Which of the following does NOT explain the distinction between financial statements and

management accounts?

A Financial statements are primarily for external users and management accounts are

primarily for internal users

B Financial statements are normally produced annually and management accounts are

normally produced monthly

C Financial statements are more detailed than management accounts

D Financial statements are audited by an external auditor and management accounts do not

normally have an external auditWhich of the following statements best defines equity (capital) of a business?

A Equity represents the value of the business

B Equity is equivalent to the value of the business’s assets

C Equity is represented by the total assets of the business

D Equity is represented by the net assets (assets minus liabilities) of the business

A business commenced on 1 January and purchased the following units of inventory:

No of

units

Unit price

(£)

Value

January 380 2.00 760

February 400 2.50 1000

March 350 2.50 875

April 420 2.75 1155

May 430 3.00 1290

June 440 3.25 1430

Total 2420 6510

In June 1,420 units were sold for £7,000. The business uses the FIFO method to value its

inventory

(i) How many units are left in inventory?

(ii) What is the cost of closing inventory for the period?

(iii)What is the gross profit for the period?

(iv)What would be the impact on gross profit on discovering that inventory costing £100 with a

net realisable value of £120 had been omitted from the original inventory valuation?

I. An increase of £100

II. An increase of £120

III. A decrease of £20

IV. No effect at all