-2019, 1(a)/Keiso Ch-4(Question-32)

Solution-1(a):

Page 17 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA APRIL-2019, 1(b)

Solution-1(b):

Page 18 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA APRIL-2019, 1(c)

Solution-1(c):

CMA APRIL-2019, 2(a)

Solution-2(a):

CMA APRIL-2019, 3(a)

Solution-3(a):

CMA APRIL-2019, 4(a)

Solution-4(a):

Page 19 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA APRIL-2019, 4(b)

Solution-4(b):

CMA APRIL-2019, 5(b)

Solution-5(b):

Page 20 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA DECEMBER-2018, 1(a)

Solution-1(a):

CMA DECEMBER-2018, 1(c)

Solution-1(c):

CMA DECEMBER-2018, 2(a)

Page 21 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-2(a):

CMA DECEMBER-2018, 5(a)

Solution-2(a):

CMA JUNE-2018, 1(b)

Solution-1(b):

Page 22 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2018, 1(c)

Solution-1(c):

CMA JUNE-2018, 1(d)

Solution-1(d):

 Financial Statements Are Derived from Historical Costs

 Financial Statements Are Not Adjusted for Inflation
 Financial Statements Only Cover a Specific Period of Time
 Financial Statements May Not Be Comparable
 Financial Statements Could be Wrong Due to Fraud
 Financial Statements Do Not Cover Non-Financial Issues
 Financial Statements May Not Have Been Verified by Audit
 Financial Statements Have No Predictive Value

Page 23 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2018, 4(a)

Solution-4(a):

CMA JUNE-2018, 5(a)

Solution-5(a):

CMA DECEMBER-2017, 1(a)/JUNE-2019, 1(a)

Page 24 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

Solution-1(a):

CMA JUNE-2017, 1(c)

Solution-1(c):

Page 25 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA DECEMBER-2017, 4(a)

Solution-4(a):
The declaration date is the day on which the board of directors announces the dividend.

The date of record is the day on which the company checks its records to identify shareholders of
the company. An investor must be listed on that date to be eligible for a dividend payout.

The date of payment is the day the company mails out the dividend to all holders of record. This
may be a week or more after the date of record.

CMA JUNE-2017, 1(a)/DECEMBER-2016, 1(a)

Solution-1(a):

Page 26 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2017, 1(b)

Solution-1(b):

CMA JUNE-2017, 2(a)

Solution-2(a):
The direct costs of issuing stock, such as underwriting costs, accounting and legal fees, printing
costs, and taxes, should be reported as a reduction of the amounts paid in. Issue costs are therefore
debited to Paid-in Capital in Excess of Par—Common Stock because they are unrelated to
corporate operations.

CMA JUNE-2017, 4(a)

Solution-4(a):

Page 27 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA DECEMBER-2016, 1(b)

Solution-1(b):

CMA DECEMBER-2016, 1(c)

Solution-1(c):

Page 28 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA DECEMBER-2016, 1(d)

Solution-1(d):

CMA DECEMBER-2016, 2(b)

Solution-2(b):

Page 29 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2016, 3(c)

Solution-3(c):

CMA JUNE-2016, 5(a)

Solution-5(a):

Page 30 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2016, 5(b)

Solution-5(b):

CMA JUNE-2016, 5(c)

Solution-5(c):
How to report an error correction:

CMA JUNE-2016, 5(d)

Solution-5(d):

Page 31 of 32
 IFA CMA Exam Question Solution
Topics: Accounting Principles (Theory)

CMA JUNE-2016, 5(e)

Solution-5(e):

Page 32 of 32