Questions and Answers of Cambridge International AS And A Level Accounting

Depreciation is only included in a cash budget in the final month. True/False?
Identify one reason why a cash budget might be prepared.
Explain why depreciation is not included in a cash budget.
What is meant by the term 'master budget'?
Name one component of a master budget.
Explain the term 'variance'.
Why would a manager flex a budget?
Copy out the 'grid' used to calculate sub-variances.
Usage is applied to direct materials. What is the word that replaces 'usage' in 'Direct labour ________ sub-variance'?
We say 'materials price'. What word do we use for the price of labour?
Why is a budget sometimes flexed?
X is a manufacturing business. Budgeted production is 1000 units. Budgeted materials used: 500 tonnes. Actual materials used: 550 tonnes. Which figure should be used in the grid for Sq?
Standard quantity direct materials information: 40 units; standard price $10.00. Actual quantity 50 units; actual price $10.00. Calculate the direct materials usage sub-variance.
Explain a possible factor that would result in an adverse materials usage sub-variance.
Explain a possible factor that would result in a favourable labour rate sub-variance.
Identify two reasons why it is important to appraise capital investment decisions.
Only large businesses need to evaluate capital projects. True/False?
Explain how the use of poor machinery might affect a direct materials usage sub-variance and a labour efficiency sub-variance.
A machine is purchased for $600. The net cash inflows are: Year 1 $250; Year 2 $250; Year 3 $250. In which year will the machine pay for itself?
Explain why the managers of a business would think it necessary to undertake a capital investment appraisal.
Payback uses cash flows to appraise a possible capital investment decision. True/False?
When undertaking a capital investment appraisal it is only necessary to consider the additional costs and additional revenues caused by the purchase of the new asset. True/False?
Identify one advantage of using payback as a method of investment appraisal.
What is meant by the term 'opportunity cost'?
Outline two limitations of using payback as a method of appraisal.
The accounting rate of return uses profits in the formula. True/False?
Average investment for the period = Half of the initial investment + Scrap value. True/False?
If a business has a return on capital employed of 23 per cent, what will be the minimum return necessary in order to undertake a new project?
Outline two advantages of using ARR as a method of capital appraisal.
Outline two disadvantages of using ARR as a method of capital investment appraisal.
Initial investment $100000; additional working capital required $20000. Calculate the average investment.
NPV is an abbreviation of net positive value. True/False?
$1000 received in two years' time is worth more/less than $1000 received today? (Delete the incorrect response.)
Identify two disadvantages of using NPV as a method of capital investment appraisal.
The discount factor used in NPV calculations is based on the predicted average inflation rate over the period of investment. True/False?
NPV of machine A is $4760; NPV of machine B is $1920. Identify the machine that should be purchased.
NPV of machine X is $(2350); NPV of machine Y is $(1990). Identify the machine that should be purchased.
Identify one method of capital investment appraisal that uses profits in the calculation.
Which methods of capital investment appraisal are calculated using cash flows?
Explain the term 'sunk cost'.
How are sunk costs treated in a capital investment appraisal?
Explain the term 'sensitivity analysis'.
The selling price of goods is deducted from the_______ gained from the selling of those same goods to calculate gross profit.
Opening inventory must always be less than closing inventory. True/False?
Inventory held at close of business on 31 July cost $13000. It will be sold for $20000. What is the value of inventory at start of business 1 August?
An asset with a carrying amount of $4000 is sold for $3800. Calculate the profit or loss on disposal.
Which methods used to value inventory are acceptable under IAS 2?
Which methods are acceptable for the purposes of the Companies Act 1985?
A greengrocer must always use FIFO as a method of valuing his closing inventory. True/False?
Which accounting standard deals with inventory?
Which method of inventory valuation uses the most recent prices paid to purchase the goods?
In times of rising prices, which method reveals profits earlier than other methods?
The closing inventory figure shown on a statement of financial position is always determined by a physical count/computer printout.
Financial year end 31 May. The inventory valuation is conducted on 10 June. a How should goods purchased on 7 June be treated? b How should sales returns received on 5 June be treated?
Borgia sends Mungo some goods on sale or return. Who includes these goods as part of their inventory?
If inventory has been overvalued, what effect has this had on reported profits?
If inventory has been undervalued, this will______ reported profits.
Why is it important to make the distinction between capital and revenue expenditure?
Give an example of a revenue receipt for a restaurant.
Which statement would you prepare to calculate net assets?
Explain what is meant by the term 'capital receipts'.
Which statement would you prepare to calculate the capital of a business?
Give two reasons why the owner of a business would prepare financial statements.
How is carriage inwards treated in an income statement?
In what way is gross profit different to profit for the year?
Why are assets shown on a statement of financial position at cost?
Which statement would you prepare to calculate gross profit?
Explain the effect that the inclusion of sales returns has on the gross profit of a business.
Gross profit is $50 000. Closing inventory was valued at $3000. It has been discovered that closing inventory should have been valued at $2000. What is the correct gross profit?
A damaged article held at the end of a financial year cost $40; after repairs costing $14 it can be sold for $55. What is the value of the article for inventory purposes?
Goods held at the end of a financial year cost $450; they can currently be purchased for $500; they have a resale value of $700. What is the value of closing inventory?
Inventories are goods that have been bought for resale that have not yet been sold at the financial year end. True/False?
Purchases = Cost of sales - Opening inventory + Closing inventory. True/False?
What effect does closing inventory have on cost of sales?
Closing inventory at 31 July 2014 is the same as opening inventory at 1 August 2014. True or false?
A sole trader has limited liability. True/False?
Sole traders are required by law to keep a full set of double-entry books. True/False?
Cash received from credit customers during the year is credited to the trade receivables adjustment account. True/False?
Cash paid to credit suppliers during the year is credited to the trade payables adjustment account. True/False?
Opening balance in a vehicles account is $23 000. No purchases or sales of vehicles take place over the year. The closing balance is $18000. What does the difference in balances represent?
Profits retained in the business___________ Drawings_________ Capital introduced = Profit for year.
Profits retained in the business + Drawings = _______ .
A statement of affairs is the same as a_________ .
Would an error in the purchases returns account affect profit for the year?
List three items that could be classified as current liabilities.
Define 'drawings'.
Purchases $217845; sales returns $377; purchases returns $652. What is the value of net purchases?
Carriage inwards will increase/decrease the value of purchases/sales.
Explain the difference between the stewardship function and the management function of using accounting information.
Identify two types of person that would use accounting information for stewardship purposes.
Identify two types of person that would use accounting information for management purposes.
Why is it important to distinguish between capital and revenue expenditure?
In what way is gross profit different to profit (before tax) for the year?
Complete the following equations:a. Gross profit - Revenue expenditure = ?b. Gross profit - Profit for the year = ?c. Profit for the year + Revenue expenditure = ?
One reason that the managers of a business prepare financial statements is to determine the areas of the business that need to be improved. This is an example of the stewardship/management function
A business charges customers carriage outwards in order to appear more profitable. True/False?
Define the term 'debtor'.
Explain the connection between debtors and trade receivables.
Fill in the gaps with 'debited', 'credited', 'income' or 'expense'.a. When a bad debt is written off, the debtor's account is_________ and the bad debts account is_________ .b. When the provision for
In which ledger would you find the bad debts account?

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