Accounting A Smart Approach 2nd Edition Mary Carey, Jane Towers-Clark, Cathy Knowles - Solutions

Amachine-hour rate is likely to be used for a manufacturing department with a high-speed production line.
Activity-based costing only includes manufacturing costs.
Understand why a business needs to prepare a budget
Explain the process of preparing a budget
Prepare a simple budget
Understand the problems of budgeting
Explain the purpose of simple variance analysis.
What conflicts might occur as a result of the different objectives of budgeting? |
Understand how various methods of costing can impact on pricing
Calculate prices using cost-plus, sales-margin, and discount methods
Consider how various pricing strategies can be used, including how target and life-cycle costing can affect product pricing
Calculate internal transfer prices in a variety of ways.
|fthe selling price is calculated from the cost of goods sold, a price based on 20%sales margin will result in a lower selling price than cost plus 20%.
Aprice-skimming strategy will result in low prices.
Target costing ensures that the product specification is changed to meet the desired selling price.
Life-cycle costing includes the costs of a product through its research and design, manufacturing, and post-sales support phases.
Atransfer price should be set to minimize tax liabilities.
Understand which costs are relevant in short-term decision making
Assess whether an organization should make or buy products
Decide which products should be prioritized if there are limited resources
Assess whether upgrading a process would be financially beneficial
Determine if a product should be discontinued or a location closed.
Asunk cost is one that has been committed but not paid for.
Companies considering whether they should make a product or buy it in from another supplier must consider their fixed costs in the short term.
Decisions to discontinue a product must take into account allocated overheads, such as head office costs.
Anexample of an opportunity cost is the contribution lost by not being able to sell one product as a result of selling another.
Relevant costs are always those which will be incurred in the future and result from a specific decision.
Discuss the nature and significance of appraising long-term investments
Use a range of investment appraisal techniques to assess and compare projects
Understand the advantages and limitations of each method.
The payback period of a project is a measure of how long it is expected to take for cash inflows from a project to cover all the outflows.
The payback period treats all the cash flows arising from a project as being of equal value, regardless of when they are expected to arise.
Assuming that a business expects to generate a return of 20% on sums invested, it should be equally happy to receive £2,000 now or £2,200 in one year’s time.
The ARR takes no account of the relative size of potential projects, as it is expressed as a percentage.
The NPV technique takes account of all the cash flows associated with a project and treats all cash flows as being of equal value regardless of when they are expected to arise.
The IRR of a project is the discount rate that gives an NPV of zero when applied to the cash flows arising from a project.
Consider how a business might set its long-term strategy
Assess the performance of a business using non-financial as well as financial measures
Consider the use of benchmarking to improve performance
Construct a balanced scorecard
Calculate customer profitability
Understand the need for corporate governance and how ethical and environmental issues should be taken into account.
What kinds of issues should a company include in its CSR report?
An operational plan is drawn up prior to the formulation of a corporate strategy.
Accountants are only interested in the financial performance of a business.
Benchmarking can be used to assess a company against industry best practice.
The balanced scorecard always has four perspectives: financial, customer, internal processes, and learning and growth.
Leading indicators give managers warning about what might happen in the future.
In addition to the statement of financial position, what other documents might a bank ask to see in order to determine whether to lend money to a business?
Astatement of financial position can be prepared for a business without considering whether or not the business is a going concern.
Astatement of financial position should distinguish long-term from short-term assets and liabilities.
The net profit for the year, from the statement of financial position, should be added to the bank balance at the year end.
When an expense has been prepaid during a financial year, the amount of the prepayment should be shown as a current asset on the statement of financial position.
Anaccrual has to be recognized and accounted for when an expense has been incurred during a financial period but not paid for during that period.
The value of inventory held at the end of a financial period is deducted in arriving-at the cost of sales but is not shown as an asset on the statement of financial position.
Understand why non-current assets need to be depreciated
Use the straight-line and the reducing-balance methods of providing for depreciation
Explain why we need to provide for bad and doubtful debts
Prepare a final adjusted statement of profit or loss and statement of financial position
Explain some of the limitations of a statement of financial position.
Property is shown as a non-current asset on the statement of financial position and it is usually included at cost less accumulated depreciation. Is this likely to be the most relevant value for all users of the accounts?
The provision for doubtful debts is based on a percentage of trade receivables at the year end, a percentage that varies from business to business. Why is there no~ common percentage for all businesses?
Charging depreciation on a non-current asset will reduce its value, as shown on the statement of financial position, over its useful life in the business.
The depreciation charge always represents the total depreciation that has been charged on an asset since it was purchased,
Ifthe reducing-balance method of depreciating an asset is used, this will give rise to an equal annual depreciation charge.
Abusiness with ten motor vehicles could choose to depreciate eight of them at the rate of 33% per annum on the straight-line basis and to provide no depreciation on the remaining two vehicles.
Any trade receivable that has remained unpaid for more than three months should be written off as a bad debt.
When a bad debt is written off, this reduces the trade receivables figure on the statement ofinancial position and reduces the profit for the year,
Discuss the nature of a limited company
Describe the main external sources of finance available to limited companies, and
Discuss their characteristics
understand the role of a stock exchange outline the reporting requirements placed upon the directors of a company.
Given that companies issuing loans and debentures will be obliged to meet interest payments when they fall due, why do companies not just issue share capital rant and avoid this obligation?
Limited liability only protects the directors of a company as it means that they are only liable to lose the amount they have invested in the company.
A company can raise funds by issuing either ordinary shares or preference shares.
A limited company is a separate legal entity, distinct from the shareholders who own it.
The stock exchange is a marketplace where the shares of all limited companies, can be bought and sold.
Debentures, issued by a company, are long-term loans on which security is usually provided.
Debenture interest and share dividends are both expenses that are allowable for tax purposes.
Prepare a statement of profit or loss and a statement of comprehensive income for a limited company
Prepare a statement of financial position for a limited company
Explain the purpose of a statement of changes in equity
Understand the importance of reliable corporate governance.
Acompany’s shareholders’ equity is made up of all of the company's share capital and all of its reserves. =
Allinterest payable is deducted in arriving at the operating profit for the year.
The ordinary share capital account records the total nominal value of all the ordinary shares that have been issued.
When shares are issued at a price in excess of their nominal value, this excess amount is recorded in the share premium account.
|faproperty is revalued at £1 million and it was previously included at a net book value of £800,000, the profit for the year will increase by the £200,000 gain arising on the revaluation.
|fa property is revalued at £600,000 and it was previously included at a net book value of £800,000, the profit for the year will reduce by the £200,000 loss arising on the revaluation.
Explain the difference between profit and cash
Prepare a simple statement of cash flows.
Acompany’s statement of cash flows should enable a user to understand why profits and cash generated are not the same.
Cash flows from operating activities are a measure of the cash generated from the main activities of the company.
The depreciation charge for the year isa non-cash expense and will always be a reconciling item in the statement of cash flows.
The nominal value of shares issued would always be shown as cash inflow from financing activities. ~ 4
Acompany that has poor liquidity is one that has adequate cash and other liquid assets available to allow it to pay any liabilities as they fall due.
Inorder to improve the liquidity in a business, it is helpful to reduce the time taken to pay trade payables and hence reduce the amount owed to them.
Explain the purpose of accounting
Discuss why non-accountants need to understand accounting
Understand the basic terminology of business transactions

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Accounting A Smart Approach 2nd Edition Mary Carey, Jane Towers-Clark, Cathy Knowles - Solutions

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