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accounting and finance for non specialists

Questions and Answers of Accounting And Finance For Non Specialists

Outline the direct and indirect methods of cash flow statement preparation. L01
At the start of this chapter, it was stated that ‘cash is king’ and that it is relatively easy ‘to manufacture profits, but virtually impossible to create cash’. Discuss this statement. L01
What is the relationship between profit and cash flow? L01
The direct method of preparing the cash flow statement is the easiest to understand, but most companies use the indirect method. Why do you think this might be so? L01
Preparing a cash flow statement using the indirect method is like being an accounting detective. Discuss this view. L01
State whether the following are true or false. If false, explain why.(a) Depreciation and profit from sale of fixed assets are both non-cash flow items and must be added back to operating profit to
The cash flows below were extracted from the accounts of Peter Piper, a music shop owner.& S Loan repaid 25,000 Purchase of office equipment 15,000 Sale of property 25,000 Interest paid 350 Interest
The cash flows below were extracted from the accounts of Picasso and Partners, a painting and decorating business.£Bank interest paid 1,000 Loan received 9,000 Cash for sale of a motor car 4,000
Diana Rink Ltd, a chain of off-licences, has the following extracts from the accounts.Profit and Loss Account£Operating profit 95,000 Depreciation for year 8,000 Profit on sale of 3,500 fixed assets
Brian Ridge Ltd, a construction company, has extracted the following cash flows from its books as at 30 November 2001.Operating profit 25,000 Interest paid Increase in stock over year 3,500 Increase
You have the following extracts from the profit and loss account and balance sheets for Grow Hire Ltd, a transport company.Grow Hire Ltd Profit and Loss Account Year Ended 31 December 2001
You have the following information regarding dividends and taxation for Brain and Co., a software house.Profit and Loss Account (Extract) Balance Sheets as at 31 December (Extracts)(from Year to 31
A construction company, Expenso Ltd, has the following summaries from the profit and loss accounts and balance sheets for the year ended 30 September 2002.£000 Turnover 460,750 Cost of Sales
Expenso Ltd (continued)Expenso Ltd Balance sheets as at 30 September 2001 2002£000 £000 £000 £000 Fixed Assets Intangible Assets Patents 4,000 4,500 Tangible Assets Land and buildings:Cost 20,000
Explain the nature and importance of accounting.
Outline the context which shapes accounting.
Identify the main users of accounting and discuss their information needs.
Distinguish between the different types of accountancy and accountant.
How much profit have we made?
Have we enough cash to pay our employees’ wages?
What level of dividends can we pay to our shareholders?
Should we expand our product range?
What price are rival products selling at?
How much raw material will I need? How much will it cost?
How many hours will it take to make each superwhizzo and how much is labour per hour? How much will it cost to make the product in terms of items such as electricity?
How should I recover general business costs such as business rates or the cost of machinery wearing out?
How much profit should I aim to make on each superwhizzo?
How much in gate receipts will we get from our league matches, cup matches and European fixtures?
How much can we afford to pay our players?
How much cash have we available to buy rising new stars and how much will our fading old stars bring us?
How much will we get from television rights and commercial sponsorship?
How much do we need to finance new capital expenditure, such as building a new stadium?
Managers should only supply financial information to the ‘current’ shareholders of companies, no other user groups have any rights at all to information, pare) not the general public or
Explain the nature of financial accounting. L01
Appreciate the basic language of accounting. L01
Identify the major accounting conventions and concepts. L01
What is financial accounting and why is its study important? L01
Sole traders, partnerships and limited companies all have different users who need financial information for different purposes. Discuss.Q4 Classify the following as an income, an expense, an asset,
Sharon Taylor has the following financial details:Sales £8,000 Assets £15,000 General expenses £4,000 Liabilities £3,000 Trading expenses £3,000 Cash outflows £12,000 Cash inflows £10,000
Priya Patel is an overseas student studying at a British University. Priya has the following financial details:£ £Tuition fees paid 6,840 Food paid 550 Hall of residence fees paid 2,000 General
Understand the role of budgeting in planning and controlling business organisations.
Be able to prepare straightforward budget statements for a small business.
Know about the stages involved in setting a budget for a larger business organisation, and appreciate some of the behavioural issues that may arise.
Be able to evaluate actual outcomes against budget plans.
Pete spends most of the 20X7 calendar year preparing to open his new business. Having identified premises that he can afford to rent, he then spends some time standing about outside counting the
17.1 You are the newly appointed management accountant of Brewster Fitzpayne Limited, a small manufacturing company. The management accounting information used in the company has previously been at a
17.2A It is widely recognised that budget setting can be mishandled in organisations and may result in some undesirable effects that work against an organisation's best interests.Write a short report
Buckle Purslane Limited uses a rolling budget system. The company's directors are currently preparing a sales and production budget for the month of March 20X7, which is just over one year away.They
Hillgate St. Martins Limited manufactures a single product. Its budget sales (in units) for December 20X4 are 9350. Opening stock of finished goods for the month is budgeted at 12 360 and closing
Luminant Productions Limited produces light fittings from a small factory unit. The company's directors have just met to discuss the sales budget and related matters for the next quarter, and have
17.6A Colney Brighouse Limited makes office furniture. The company's directors are preparing sales and production forecasts for January, February and March 20X4. Sales forecasts in units for its two
17.7 Barfield Primrose Limited is the manufacturer of the renowned 'Primrose' ice cream maker, which retails at £199. Barfield Primrose sells to wholesalers at £145 per unit. The prime cost
17.8A Corby Thirlwell Limited manufactures ornamental birdbaths made out of reconstituted stone. The company works on a rolling budget system, and its senior management is currently examining
17.9 Reinhart has his own wholesale business selling goods to retailers. His sales are made entirely on credit. In respect of the sales in any given month he expects 75% to be paid for in the next
17.10A Roxanne's budgeted year-end accounts at 31 December 20X4 include a figure for debtors of £23 600. This represents:£20% of November sales of £28 000 5 600 60% of December sales of £30 000
17.11 Skippy is about to set up in business as a tour operator, after several years of working in the travel industry. He is starting out on a small scale, working from a room in a friend's office.
17.12 Referring to the information given in exercise 17.11, at the beginning of April 20X4 Skippy reviews the past three months. Bookings on the first coach trip to Austria were not as good as
17.13A Silas is starting out in business on his own, running a shop selling scuba diving gear. He has gained a lot of free publicity for his new venture by writing articles in specialist trade and
17.14A Working with the information from 17.13A, put the cash flow information into a spreadsheet. Use the spreadsheet to perform 'what if' calculations to answer Silas's questions as follows:i)
Understand the use of a standard costing system in a manufacturing environment.
18.1 Denholm Pargeter Limited is an engineering company producing a wide range of component parts for the aerospace industry. Its component XP04/H has the following budget sales and prime costs for
18.2A Dorchester Slugg Limited manufactures plastic refuse bins. Its monthly budget for August 20X6 is as follows:£Sales: 4 000 unitsX£18 72000 Costs Direct materials: 4000 (7kg x £1) (28
18.3 Darblay Harriett Limited produces a single product - a vv.ooden cabinet. The company's budget for November 20X9 is as follows;Sales: 2 000 units x £19.50£39 000 Costs Direct materials: 2 000 x
18.6 What is the sales price variance for the month?a) £640 (F)b) £640 (A)c) £2 650 (F)d) £2 650 (A).
18.7 What is the direct materials price variance for the month?a) £2 226 (F)b) £2 226 (A)c) £2 385 (F)d) £2 385 (A).
18.8 What is the direct materials quantity variance for the month?a) £1 749 (F)b) £1 749 (A)c) £1 590 (F)d) £1 590 (A).
18.9 What is the direct labour rate variance for the month?a) £901 (A)b) £795 (A)c) £795 (F)d) £901 (F).
18.10 What is the direct labour efficiency variance for the month?a) £2 332 (F)b) £2 332 (A)c) £2 226 (F)d) £2 226 (A).The following information is relevant for questions 18.11A to 18.16A Estella
18.11A What is the sales profit volume variance for the month?a) £6 313 (A)b) £8 946 (A)c) £8 946 (F)d) £6 313 (F).
18.12A What is the sales price variance for the month?a) £2 490 (F)b) £2 490 (A)c) £15 190 (F)d) £15 190 (A).
18.13A What is the direct materials price variance for the month?a) £6 555 (A)b) £1 245 (A)c) £6 555 (F)d) £1 245 (F).
18.14A What is the direct materials quantity variance for the month?a) £3 320 (F)b) £3 320 (A)c) £7 800 (A)d) £7 800 (F).
18.15A What is the direct labour rate variance for the month (to the nearest £)?a) £360 (A)b) £360 (F)c) £1 021 (F)d) £1 021 (A)
18.16A What is the direct labour efficiency variance for the month (to the nearest £)?a) £523 (A)b) £523 (F)c) £340 (F)d) £340 (A).
18.17 Ferguson Farrar Limited is a manufacturing company. For the month of April 20X3 it budgeted for 4000 units of production, each to use 1.5 hours of machine time. Production overhead absorption
18.19 Grindleton Gears Limited is a manufacturing business that uses a standard costing system. If a variance exceeds 5% of the flexed budget total for that item, the management team investigates it,
Understand the nature and classification of costs as variable, fixed or semi-variable.
Brinn Bartholomew Limited: Budget for June 20X9 Sales: 1400 bins x £250 each£350 000 Variable costs Direct materials: 1400 bins x £97 Direct labour: 1400 bins x £36 Contribution(135 800) (50400)
The following points can be plotted onto the graph:production 010 000 Level of Fixed costs £50 000 50 000 Total costs £50 000 100 000 555
We do not need to plot any other points in order to draw the graph, because variable costs increase at a steady rate in line with the level of production. The data produces the graph shown in Figure
19.1 Billericay Ashworth Limited makes tennis racquets. In an average month it produces about 3000 racquets. The following are some of the costs the company incurs:• Cost of raw materials. Each
19.2A A tour operator, Colby Overland Limited, is organising a coach trip to Russia as one of its new season's forthcoming attractions. Two of the major costs incurred are described as follows:i)
19.3 Classify each of the following costs as:• variable• fixed• stepped• semi-variable.i) Sales staff members' mobile phone charges. There is a basic rental cost irrespective of the number of
19.4 For each of the following types of business, list at least two fixed and two variable costs that might typically be incurred:• self-employed taxi driver• solicitor• shirt manufacturer•
19.5A For each of the following types of business, list at least two fixed and two variable costs that might typically be incurred:• milk delivery business• coffee bar• stationery
19.6 Porton Fitzgerald Limited manufactures wardrobes. The selling price of a wardrobe is £210. Each wardrobe costs £52 in direct materials (all variable) and £34 in direct labour (all variable).
19.7A Vernon Xylophones Limited makes xylophones (no surprises there). The direct materials cost of a xylophone is £300; the direct labour process is intensive and costs £450 per xylophone. Both
19.8 Fullbright Bognor Limited, a manufacturing business, has the following cost structure:Selling price per unit: £85 Variable costs per unit: £41 The company's directors expect to incur fixed
19.9A Finch Fletcher Limited manufactures trumpets. Each trumpet sells for £350, and has variable costs of manufacture of £120. The company can produce no more than 1200 in a year. In the year
19.10 Foster Beniform Limited makes mannequins for shop window displays. The company's directors are meeting to discuss sales budgets for 20X8. The business has struggled to make a profit in recent
19.11A Fallon Frodsham Limited manufactures and installs small prefabricated building structures that are sold to people who want to establish a home office using part of their gardens. Each
19.12 Gropius Maplewood Limited manufactures a single product that it sells for £150 per unit. Variable costs of each unit are £62, but are expected to rise at the beginning of 20X8 to £63;
19.13A Gulf Gadgets Limited manufactures chess sets. Each chess set sells for £185. Variable costs of manufacture are £78. The company's directors are currently setting the budget for 20X9. Fixed
19.14 Gimbali Grace Limited manufactures a single model of electric fan heater. Each heater sells for £21. Variable costs of manufacture are £7.50. Fixed costs of the business are estimated at
19.15A Gecko Grimsby sells specialist aquaria. In the 20X4 financial year each aquarium sold for £1320. The variable costs of manufacture were £321 per aquarium and the total fixed costs incurred
19.16 Garbage Solutions Limited makes wheelie bins. In the 20X1 financial year each bin will sell for £25, with variable labour costs of £3.20 per bin and variable raw materials costs of £4.20.
19.17A Gospodin Grimshaw Limited manufactures hiking boots for sale which it sells principally in Russia and other parts of eastern Europe.Each pair of boots sells for £15. Variable costs are £5.50
19.18 Harrison Haworth Limited makes rucksacks. It has developed and patented a highly effective waterproof material and a revolutionary design. These make the company's products very much sought
19.19 Inez & Pilar Fashions Limited is a fashion manufacturing and wholesale business operating from rented premises. The business is well established and has operated successfully for several years.
19.20A Ince Pargeter Limited manufactures padded carrying cases for laptop computers. The market is currently buoyant, and the company's factory is working to capacity. The company has been offered

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