Questions and Answers of Accounting A Smart Approach

Miro Ltd has received its bank statement for the last month and has started the reconciliation process by checking the statement items with its own records. The following items were found: (i) The
Roger is considering setting up in business, importing art and craft work from South America. He has made the following estimates of the activities for the first year. (i) (ii) He will transfer 10
Sunny runs a wholesale fruit and vegetable business. Different suppliers are offered different terms depending upon the quantity, timing, quality and relia- bility of supply. Customers negotiate the
John Bale purchased and sold the following units of one line of stock. All the units are identical. Purchases Date Quantity Price per unit (E) 5 Nov 500 3.00 19 Nov 300 3.10 21 Nov 250 3.15 27 Nov
Palo Ltd has put the following values on the stock in hand at the end of the period: Cloth A Cloth B Cost () 4567 8.650 Net realizable value (E) 8 764 12 400 Trimmings 2 450 Lining cloth Total 4 750
Compare the relative advantages and disadvantages of using the continuous and the periodic methods of stock recording.
What valuation would you include in the financial statements for the following items of stock: (i) Ten printers were purchased for £4200 list price less a trade discount of 4 per cent. Deliv very
Take a business with five types of stock in hand at the year end. The cost and net realizable value of each is given below, together with the total cost and total net realizable value figures. PARUDE
Going back to our bicycle example; assume that the bicycles purchased in the month had cost £230 each instead of the £200 that the ones in stock had cost. Required What price would we use to value
The calculations of cost of sales and closing stock is different for each method. Assume that the sales all took place at £350. Required What will be the profit under each method of stock valuation?
Why is the term ‘bean counter’ no longer appropriate in describing the modern accountant?
Discuss the definitions of accounting given by the American Accounting Association in 1966.
From a systems perspective why is it wrong to view financial accounting as being one of two very distinct academic disciplines?
What is the process by which data is converted to information?
Discuss the contribution of General System Theory to the development of the principles and practices of management.
Explain the difference between an open system and a closed system and give examples of each.
You have been asked to provide a report to a member of the management team (who is not an accountant). You arrange an interview with the manager to discuss the requirement. List the main areas that
What is meant by the term ‘limited liability? Why would John and Azina not obtain the full benefit of limited liability if they set up as a company?
What three documents must be produced during the formation of a joint-stock company? Describe the purpose of each.
i State if the shares below are being sold at a premium or at a discount. Par value () Selling price () Premium/discount 1.00 1.00 1.20 0.80 0.25 1.10 4.00 2.50 3.00 1.00 0.10 0.35 100.00 110.00
Is it true to say that shareholders in a large joint-stock company (the legal owners) have very little say in the management of the company?
Explain the crucial differences that exist between a debenture and an ordinary share (equity).
The following notes describe the procedures which the Bales might adopt for the purchasing section of their business. When goods are delivered they usually arrive with a delivery note detailing the
What is meant by the term ‘internal controls’? Why is it important to have good internal control procedures in an organization?
Large food retailers have a problem with shop lifting, with making sure that all goods are paid for and controlling large numbers of part-time staff. Required Think of a large supermarket with which
(i) Define in your own words the terms ‘entity concept’ and ‘cost principle’. (ii) Rose runs a flower arranging business from her home. She uses the study as her office but it is also used by
Imagine you are in the shop belonging to Bale and Co. It looks much like any computer hardware and software store that you may be familiar with. Required (a) What ‘assets’ might you find in the
Ahmed started in business as a newsagent on | April. The following information has been extracted from the business records of Ahmed at 30 April.Money invested by owner 30000 Cost of goods sold 800
Look at the list of items for Ahmed’s shop given above. Required (a) What liabilities does Ahmed have? (b) Can you find one long-term liability and one short-term liability?
Look at the transactions for Ahmed. Required How much capital did Ahmed himself invest in the business?
Look at the list of transactions for Ahmed for April. Required Identify the expenses incurred.
Which of the following items would be recorded as part of the accounting system for a retail shop? (i) Rent of shop £2400 p.a. (ii) Rent of flat over shop which is used by the owner as a main
Using the accounting equation fill in the following: Assets Liabilities 3.500 Capital 1.000 4.000 Liabilities Capital Assets 7 200 Capital 4.000 Assets Liabilities 200 Fixed assets 6.000 Capital
Describe transactions that would explain the changes in the following series of balance sheets: Recording, classifying and processing data A Bank 12 000 Capital 12 000 B Van 6.000 Capital 12 000
Teek starts business with £5000 capital, paying this amount into a bank account (i) Bought fittings £600, paying by cheque. (ii) Bought goods on credit £2000. (iii) Bought van for £3000 paying
Aileen starts in business as a supplier of specialist art supplies by mail order on 1 May and makes the following transactions in the first few weeks: 1 May 2 May 3 May 4 May 5 May 6 May Opens a
How informative is the manual system? Can you answer the following questions without calculating further figures: / (i) | What did customer 2 owe on 22 November? (ii) What was the balance of the bank
Is there a problem when customer 1 pays £50.00? Should Azina be concerned?
How should the purchase return be treated?
Should the creditors for fixed assets be kept separate from other creditors?
What procedures should be followed before a supplier invoice is paid?
Create the following customer accounts: Account Reference Account Name SL001 SL002 Cardiff Timber Suppliers Micham & Micham Account Address South Dock Cardiff Docks Cardiff High Street Bristol BS22
On checking your work you discover that you need to make the following alterations: (i) SLOO1 Change Credit Limit to £9000 (ii) SLO02 Change post code to BS24 4TY (iii) SLO03 Change contact name to
Print a list of the customers accounts you have created (names and addresses). Study the sales ledger menu and select the correct option and follow the prompts.
Create the following supplier accounts: Account Reference Account Name Account Address Credit Limit Telephone No Fax No Contact Name PLO001 Mirage Computers Mirage House Singleton Swansea S42 6DJ
On checking your work you discover that you need to make the following alterations: (i) PLOOO1 Change post code to $42 8D] (ii) PLOO02 Change Credit Limit to £6,500 (iii) PLOOO3 Delete account
Print a list of the customer accounts you have created (names and addresses), Exercise relating to the setting up of the nominal ledger
Create the following nominal ledger accounts: Account number 1001 1050 1030 2150 4001 4002 4003 Account name Fixture and Fittings Building Society Computer Equipment Tax Due Sale of Computers Sale of
Make the following changes: (i) 6000 Mortgage Interest (ii) 6200 Sales Promotion (iti) 1050 Building Society Investment (iv) 2150 VAT
You have just created 16 nominal ledger accounts, state which ones are assets, liabilities, expenses or revenue.
Print a list of your nominal accounts. At this point after taking a backup on the disk marked ‘exercises’ inform your lecturer that you are now ready to set up all the accounts for the case study.
Using the chart of account you designed for the manual system and the names of your customers and suppliers, create all the necessary accounts on your computer system in preparation for the posting
The accountant has discovered that an electricity bill of £700 has been posted to the advertising account by mistake. Required Draft a journal entry in good form to correct the error. Post to the
What sort of errors, that can be common in a manual system, are eliminated by an integrated accounting system ?
Why are day books available after inputting in an integrated system rather than before processing as in a manual system.
Why should batches not exceed 20 documents?
Design a journal document which will be available pre-printed and pre-numbered.
Jean Sutherland had devised an exercise to test the students understanding of which ledger to access and how the double entry is completed. The exercise, although manual, is very similar to the way
Post the following invoices. Due to the fact that we have limited space to record detail, reference each transaction using the transaction number given in column one. Ensure that the total value of
A Post the following credit notes B_ Within the sales ledger examine each account you have posted to by using the menu option Transaction History. C Within the sales ledger examine the nominal
Post the following receipts in a manual system and then on to your computer system: Trans No 14 15 Date 190795 200795 16 210795 Customer SL0001 Amount () 350 SL0002 400 SL0003 140 B Within the sales
Identify who uses financial statements and what their needs are
Calculate and interpret ratios that enable you to comment on a business’ profitability, liquidity, and efficiency.
What is Just-in-Time inventory control?
Profitability ratios look at how effectively the short-term assets and liabilities of the business are being managed.
It is not useful to compare ratios with budgeted figures.
Return on capital employed is calculated by dividing operating profit by capital employed.
Stronger controls on credit may lead to a decrease in trade receivable days.
The working capital cycle is computed by adding inventory days to trade payable days and deducting trade receivable days.
Calculate and interpret ratios that enable you to comment on a business’ capital structure, investment returns, and performance
Discuss the limitations of ratio analysis.
Capital structure ratios look at how good the returns and performance of shares in a company are and help investors and potential investors to assess the likely success rate of the company.
Gearing measures the extent to which a business is financed by sales rather than equity capital.
The higher a company’s interest cover, the more difficulty it is likely to have in meeting its interest obligations.
Acompany with gearing of 80% would be considered to be highly geared and to carry low level of risk.
PEratios will not be affected by the market price of the share.
If acompany’s EPS figure is gradually increasing year by year, this shows that the company is making more profit per share every year.
Explain the difference between management accounting and financial accounting
Distinguish between fixed and variable costs
Use break-even analysis as a decision-making tool
Calculate and understand contribution, the break-even point, and margin of safety
Discuss the limitations of break-even analysis.
Can all costs be clearly categorized as fixed or variable?
Why is contribution different from profit?
Management accounting has set formats for statements, determined by regulation.
The break-even point is useful for decision-making purposes to help businesses know the point at which they are making neither a profit nor a loss.
|fa product hasa selling price of £15, with raw material costs of £6 per unit and labour costs of £3 per unit then the contribution per unit would be £6.
Ifabusiness has a high margin of safety then it is likely to be high risk.
Anassumption of break-even analysis is that fixed costs remain static over the relevant range.
Understand why overheads need to be included when costing products
Calculate a simple ‘blanket’ overhead rate
Apply absorption costing methods to fully cost out a range of products
Understand the limitations of traditional costing methods
Calculate a simple activity-based cost.
|f there are two service departments (such as canteen and maintenance departments) that use the services of each other, how could their costs be apportioned across the manufacturing departments?
Will the total overhead cost each year calculated by ABC be the same as that for absorption costing? If not, why not?
What are the advantages and disadvantages of investing in an ABC system?
In absorption costing, if the actual volumes are greater than forecast and the actual costs are less than estimated, there will be an under recovery. of overheads.
Inabsorption costing, if the actual volumes are less than forecast and the actual costs are more than estimated, there will need to be an adjustment to increase profit.
In absorption costing, costs are reapportioned from service departments to manufacturing departments.

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