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Accounting and Finance
Relating to the opening and closing inventory for a financial period, which of the following is true?a. Both figures are shown in the income statement but only the opening inventory is shown in the
If a business has paid gas bills totalling £34,000 during a financial period but owes£3,000 for gas by the end of the period, what will be the opening balance in the gas account at the start of the
A business paid a £720 subscription to a trade magazine on 30 June 2008, for the two years to 1 July 2010. The business's financial year ends on 30 November 2008. What relevant figures for
A business buys a car which costs £15,000. This price includes £500 for insurance and £60 for road tax. The business's name was painted on the side of the car at an additional cost of£160. The
A machine is bought for £18,000, plus £3,000 installation costs. It is to be depreciated on a diminishing balance basis using a rate of 60% p.a. What is the depreciation to be charged in the second
Cost of sales equals:a. Opening inventory plus purchases plus closing inventoryb. Opening inventory less purchases plus closing inventoryc. Closing inventory plus purchases less opening inventoryd.
The terms real, intangible and monetary all relate to a particular accounting concept. What is it?
How are fixed and current assets distinguished from one another?
List four different types of current asset.
In the absence of any new capital introduced, or any withdrawal of capital by the owner, what will cause the balance on the owner's equity account to change from year to year?
List three classes of short-term liability and two classes of long-term liability that will appear in the typical balance sheet.
State two different ways in which profit can be measured.
Write out the full accounting equation.
Why is the matching principle important when preparing a profit and loss account and balance sheet?
What do you understand by Cronhelm's additivity principle and why does this prin- ciple tend to lead to the understatement of the net asset value of a company as shown in its balance sheet?
In what ways does a US balance sheet differ from that presented using the UK method of preparation?
In what important ways will a profit and loss account differ from a statement of cash flow?
List three different types of profit figure that you are likely to see in a published profit and loss account.
Make as comprehensive as possible a list of the assets you own today including your home if you own one, or unexpired rent if you still have some time to go before your next rent bill is due. Decide
Deduct ion your total value of assets drawn up in the previous Review activity any liabilities : (mortgages, bank loans, etc.) to calculate how much you are worth (this is referred to as your
Sid's business during the next month is even better than in the first. Sid purchased a further 200 of diesel and had just filled his tank with 35 worth before finishing on the last day of the month.
Taking the closing balance sheet from the example above prepare a balance sheet and profit and loss account for the third year of trading incorporating the following transactions: 1. The owner
Prepare a cash flow statement for the above business as at the end of year 2 to create the comparative figures for the above statement
Repeat the above, reconciling the operating profit and cash statement for the year ended 31 December, year 2.
Take each figure in the 2001 columns and measure its percentage change over 2000. Identify where the most signifi- cant changes have occurred.
As with the balance sheet, compare the current-year reported figures in the profit and loss account with the information shown for the prior year. Calculate the percentage change from one year to
Compare the current- and prior-year figures for cash flow and not the magnitude and direction of change for each line of the statement.
List four aspects of the role of accounting.
Complete the following: Information is data which are
What distinguishes the money from the capital market?
What two events led to the transformation and spread of accounting between the 12th and 15th centuries?
Name four fundamental types of business operation.
Name three factors that distinguish firm size.
To whom are the directors of a company accountable?
What are the four principal duties of the directors of a company?
List four stakeholder groups with an interest in the typical firm.
On what matching principle is financial accounting based?
Identify the five steps in the application of the decision-oriented approach to ac- counting.
List the five quality criteria in the provision of accounting information.
What are the two matching principles which characterise management accounting?
Most large companies have a website that contains ‘investor information’ such as the latest set of accounts and any other information relevant to shareholders. On the Internet locate the websites
On the balance sheet equation show how the following transactions would be entered:(i) A purchase of fixed assets worth £500 000 from a supplier for payment in one month (show both the purchase
Mr Sloppy has left you a list of balances with instructions to prepare a balance sheet and profit and loss account in standard UK format. He has left you with no further instructions.You are
Mr Sloppy also leaves a note stating that:* the operating cash flow for the year was £66 000* fixed assets were purchased for £35 000* last year’s tax was paid of £16 500.You are required to:(i)
Far Eastern Limited commenced their year’s operations with the balance sheet shown below:During the year the business engaged in the following transactions:*New plant was purchased for £8000 and
Locate and print out the latest publishéd financial report from www.Cobham.co.uk. Compare the current- and prior-year figures in the balance sheet and profit and loss account, noting the magnitude
Locate and print out the most recent accounts of Marks & Spencer ple from the www.marksandspencer.com web site for comparison with the accounts of Cobham plc. Place the balance sheets and cash flow
Promptprint Ltd, a printing business, has received an enquiry from a potential customer for the quotation of a price for a job. The pricing policy of the business is based on the plans for the next
IAn accountant prepared a statement of financial position for a business. In this statement, the equity of the owner was shown next to the liabilities. This confused the owner, who argued 'My equity
Iso should be shown as an asset on the statement of financial position.' How would you explain this misunderstanding to the owner?
IThe statement of financial position shows how much a business is worth.' Do you agree with this statement? Explain the reasons for your response.
IWhat is meant by the accounting equation? How does the form of this equation differ between the two statement of financial position layouts mentioned in the chapter?
I In recent years there have been attempts to place a value on the 'human assets' of a business in order to derive a figure that can be included on the statement of financial position. Do you think
I Although the income statement is a record of past achievement, the calculations required for certain expenses involve estimates of the future.’ What does this statement mean? Can you think of
I Depreciation is a process of allocation and not valuation.’ What do you think is meant by this statement?
I What is the convention of consistency? Does this convention help users in making a more valid comparison between businesses?
I ‘An asset is similar to an expense.’ In what ways in this true or untrue?
I ‘Searching for an agreed conceptual framework for accounting rules is likely to be a journey without an ending.’ Discuss.
I What problems does a user of segmental statements face when seeking to make comparisons between businesses?
What problems does a user of segmental statements face when seeking to make comparisons between businesses?
The following information was extracted from the financial statements of I. Ching (Booksellers)plc for the year to 31 May 2013:Required:Prepare a statement of comprehensive income for the year ended
Manet plc had the following share capital and reserves as at 1 June 2012:During the year to 31 May 2013, the company revalued property, plant and equipment upwards by £30 million and made a loss on
Segmental information relating to Turner plc for the year to 30 April 2013 is shown below.Required:Analyse the performance of each of the three main business segments for the year and comment on your
What causes the profit for the reporting period not to equal the net cash inflow?
Torrent plc’s income statement for the year ended 31 December 2012 and the statements of financial position as at 31 December 2011 and 2012 are as follows:During 2012, the business spent £67
Chenplc’s income statements for the years ended 31 December 2012 and 2013 and the statements of financial position as at 31 December 2012 and 2013 are as follows:Included in ‘cost of sales’,
The following are the financial statements for Nailsea plc for the years ended 30 June 2012 and 2013:There were no disposals of non-current assets in either year. Dividends were paid in 2012 and 2013
The following financial statements for Blackstone pic are a slightly simplified set of published accounts. Blackstone plc is an engineering business that developed a new range of products in 2009.
Simplified financial statements for York plc are:Notes:2013 1 Operating expenses include depreciation of £13 million and a surplus of £3.2 million on the sale of non-current assets.2 The expense
Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2012 and 2013 are as follows:Dividends were paid on ordinary shares of
The financial statements for Harridges Ltd are given below for the two years ended 30 June 2012 and 2013. Harridges Limited operates a department store in the centre of a small town.Dividends were
Iqbal Ltd started trading on 1 July 2008. During the first five years of trading, the following occurred:Required:Assume that the company paid the maximum legal dividend each year. Under normal
The following is a draft set of simplified financial statements for Pear Limited for the year ended 30 September 2013.The following information is available:Required:Prepare a revised set of
Rose Limited operates a small chain of retail shops that sell high-quality teas and coffees.Approximately half of sales are on credit. Abbreviated and unaudited financial statements are as
Consider the shareholder and the director user groups. Describe at least five ways in which their personal objectives might conflict. For each of the conflicts you have already described, how might
Obtain a copy of a quality daily newspaper and identify any article that refers to or discusses the financial problems of a named business firm. Using the World Wide Web as a source discover using a
Ona sheet of paper draw two columns. Head the left hand column ‘financial accounting’ and the right-hand column ‘management accounting’. Using the two columns make comparative notes
Accounting developed in Europe in response to the needs of merchants. Discuss the extent to which the subject has had to change in response to the development of other types of business enterprise.
There are a number of different criteria for evaluating the quality of accounting information. Discuss the extent to which these add anything to our understanding of the nature of such information.
What is a discretionary budget? Try to think of at least three expenses (not already mentioned in the chapter) that might form part of a discretionary budget. What problems do discretionary budgets
Jill manages a team of six junior managers, who in turn each manage a separate section of between five and seven junior employees. The business operates a system of budgetary control through
Why are flexible budgets considered to be more useful than fixed ones in the context of budgetary control?
Chen plc’s income statements for the years ended 31 December 2020 and 2021 and the statements of financial position as at 31 December 2020 and 2021 are as follows:There were no non-current asset
The following are the financial statements for Nailsea plc for the years ended 30 June 2021 and 2022:Required:Prepare a statement of cash flows for Nailsea plc for the year ended 30 June 2022. Income
Iqbal Ltd started trading on 1 July 2017. During the first five years of trading, the following occurred:Required:Assume that the company paid the maximum legal dividend each year. Under normal
The following is a draft set of simplified financial statements for Pear Limited for the year ended 30 September 2022.1 Depreciation has not been charged on office equipment with a carrying amount of
Manet plc had the following share capital and reserves as at 1 June 2021:During the year to 31 May 2022, the company revalued property, plant and equipment upwards by £30 million and made a loss on
Segmental information relating to Turner plc for the year to 30 April 2022 is:Required:Analyse the performance of each of the three main business segments for the year and comment on your results.
A company is considering investing in a new production facility at a cost of $120 million. The new facility is expected to produce annual cost savings as set out in Table 9.21. The facility is
Freshfare Co is a food retailer with 25 stores in the south of the country in which it operates. The board of directors are currently considering expansion into the north of the country by opening a
ANG Co is a manufacturer of high-performance processor chips for smart phones and other mobile devices. The company, based in Europe, has grown rapidly over the last five years. It has been able to
Explain the concept of ‘margin of safety’ in CVP analysis.
If a business reduces its fixed costs whilst maintaining the same contribution margin, will this increase or decrease its break-even point?
Explain what is meant by ‘operating gearing’.
If a company increases its operating gearing, will this make its profit more or less sensitive to changes in sales volume?
Explain three potential weaknesses of CVP analysis as a decision tool.
Alpha Co has 200 units of material x in inventory. This originally cost \($40\) per unit.Alpha Co no longer needs the material x for its original use. It could sell the inventory for \($10\) per
Give an example of a cost which may not be relevant in the short term, but could become relevant in a long-term decision.
Discuss what is meant by the term ‘stakeholder salience’ and why it might be important to incorporate this theory into a business’s communication strategy.
In terms of the accounting standard-setting process, provide examples of who might be classified into each of the following categories and explain why you believe this to be the case:a dormant
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