Business Accounting
Exam Answer Key
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of accounting as they apply to business organizations. The course covers essential topics such as the recording and analysis of financial transactions, preparation of financial statements, interpreting balance sheets, income statements, and cash flow statements, and understanding the regulatory environment. Emphasis is placed on the use of accounting information for decision-making, budgeting, financial planning, and performance evaluation, enabling students to develop the analytical skills required for effective management and financial control in today's dynamic business environment.
Recommended Textbook
Accounting Understanding and Practice 4th Edition by Danny Leiwy
Available Study Resources on Quizplus
19 Chapters
492 Verified Questions
492 Flashcards
Source URL: https://quizplus.com/study-set/3607
Page 2
Chapter 1: The Statement of Financial Position Balance
Sheetand What It Tells Us
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/71624
Sample Questions
Q1) If non-current assets are £250,000,current assets £70,000,long-term borrowing £50,000 and current liabilities £10,000 ,what is the value of owner's equity?
A) £240,000
B) £260,000
C) £120,000
D) £270,000
Answer: B
Q2) The statement of financial position of Rosie Ltd.includes the following entries: inventory £25,000,trade receivables £12,000,cash £11,000 and current liabilities £25,000 (made up of trade payables £16,000,short-term borrowing £800 and £8,200 current tax payable).Calculate the current ratio.
A) 0.9: 1
B) 1:1
C) 0.4:1
D) 1.9:1
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: The Income Statement Profit and Loss Account
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/71613
Sample Questions
Q1) If a company purchases a machine for £60,000 and charges depreciation at 10% on a diminishing balance basis,what is the depreciation charge in the forth year?
A) £5,042
B) £4,374
C) £6,000
D) £4,860
Answer: B
Q2) If the cost of goods sold was £8,000 for goods which eventually sold for £20,000,what is the gross profit ratio?
A) 40%
B) 60%
C) 150%
D) 250%
Answer: B
Q3) Expenses are the amount paid out in cash during an accounting period
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: The Development of Financial Reporting
Available Study Resources on Quizplus for this Chatper
33 Verified Questions
33 Flashcards
Source URL: https://quizplus.com/quiz/71612
Sample Questions
Q1) If a company buys goods for £50,and then sells half of these for £100.How much profit would be recognised?
A) £25
B) £50
C) £75
D) £100
Answer: C
Q2) Which fundamental accounting concept stipulates that revenue and costs are recognized as they are earned or incurred?
A) Consistency
B) Comparability
C) Accruals
D) Prudence
Answer: C
Q3) The establishment of the limited liability company made the position of creditors less secure
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Ratios and Interpretation: a Straightforward Introduction
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71611
Sample Questions
Q1) If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the price/earnings (P/E)ratio?
A) 20
B) 10
C) 45
D) 22
Q2) If a company reported a profit for the year of £90m,share capital of £200m and a share price of £9.00 - what is the earnings per share (EPS)?
A) 20p per share
B) 10p per share
C) 45p per share
D) 22p per share
Q3) Which of the following rations considers the relationship between profit,equity and long-term borrowing?
A) Quick ratio
B) Current ratio
C) Capital gearing ratio
D) ROCE
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: How the Stock Market Assesses Company Performance
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71610
Sample Questions
Q1) The "market capitalization" of a company refers to the total market value of a companies shares
A)True
B)False
Q2) Which of the following statements is correct?
A) A company which is expected to deliver rapid growth will have a high price earnings ratio and low dividend yield
B) A company which is expected to deliver rapid growth will have a high price earnings ratio and high dividend yield
C) A company which is expected to deliver rapid growth will have a low price earnings ratio and low dividend yield
D) A company which is expected to deliver rapid growth will have a low price earnings ratio and high dividend yield
Q3) Total profit divided by dividend is known as:
A) Price earnings ratio
B) Dividend cover
C) Dividend yield
D) Earnings per share
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Cash Flow Statements: Understanding and Preparation
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71609
Sample Questions
Q1) The cash flow statement reports inflows and outflows of cash under which three headings?
A) Operating activities, investing activities and expense activities
B) Operating activities, investing activities and equity activities
C) Operating activities, investing activities and finance activities
D) Operating activities, investing activities and debt activities
Q2) The statement of financial position and income statement are based on the accruals concept
A)True
B)False
Q3) Generating lots of cash is a definite sign of success
A)True
B)False
Q4) Which of the following statements is false?
A) Payment for inventory not sold until the next period, is an example of a payment of cash which is not an expense
B) Borrowing money is an example of a receipt of cash which is not revenue
C) Discount allowed to customers for prompt payment, is an expense that is treated as a payment of cash
D) Depreciation is an expense which is not a payment of cash
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Advanced Interpretation of Company and Group Accounts
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71608
Sample Questions
Q1) A one-off loss is likely to be a major problem for company
A)True
B)False
Q2) High levels of debt in a company is always a cause for concern
A)True
B)False
Q3) Which of the following would not form part of the financial statements?
A) Statement of changes in equity
B) Cash flow statement
C) Income statement
D) Directors' remuneration report
Q4) Which of the following z-scores would suggest a company was likely to fail?
A) 1.86
B) 2.99
C) 1.72
D) 1.90
Q5) "Minority interest" refers to the owners of shares which have no voting rights
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Current Issues in Financial Reporting
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71607
Sample Questions
Q1) In what way has IFRS 3 made accounting for goodwill open to manipulation by managers?
A) Requires goodwill to be treated as an expense on the income statement
B) Requires goodwill to be treated as a one-off gain in the income statement
C) Requires goodwill to be subject to an annual impairment review
D) Requires goodwill to be treated as an asset on the balance sheet and amortized
Q2) The term "creative accounting" is used to describe the development of accounting techniques which more accurately reflect the economic reality of a company
A)True
B)False
Q3) Creative accounting is not only concerned with maximizing profit and may include income smoothing which may require understating profits
A)True
B)False
Q4) It is easier to generate "fictitious" cash flow figures than to produce "fictitious" profit figures
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Bookkeeping to Trial Balance
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/71606
Sample Questions
Q1) At the end of a financial year,businesses often have "prepayments" which are amounts paid in advance,and "Accruals" which are amounts owing.For example,the business may have prepaid a month's rent.It may also have used some utilities that it has not yet paid for.The accounting treatment is as follows:
A) Adjust the relevant accounts in the Income Statement. Prepayment is a current asset. An Accrual is a current liability, both of which are shown on the Statement of Financial Position.
B) Do nothing. The money will eventually catch up with the accrued transactions, and the prepaid items will be used in the next financial year.
C) Adjust only the accrued amounts - show the additional utilities on the Income Statement and show an Accrual as a current liability on the Statement of Financial Position. Prepayments should be ignored
D) Adjust only the prepaid amounts - reduce the rent on the income statement and show the prepayment as a current asset on the Statement of Financial Position. Accruals should be ignored
Q2) In general,a sales account has a credit balance
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Trial Balance to Final Accounts
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71623
Sample Questions
Q1) In drawing up a Trial Balance,the following figures are shown:
\[\begin{array} { | l | l | l | }
\hline \text { Accaunt } & \text { Dr } & \text { Cr } \\
\hline \text { Bank } & & 1,800 \\
\hline \text { Cash } & & 200\\
\hline
\end{array}\]
What can be deduced from the extract above?
A) There is a total of £2,000 in the business - £1,800 at the bank, and £200 in the cash tin
B) There is an overdraft of £1,800 at the bank and the cash tin is owed £200
C) The bank is showing as overdrawn by £1,800. The cash account must be incorrect
D) The bank balance is £1,800 "in credit" meaning there is £1,800 at the bank. The cash tin is owed £200
Q2) If land is revalued upwards,the accounting adjustment will be:
A) Dr: Land Cr: Revaluation reserve
B) Dr: Revaluation reserve Cr: Land
C) Dr: Land Cr: Cash
D) Dr: Revaluation reserve
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Financing a Business
Available Study Resources on Quizplus for this Chatper
24 Verified Questions
24 Flashcards
Source URL: https://quizplus.com/quiz/71622
Sample Questions
Q1) The total figure for equity on the balance sheet includes all of the following except:
A) Share capital
B) Share premium
C) Retained profits
D) Preference share capital
Q2) Which of the following statements is correct?
A) The value of a company's share will decrease unless a dividend is paid every year
B) The value of a company's share will increase if a regular dividend is paid
C) If a company can earn a better rate of return, by investing retained profits, than shareholders can earn themselves, then dividends should be paid
D) If a company can earn a better rate of return, by investing retained profits, than shareholders can earn themselves, then there is a case for dividends not to be paid
Q3) Preference shares are excluded in the calculation of earnings per share
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Management of Working Capital
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71621
Sample Questions
Q1) High levels of working capital are associated with insolvency
A)True
B)False
Q2) It always makes sense to hold as much inventory as possible,"just in case" the inventory is needed and it is cost free
A)True
B)False
Q3) If two companies had the same amount of fixed assets and the same profit,the company with the lower amount of working capital would have a higher return on capital employed (ROCE)
A)True
B)False
Q4) If trade receivables is reduced,the amount of capital employed is reduced and profitability is increased
A)True
B)False
Q5) There is no relationship between a companies turnover and their working capital
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Introduction to Management Accounting
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/71620
Sample Questions
Q1) Which of the following statements are correct?
(i)Financial Accounting is required by law
(ii)Financial Accounting includes budgeting,forecasting and decision making
(iii)Management Accounting must follow a set pattern
(iv)Management Accounting includes budgeting,forecasting and decision making
A) (i) and (iv) are correct
B) (i), (ii) and (iii) are correct
C) (i), (ii) and (iv) are correct
D) All of them are correct
Q2) When standard costing is used in conjunction with budgeting,variances can be calculated to show where actual results were not as expected
A)True
B)False
Q3) In a manufacturing account an inventory adjustment is made to direct materials in respect of how much was purchased (as opposed to how much was consumed)
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Investment Appraisal
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71619
Sample Questions
Q1) A company is evaluating an investment in a piece of machinery.The machine costs
£10,000 and is expected to generate cash flows of £3,000 in year 1,£4,300 in year 2 and £5,800 in year 3.The discount rate is 10% and the relevant discount factors are:
\[\begin{array} { c c }
\text { Year 1 } & 0.909 \\
\text { Year 2 } & 0.826 \\
\text { Year 3 } & 0.751
\end{array}\]
Calculate the NPV
A) £13,100
B) £10,634.60
C) £634.60
D) £0
Q2) In order to convert a future cash flow into a present value,you need to:
A) Divide by a discount factor
B) Divide by the current investment rate
C) Multiply by a discount factor
D) Multiply by the current investment rate
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Budgetary Planning and Control
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71618
Sample Questions
Q1) The difference between a fixed budget and a flexible budget is:
A) A fixed budget assumes a given level of production and sales and a flexible budget can accommodate different levels of production
B) A fixed budget considers fixed costs only, a flexible budget considers fixed and variable costs of production
C) A fixed budget is for a single department, a flexible budget covers a range of departments and units
D) A fixed budget is modified annually, a flexible budget is modified monthly
Q2) Which of the following is not a disadvantage usually associated with budgeting?
A) Encourages "budget slack"
B) Discourages delegation and the identification of management responsibility
C) In practice, it is often difficult to come to an agreement about the organizations objectives
D) Can often be a "paperwork exercise" not fully understood by mangers
Q3) Which of the following is not an advantage usually associated with budgeting?
A) Can be used to motivate staff
B) Can be used to evaluate performance
C) Encourages managers to "spend up to budget"
D) Helps identify "limiting factors", such as production capacity
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Absorption Costing
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71617
Sample Questions
Q1) A small company has one factory but produces several different products. It has direct material and direct labour costs which are allocated to the different products directly.
The factory is machine intensive,rather than labour intensive. It also has overheads such as rent,rates and electricity costs.
As well as the factory,it also has a staff canteen and a maintenance department. Which of the following statements about Absorption Costing is INCORRECT?
A) Where possible, costs should be directly allocated, such as direct material and direct labour in producing each product.
B) Costs that cannot be allocated may be apportioned, for example rent based on floor area.
C) Other overheads such as maintenance and canteen costs may be absorbed using machine hours.
D) Overheads that are incurred in overhead areas cannot be absorbed - eg maintenance of the canteen
Q2) Direct labour costs are wages and employment costs charged directly to particular jobs as well as maintenance staff costs
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 18
Chapter 17: Marginal Costing and Decision-Making
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71616
Sample Questions
Q1) The MoneyTalks company produces and sells 125,000 units a year for £50 each.Variable costs are £40 and annual fixed costs are £600,000. Calculate the break-even point in sales revenue.
A) £266,666
B) £26,666
C) £2,400,000
D) £21,818
Q2) WhoMadeWho Ltd.is planning to reduce the selling price of one of its products from £80 to £60.Fixed costs are £1.1m per annum; variable costs £40 per unit; 70,000 units per annum are made and sold.
How many additional units must be sold to make up for the price reduction?
A) 10,000 units
B) 600,000 units
C) 140,000 units
D) 70,000 units
Q3) "Contribution" can be defined as sales minus variable costs
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Standard Costing and Variance Analysis
Available Study Resources on Quizplus for this Chatper
25 Verified Questions
25 Flashcards
Source URL: https://quizplus.com/quiz/71615
Sample Questions
Q1) The LAH company produces product BG,which includes variable overhead standard cost of 5 hours at £15 per hour,based on a budget production of 3,000 units.The actual results for the last period were as follows:
\[\begin{array} { l c }
\text { Production } & 3,100 \\
\text { Hours incurred } & 16,000 \\
\text { Variable overhead } & £ 235,00
\end{array}\]
Calculate the variable overhead efficiency variance.
A) £5,000 favorable
B) £5,000 adverse
C) £7,500 favorable
D) £7,500 adverse
Q2) Which of the following would lead to a materials price variance?
A) More materials have been used than standard
B) More labour hours have been worked than standard
C) The price of materials was higher than standard
D) Direct labour rate was higher than standard
To view all questions and flashcards with answers, click on the resource link above.
Chapter 19: Incomplete Records
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/71614
Sample Questions
Q1) The opening capital of Overdrive Ltd at 1st January was £31,000.At 31st December the capital figure was £45,000.How much profit had been earned?
A) It is not possible to tell from the information provided
B) £14,000
C) (£14,000)
D) £45,000
Q2) Robert's bank statements show he had an opening bank balance of £13,000 and a closing bank balance of £16,000.Robert knows he paid £12,000 to suppliers and that he took drawings of £3,000.Calculate what Robert received from debtors.
A) £18,000
B) £8,000
C) £31,000
D) £13,000
Q3) It is essential that every business keeps a complete record of ALL transactions
A)True
B)False
Q4) Not every debit has a credit
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21