Questions and Answers of Cost And Management Accounting An Introduction

What are the main headings to be found in most company balance sheets? (Section 7.4)AppendixLO1
The following technical terms appear in this chapter. Check that you know the meaning of each. (If you cannot find them again in the text, they are defined at the end of the book.)(a) revenue(b)
Name the primary financial statements and explain the purpose of each. (Section 7.3.1)AppendixLO1
What is the role of the IASB? (Section 7.2.2)AppendixLO1
What is the IAS Regulation? (Section 7.2.1)AppendixLO1
What is a Directive? (Section 7.2.1)AppendixLO1
Explain the nature of, and reason for, other forms of communication beyond the annual report.AppendixLO1
Explain the main features of group financial statements.AppendixLO1
Define ‘parent company’ and ‘subsidiary company’ and explain how a group is structured.AppendixLO1
Explain the main contents of (a) the balance sheet, (b) the income statement(profit and loss account) and (c) the cash flow statement as presented by larger companies.AppendixLO1
Explain the structure of company reporting as set out in the Framework and in UK guidance.AppendixLO1
Explain the key international influences that affect accounting practice in the UK.AppendixLO1
Define, and explain the definition of, accounting.AppendixLO1
Explain what is meant by a conceptual framework.AppendixLO1
Explain the distinguishing features of a sole trader, a partnership and a limited company.AppendixLO1
List the main users of financial information and their particular needs.AppendixLO1
Discuss the usefulness of financial statements to the main users.Additionally, for those who choose to study the supplement:AppendixLO1
Define the basic terminology of business transactions.AppendixLO1
Define ‘accounting’ and identify the separate questions raised by the definition. (Section 1.1)AppendixLO1
The following technical terms appear for the first time in this chapter. Check that you know the meaning of each. (If you can’t find them again in the text, there is a glossary at the end of the
Define and explain the accounting equation.AppendixLO1
Define assets.AppendixLO1
Apply the definition to examples of assets.AppendixLO1
Explain and apply the rules for recognition of assets.AppendixLO1
Define liabilities.AppendixLO1
Apply the definition to examples of liabilities.AppendixLO1
Explain and apply the rules for recognition of liabilities.AppendixLO1
Define ownership interest.AppendixLO1
Explain how the recognition of ownership interest depends on the recognition of assets and liabilities.AppendixLO1
Use the accounting equation to show the effect of changes in the ownership interest.AppendixLO1
Explain how users of financial statements can gain assurance about assets and liabilities.Additionally, for those who choose to study the supplement:AppendixLO1
Explain how the rules of debit and credit recording are derived from the accounting equation.AppendixLO1
Write out the basic form of the accounting equation. (Section 2.2)AppendixLO1
Define an asset and explain each part of the definition. (Section 2.3)AppendixLO1
Give five examples of items which are assets. (Section 2.4)AppendixLO1
Use the definition to explain why each of the items in your answer to A.2.3 is an asset.(Section 2.4)AppendixLO1
Explain what ‘recognition’ means in accounting. (Section 2.5)AppendixLO1
State the conditions for recognition of an asset. (Section 2.5)AppendixLO1
Explain why an item may pass the definition test but fail the recognition test for an asset.(Section 2.5)AppendixLO1
Give three examples of items which pass the definition test for an asset but fail the recognition test. (Section 2.5)AppendixLO1
Some football clubs include the players in the statement of financial position (balance sheet) as an asset. Others do not. Give the arguments to support each approach.(Section 2.5)AppendixLO1
Define a liability and explain each part of the definition. (Section 2.6)AppendixLO1
Give five examples of items which are liabilities. (Section 2.7)AppendixLO1
Use the definition to explain why each of the items in your answer to A2.11 is a liability.(Section 2.7)AppendixLO1
State the conditions for recognition of a liability. (Section 2.8)AppendixLO1
Explain why an item may pass the definition test but fail the recognition test for a liability.(Section 2.8)AppendixLO1
Define the term ‘equity’. (Section 2.9)AppendixLO1
Explain what is meant by ‘net assets’. (Section 2.9)AppendixLO1
Set out the accounting equation for AppendixLO1
change in the ownership interest. (Section 2.11)AppendixLO1
Define ‘revenue’ and ‘expenses’. (Section 2.11.1)AppendixLO1
Set out the accounting equation which represents the position after a change has occurred. (Section 2.11.2)AppendixLO1
Explain the auditor’s approach to giving assurance about assets and liabilities.(Section 2.12)AppendixLO1
Explain whether each of the items from question B.2.1 above which you have identified as assets and liabilities would also meet the conditions for recognition of the item in the statement of
Explain why each of the following items would not meet either the definition or the recognition conditions of an asset of the business:(a) a letter from the owner of the business, addressed to the
The following information has been gathered from the accounting records of Pets Parlour:46 Part 1 A conceptual framework: setting the scene Assets and liabilities at 31 December Year 4£Cash at bank
In order to utilize some spare capacity, E Limited is preparing a quotation for a special order which requires 800 kgs of material R.E Limited has 350 kgs of material R in stock(original cost £1.80
Q ple makes two products—Quone and Qutwo—from the same raw material. The selling price and cost details of these products are as shown below:If materials were limited to 2000 kg per week, the
M ple makes two products — MI and M2 —budgeted details of which are as follows:The fixed overhead shown above comprises both general and specific fixed overhead costs. The general fixed overhead
Determining minimum short-term acceptable selling price Company A expects to have 2000 direct labour hours of manufacturing capacity (in normal time)available over the next two months after
Acceptance of a contract JB Limited is a small specialist manufacturer of electronic components and much of its output is used by the makers of aircraft for both civil and military purposes. One of
Preparation of a cost estimate involving the identification of relevant costs You are the management accountant of a publishing and printing company which has been asked to quote for the production
Calculation of minimum selling price You have received a request from EXE plc to provide a quotation for the manufacture of a specialized piece of equipment. This would be a one-off order, in excess
Decision on whether to launch a new product A company is currently manufacturing at only 60%of full practical capacity, in each of its two production departments, due to a reduction in market share.
Contribution analysis and an outsourcing decision AZ Transport Group ple comprises three divisions— AZ Buses; AZ Taxis; and Maintenance.AZ Buses operates a fleet of eight vehicles on four different
Limiting key factors PDR ple manufactures four products using the same machinery. The following details relate to its products:There is a maximum of 2000 machine hours available per
Key/limiting factor decision-making BVX-Limited manufactures three garden furniture products — chairs, benches and tables. The budgeted unit cost and resource requirements of each of these items is
Allocation of scarce capacity and make or buy decision where scarce capacity exists PQR Limited is an engineering company engaged in the manufacture of components and finished products. The company
Price/output and key factor decisions You work as a trainee for a small management consultancy which has been asked to advise a company, Rane Limited, which manufactures and sells a single product.
‘Attributing direct costs and absorbing overhead costs to the product/service through an activitybased costing approach will result in a better understanding of the true cost of the final
In a marginal costing system only variable costs would be assigned to products or services, in which case management may rely ona- contribution approach to decisions.Required:(a) Explain and discuss
Calculation of ABC product costs and a discussion of the usefulness of ABC Trimake Limited makes three main products, using broadly the same production methods and equipment for each. A conventional
Preparation of conventional costing and ABC profit statements The following budgeted information relates to Brunti ple for the forthcoming period:Overheads allocated and apportioned to production
Computation of traditional and ABC unit costs and comments on the reported costs BML has three product lines P1, P2 and P3. Since its creation the company has been using a single direct labour cost
Comparison of ABC with traditional product costing(a) In the context of activity-based costing(ABC), it was stated in Management Accounting—Evolution not Revolution by Bromwich and Bhimani, that
Payback and NPV calculations A company is trying to decide which of two investment projects it should choose. The following information is provided:1. Each product is expected to be operational for
Calculation of accounting rate of return and NPV A company is proposing to enter a new market and has collected the following data.Capital expenditure on plant and machinery to product product X will
NPV and payback calculation plus a replacement decision The management of a hotel group is deciding whether to scrap an old but still serviceable machine bought five years ago to produce fruit pies
An investment project has the following expected cash flows over its economic life of three years:Required:(i) Calculate the net present value (NPV) of the project at discount rates of 0%, 10% and
Present value of purchasing or renting machinery The Portsmere Hospital operates its own laundry.Last year the laundry processed 120000 kilograms of washing and this year the total is forecast to
Calculation of payback, NPV and ARR, and recommendation of which of two mutually exclusive projects should be accepted.(a) Essential to an understanding of the investment appraisal techniques of
The following details have been extracted from the debtor collection records of C Limited:Invoices are issued on the last day of each month.Customers paying in the month after sale are entitled to
Outline:(a) the objectives of budgetary planning and control systems; (7 marks)(b) the organization required for the preparation of a master budget. (10 marks)(Total 17 marks)ACCA Level I Costing
The preparation of budgets is a lengthy process which requires great care if the ultimate master budget is to be useful for the purposes of management control within an organization.You are
Preparation of functional budgets X plc manufactures Product X using three different raw materials. The product details are as follows:The company is considering its budgets for next year and has
Preparation of functional budgets D Limited is preparing its annual budgets for the year to 31 December 2001. It manufactures and sells one product, which has a selling price of£150. The marketing
Calculation of sales to achieve target profit and preparation of functional budgets There is a continuing demand for three subassemblies— A, B and C — made and sold by MW Limited. Sales are in
Preparation of functional budgets Data Wilmslow Ltd makes two products, the Alpha and the Beta. Both products use the same material and labour but in different amounts. The company divides its year
Budget preparation and comments on sales forecasting methods You have recently been appointed as the management accountant to Alderley Ltd, a small company manufacturing two products, the Elgar and
Preparation of cash budgets The following data and estimates are available for ABC Limited for June, July and August.1. 10% of sales are for cash, the balance is received the following month. The
Preparation of cash budgets A redundant manager who received compensation of £80000 decides to commence business on 4 January, manufacturing a product for which he knows there is a ready market. He
Preparation of cash budgets Y plc is currently preparing its budgets for the year ending 30 September 2001.The sales and production budgets have been completed and an extract from them is shown
Direct labour budget and labour cost accounting A company, which manufactures a range of consumer products, is preparing the direct labour budget for one of its factories. Three products are
Outline the main features of a responsibility accounting system.
Explain the meaning of each of the undernoted terms, comment on their likely impact on cash budgeting and profit planning and suggest ways in which any adverse effects of each may be reduced. (a)
Preparation of flexible budget, separation of fixed and variable costs and comments on variances Secondline Ltd, aware of the uncertain nature of its market for the coming year has prepared budgeted
Preparation of flexible budgets The following monthly budgeted cost values have been taken from the budget working papers of MZ Limited for the year ended 30 September 2000.Required:(a) Prepare a
Preparation of flexible budgets based on an analysis of past cost behaviour and an adjustment for inflation TJ Limited is in an industry sector which is recovering from the recent recession. The
Preparation of flexible budgets A manufacturing company has the following budgeted costs for one month which are based on a normal capacity level of 40000 hours.A departmental overhead absorption
Preparation of flexible budgets and an explanation of variances You have been provided with the following operating statement, which represents an attempt to compare the actual performance for the

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