Acca f3 Financial Accounting (int) Study Text

Introduction

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Studying F3 

As the name suggests, this paper examines basic financial accounting topics and is fundamental for all 

financial accountants. 

The examiner for this paper is 

Nicola Ventress. She is a member of the ICAEW and an experienced 

accounting and financial reporting author and tutor. 

1 What F3 is about 

Paper F3 aims to develop your knowledge and understanding of the underlying principles, concepts and 

regulations relating to financial accounting. You will need to demonstrate technical proficiency in the use 

of double entry techniques, including the preparation of basic financial statements for sole traders, 

partnerships and limited liability companies. The skills you learn at F3 will be built upon in papers F7 and 

P2.

2 What skills are required? 

You are expected to demonstrate Level 1 skills throughout the syllabus. This means that you need to show 

'knowledge and comprehension'. It is not sufficient to merely know the subject, you need to understand it 

and show that you understand. Therefore you will need to not only know an accounting standard but also 

show how to use it in practice. 

Double entry bookkeeping is a basic skill that you will need throughout all the financial accounting papers. 

Therefore it is essential that you master it at this stage or you will find the higher papers very difficult to 

understand.

For paper F3, you also need to be able to prepare basic financial statements. Once again, your basic 

knowledge from paper F3 will be built upon in papers F7 and P2. Therefore you must understand the 

basics of preparing financial statements now. 

3 How to improve your chances of passing 

Examiners have repeatedly emphasised that students must know the 

whole syllabus. This is particularly 

important for paper F3, as all fifty questions are compulsory and the examiner aims to cover most of the 

syllabus. If you miss out a syllabus area, you will severely limit your chances of passing the exam. 

Above all you must practise questions. The text gives you some exam style questions but you really need a 

large question bank to practise on as given in BPP's Practice and Revision Kit. Do keep to the timing 

specified. The exam is 2 hours for 90 marks, which means 1.3 minutes per mark or just over 2.5 minutes 

for a 2 mark question. In the exam question bank we suggest that you allow 1 minute for a 1 mark 

question and 2 minutes for a 2 mark question. 

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viii

Introduction

The exam paper 

The exam is a two-hour paper. 

There will be fifty questions and they are all compulsory. The format of the paper based Pilot Paper is 50 

MCQs, 40 being 2 mark questions and 10 being 1 mark questions. The examiner has confirmed that this 

will be the format for future exams. 

All exams are marked by computer and so no marks will be given for workings. 

Analysis of pilot paper 

Number of marks

40

2 mark compulsory MCQs

80

10

1 mark compulsory MCQs

10

90

Computer based exam 

You can also sit the exam as a computer based assessment. Feedback from students implies that the 40 2 

mark questions are divided approximately 50:50 between MCQs and data entry style questions. Data entry 

style questions may require you to enter the answer to a calculation or words to complete a sentence and 

are very similar to the non-MCQ style questions found in the Quick Quizzes. 

Technical articles 

There have been a number of technical articles on exams in recent editions of Student Accountant. 

Fundamental Knowledge, 7 February 2008 (why all the questions in Fundamentals level exams are 

compulsory)

Be Prepared – multiple choice questions, 7 July 2008 (practical guidance on how to maximise marks in 

MCQs)

Computer-based exams put to the test, 19 August 2008. 

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1

The context and purpose of 

financial reporting

P

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3

Introduction to 

accounting

Introduction

We will begin by looking at the aim of Paper F3, as laid out in ACCA's syllabus 

and Study Guide and discussed already in the introductory pages to this text (if 

you haven't read through the introductory pages, do so now – the information 

in there is extremely important). 

'Aim of Paper F3 

 

To develop knowledge and understanding of the underlying principles 

and concepts relating to financial accounting and technical proficiency 

in the use of double-entry accounting techniques including the 

preparation of basic financial statements.' 

Before you learn 

how to prepare financial reports, it is important to understand 

why they are prepared. Sections 1 – 3 of this chapter introduce some basic 

ideas about financial reports and give an indication of their purpose. You will 

also be introduced to the 

functions which accountants carry out: financial 

accounting and management accounting. These functions will be developed in 

detail in your later studies for the ACCA qualification.

Section 4 identifies the main 

users of financial statements and their needs.

Finally, in Section 5, we will look at the 

main financial statements: the

statement of financial position and the income statement; as well as the main 

elements of assets, liabilities, equity, revenue and expense. 

Topic list 

Syllabus reference 

1 The purpose of financial reporting 

A1(a) 

2 Types of business entity 

A1(b) – (d) 

3 Nature, principles and scope of financial reporting 

A1(e) 

4 Users' and stakeholders' needs 

A2(a) 

5 The main elements of financial reports 

A3(a) – (b) 

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