Questions and Answers of Cost And Management Accounting An Introduction

Which of the items in the list of transactions in question A5.1 will have an effect on an income statement (profit and loss account)?AppendixLO1
Which of the items in the list of transactions in question A5.1 will have an effect on a statement of cash flows?AppendixLO1
Which of the items in the list of transactions in question A5.1 will have an effect on a statement of financial position (balance sheet)?AppendixLO1
Analyse each of the following transactions to show the two aspects of the transaction:(Section 5.3)Apr. 1 Jane Gate commenced her dental practice on 1 April by depositing £60,000 in a business bank
(a) Using the list of transactions at question A5.5 prepare a spreadsheet similar to that presented in Table 5.3.(b) Show that the spreadsheet totals satisfy the accounting equation.AppendixLO1
Using the totals from the columns of the spreadsheet of question B5.1, prepare for the dental practice in the month of April:(a) a statement of cash flows;(b) a statement of financial position
Prepare ledger accounts for the transactions of Jane Gate’s dental practice, listed in question A5.5.AppendixLO1
Which of the following errors would be detected at the point of listing a trial balance?(a) The bookkeeper enters a cash sale as a debit of £49 in the cash book and as a credit of £94 in the sales
Explain the application of the accounting equation to transactions involving the buying and selling of inventory (trading stock).AppendixLO1
Explain the application of the accounting equation to transactions involving the manufacture and sale of products.AppendixLO1
Analyse transactions of a trading or manufacturing business during a specific period of time, using the accounting equation.AppendixLO1
Prepare a spreadsheet analysing the transactions, and show that the results of the spreadsheet analysis are consistent with financial statements provided by the organisation.AppendixLO1
Explain the main aspects of the statement of cash flows, profit and loss account and statement of financial position (balance sheet) of a trading or a manufacturing business.Additionally, for those
Analyse the transactions of a trading or a manufacturing business using the rules of debit and credit bookkeeping.AppendixLO1
Prepare, from a list of transactions of an organisation, ledger accounts and a trial balance which could be used to confirm the financial statements provided by the organisation.AppendixLO1
On 1 May the Sea Traders Company purchased 200 spare parts for fishing boats, costing £20 each. On 5 May, 60 of these spare parts were sold to a customer at a price of £25 each. The customer paid
Summarise the transactions of question A6.1 in a spreadsheet and show that the totals of the spreadsheet satisfy the accounting equation.AppendixLO1
The following transactions relate to Toy Manufacturers Company during the month of June.Date Business transactions £June 1 Purchase toy components from supplier, 100 items at £3 each, paying 300 in
The following list of transactions relates to the business of Peter Gold, furniture supplier, during the month of April. Analyse each transaction to show the two aspects of the transaction.150 Part 2
(a) Using the list of transactions at question A6.4 above, prepare a spreadsheet similar to that presented in Table 6.8.(b) Show the resulting impact on the accounting equation and demonstrate that
Using the total from the columns of the spreadsheet of question B6.1(a), prepare for the business in the month of April:(a) a statement of cash flows;(b) a statement of financial position (balance
Define a non-current (fixed) asset and apply the definition.AppendixLO1
Explain the recognition conditions that are applied to tangible non-current (fixed)assets, intangible non-current (fixed) assets and non-current (fixed) asset investments.AppendixLO1
Explain users’ needs for information about non-current (fixed) assets.AppendixLO1
Describe and explain the non-current (fixed) asset information provided in annual reports of companies.AppendixLO1
Evaluate the usefulness of published information about non-current (fixed) assets.AppendixLO1
Explain the nature of depreciation.AppendixLO1
Calculate depreciation, record the effect on the accounting equation and report the result in financial statements.Additionally, for those who choose to study the supplement:AppendixLO1
Record non-current (fixed) assets and depreciation in ledger accounts.AppendixLO1
State the definition of a non-current (fixed) asset and explain why each condition is required. (Section 8.2)AppendixLO1
Explain the categories: (Section 8.2.1)(a) tangible non-current (fixed) assets;(b) intangible non-current (fixed) assets; and(c) non-current (fixed) asset investments;and give an example of
What do users of financial statements particularly want to know about non-current(fixed) assets? (Section 8.4)AppendixLO1
What type of information would you expect to find about non-current (fixed) assets in the financial statements and notes of a major UK listed company? (Section 8.4)AppendixLO1
State the definition of depreciation. (Section 8.7)AppendixLO1
What is meant by accumulated depreciation (also called aggregate depreciation)?(Section 8.7)AppendixLO1
What information is needed to calculate annual depreciation? (Section 8.7.1)AppendixLO1
What is the formula for calculating straight-line depreciation? (Section 8.7.2)AppendixLO1
How is reducing-balance depreciation calculated? (Section 8.7.3)AppendixLO1
How does depreciation help to retain cash in a business for asset replacement?(Section 8.7.5)AppendixLO1
Why does the net book value of a non-current (fixed) asset not always equal the proceeds of sale? (Section 8.8.5)AppendixLO1
Why is depreciation said to cause an allocation problem in accounting? (Section 8.8.6)AppendixLO1
How should the cost of a non-current (fixed) asset be decided? (Section 8.2.2)AppendixLO1
What are the matters of judgement relating to non-current (fixed) assets which users of financial statements should think about carefully when evaluating financial statements?AppendixLO1
What is meant by impairment? (Section 8.8.7)AppendixLO1
On reviewing the financial statements of a company, the company’s accountant discovers that expenditure of £8,000 on repair to factory equipment has been incorrectly recorded as a part of the cost
On 1 January Year 1, Angela’s Employment Agency was formed. The owner contributed £300,000 in cash which was immediately used to purchase a building. It is estimated to have a 20-year life and a
Assume that fee income and costs are the same in Year 2 as in Year AppendixLO1
Record the transactions and events of Year 2 in an accounting equation spreadsheet. Prepare the statement of financial position (balance sheet) at the end of Year 2 and the income statement (profit
Angela’s Employment Agency sells the building for £285,000 on the final day of December Year 3. Record the transactions and events of Year 3 in an accounting equation spreadsheet. (See Table 8.7
Explain how the accounting equation spreadsheet of your answer to question B8.4 would alter if the building had been sold for £250,000.AppendixLO1
On 1 January Year 1, Company A purchased a bus costing £70,000. It was estimated to have a useful life of three years and a residual value of £4,000. It was sold for £8,000 on the last day of Year
The biscuit machine in question C8.1 was sold at the end of Year 4 for a price of £3,000.Required(a) Prepare the spreadsheet for Year 4 analysing the transactions and events of the year.(b) Prepare
The Souvenir Company purchased, on 1 January Year 1, a machine producing embossed souvenir badges. The machine cost £16,000 and was estimated to have a five-year life with a residual value of
Prepare ledger accounts to report the transactions and events of questions C8.1 and C8.2.AppendixLO1
Write a short commentary on each ledger account prepared in S1, to enable a nonaccountant to understand their purpose and content.AppendixLO1
Define a current asset and apply the definition.AppendixLO1
Explain the operation of the working capital cycle.AppendixLO1
Explain the factors affecting recognition of inventories (stocks), receivables(debtors) and investments.AppendixLO1
Explain how the information presented in a company’s statement of financial position (balance sheet) and notes, in relation to current assets, meets the needs of users.AppendixLO1
Explain the different approaches to measurement of inventories (stocks) and cost of goods sold.AppendixLO1
Analyse provisions for doubtful debts using a spreadsheet.AppendixLO1
Analyse prepayments using a spreadsheet.AppendixLO1
Explain the term ‘revenue’ and the application of principles of revenue recognition.Additionally, for those who choose to study the supplement:AppendixLO1
Record receivables (debtors) and prepayments in ledger accounts.AppendixLO1
What is the definition of a current asset? (Section 9.2)AppendixLO1
What is the working capital cycle? (Section 9.3)AppendixLO1
What are the features of raw materials, work in progress and finished goods which justify their recognition in a balance sheet? (Section 9.4.1)AppendixLO1
What information do users need about current assets? (Section 9.5)AppendixLO1
What is meant by FIFO, LIFO and the average cost method of pricing issues of goods?(Section 9.8.3)AppendixLO1
How is a provision for doubtful debts decided upon? (Section 9.9)AppendixLO1
What is a prepayment? (Section 9.10)AppendixLO1
What is meant by ‘revenue recognition’? (Section 9.11)AppendixLO1
Why are there problems with revenue recognition? (Section 9.11.2).AppendixLO1
The Sycamore Company has inventories which include the following four items:Description Purchase cost Selling price Cost of selling£ £ £Engine 6,500 8,250 350 Chassis 2,000 1,800 200 Frame 4,800
On reviewing the company’s financial statements, the company accountant discovers that items of year-end inventory of goods which cost £18,000 have been omitted from the record. What will be the
On reviewing the financial statements, the company accountant discovers that an amount of £154,000 owed by a customer will be irrecoverable because the customer has fled the country. What will be
During its first month of operations, a business made purchases and sales as shown in the table below:Date Number of units Unit cost Number of purchased units sold Jan. 5 100 £1.00 Jan. 10 50 Jan.
A company has a stock of goods consisting of four different groups of items. The cost and net realisable value of each group is shown in the table below.Group of items Cost Net realisable value£ £A
At the end of Year 3 the Bed Company has a statement of financial position (balance sheet)comprising £3,000 receivables (debtors), £8,000 other assets and £11,000 ownership interest, consisting of
The Bed Company continues trading during Year 4. The statement of financial position (balance sheet) at the end of Year 4, in its first draft, showed receivables (debtors) as £4,850 and the
On 1 December Year 1 a company paid £2,400 as an insurance premium to give accident cover for the 12 months ahead. The accounting year-end is 31 December.Required Prepare an accounting equation
A fire destroyed a company’s detailed stock records and much of the merchandise held in stock. The company accountant was able to discover that stock at the beginning of the period was £40,000,
It is the policy of Seaton Ltd to make provision for doubtful debts at a rate of 10% per annum on all debtor balances at the end of the year, after deducting any known bad debts at the same date. The
A listed company is of the view that shareholders might welcome a statement of highlights and supplementary information as a leaflet to be inserted in the annual report. Give advice on the principles
Could a cash flow statement be presented as the only financial statement reported by a company? Explain your view.AppendixLO1
What features are likely to make a balance sheet helpful to users?AppendixLO1
Write a note for financial analysts explaining how the published income statement (profit and loss account) provides a useful indication of the financial performance of a company.AppendixLO1
Write a letter to the financial controller of a company advising on the factors which a company should take into consideration when deciding how to arrange information in financial
Apart from the annual report, what other documents do companies use to communicate financial statement information to investors, creditors and other users of financial statements?(Section
What is an associated company? (Section 7.8.5)AppendixLO1
Explain what is meant by goodwill on acquisition. (Section 7.8.4)AppendixLO1
Explain, using the accounting equation, the effect on the parent company’s balance sheet of a share issue in exchange for shares in the subsidiary company. (Section 7.8.1)AppendixLO1
Explain, using the accounting equation, the effect on the parent company’s balance sheet of a cash payment for an investment in a subsidiary company. (Section 7.8.1)AppendixLO1
Define the terms: (Section 7.7.1)(a) group;(b) parent company; and(c) subsidiary.AppendixLO1
Explain the purpose of consolidated financial statements. (Section 7.7)AppendixLO1
Explain why groups of companies are formed. (Section 7.7)AppendixLO1
Why does depreciation appear as a line item in the reconciliation of operating profit with cash flow? (Section 7.6.3)AppendixLO1
What are the main sections of a cash flow statement prepared according to IAS 7?(Section 7.6)AppendixLO1
What are the main headings to be found in most company income statements (profit and loss accounts)? (Section 7.5)AppendixLO1
In the Companies Act formats, what is the reason for the order of items under heading C: current assets? (Section 7.4)AppendixLO1

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