Questions and Answers of Business Accounting

Describe how PPBS may conflict with departmental budgets.
Review a set of company financial statements for social disclosures. Consider the usefulness of such disclosures to different user groups.
Why has the traditional model of income measurement failed to account for the impact of business activities on the environment?
If corporate governance is so important, why do you think unlisted companies are not required to apply the Combined Code?
Define corporate governance.
If the Combined Code is a voluntary code of conduct for the directors of all UK limited companies, why is it that all listed UK companies must report annually on their compliance with it?
Briefly describe the development of the Combined Code from 1991 to the present day.
Briefly describe the main and supporting principles relating to directors contained in the Combined Code.
Why do you think similar public sector organisations are likely to use virtually identical control systems?
What is the public sector?
Briefly describe the differences between the structure of local authority auditing in Northern Ireland compared to England and Wales
Briefly describe the role of the Accounting Officer of a central Government department.
Briefly describe the differences between the structure of public sector auditing in Scotland compared to the rest of the UK.
Imagine we bought a building in 1990 for £40,000 that is now worth £120,000. If we rented a similar building now it might cost us £30,000 a year. What use would you make of the knowledge that the
‘Financial accounting looks behind, whilst management accounting looks ahead.’ To what extent does this quotation accurately reflect the role of the two branches of accountancy?
What other objectives can you think of? Try to think of another two. If you can, try to make them objectives which cannot be identified or demonstrated using information provided by financial
‘Financial accounting is non-dynamic, backward looking, conservative, as objective as possible, and subject to statutory and other regulation. Management accounting is future oriented, is dynamic,
Both these examples have something in common relating to the timeframe in which the actions taken can be justified. What is it?
What are some of the deficiencies of financial accounting?
Apart from what is said above, what do you think is the main difference between formal and informal information systems?
Why is it important that the employees of an organisation should clearly understand what the objectives of the organisation are?
How can there be a conflict between the various objectives of an organisation?
Describe how the management process is carried out.
Which aspects of this exhibit also relate to financial accounting?
Categorise each of the following costs into one of these six categories:(i) Direct materials(ii) Direct labour(iii) Indirect manufacturing costs(iv) Administration expenses(v) Selling and
Here is a list of typical types of expenses found in a manufacturing firm. These can be analysed as to whether they are direct materials, direct labour, direct expenses, indirect manufacturing costs,
Apart from the obvious fact that it is irrelevant, why is useless data such a bad thing?
Categorise each of the following costs into one of these six categories:(i) Direct materials(ii) Direct labour(iii) Indirect manufacturing costs(iv) Administration expenses(v) Selling and
From the following information, calculate:(a) Prime cost(b) Production cost(c) Total cost. Wages and salaries of employees: In factory (70 per cent is directly concerned with units being
From the following information work out:(a) Prime cost(b) Production cost(c) Total cost. Wages and salaries of employees: In factory (60 per cent is directly concerned with units being
Raleigh Ltd’s costs and revenues for the current year are expected to be:It was expected that 200,000 units would be manufactured and sold, the selling price being £12 each. Suddenly during the
(a) The terms cost behaviour and analysis of total cost are regularly used in cost accounting to classify costs. Distinguish between the two terms.(b) Explain how the following costs will:(i)
Jack Ltd expects its cost per unit, assuming a production level of 200,000 units per annum, to be:Selling price is £15 per unit.The following propositions are put to the managing director. Each
Assume that two companies have exactly the same pattern of costs and revenue and both use FIFO when valuing stock, but that Columbus Ltd uses a marginal costing approach to the valuation of stock in
Greatsound Ltd manufactures and sells compact disc players, the cost of which is made up as follows:The current selling price is £187.Greatsound Ltd works a day shift only, at present producing
Your company has been trading for three years. It has used a marginal costing approach to value its stock in its financial statements. The directors are interested to know what the recorded profits
Arncliffe Limited manufactures two types of product marketed under the brand names of ‘Crowns’ and ‘Kings’. All the company’s production is sold to a large firm of wholesalers.Arncliffe
Gainford Ltd is a manufacturing company which produces three specialist products – A, B and C. For costing purposes the company’s financial year is divided into thirteen periods of four weeks.
(a) What is meant by the terms contribution and marginal cost?(b) Barton & Co Ltd make and sell 2,000 units per month of a product ‘Barco’. The selling price is £65 per unit, and unit costs are:
Reed Ltd manufactures three products A, B and C. Budgeted costs and selling prices for the three months ending 30 September 20X2 are as follows:Labour costs are £3 per hour, and material costs are
Paul Wagtail started a small manufacturing business on 1 May 20X8. He has kept his records on the double entry system, and has drawn up a trial balance at 30 April 20X9 before attempting to prepare
The figures given below are all that could be salvaged from the records after a recent fire in the offices of Firelighters Limited. The company manufactures a single product, has no raw materials or
Vale Manufacturing started in business on 1 April 20X3, and incurred the following costs during its first three years.Required:(a) Prepare a statement showing the gross profit for each of the three
Lenses Ltd makes six different products: P, Q, R, S, T and U. An analysis of costs ascertains the following:Fixed costs of £34,200 are allocated per unit as P: £12; Q: £21; R: £21; S: £30; T:
Frames Ltd make four different products: K, L, M and N. They have ascertained the cost of direct materials and direct labour and the variable overhead for each unit of product. An attempt is made to
(a) What are the differences between marginal cost pricing and full cost pricing?(b) How far is it true to state that marginal cost pricing is a short-term strategy? (c) A.S. Teriod Ltd makes five
In a factory, four types of jobs are performed in separate production departments A, B, C and D. In addition there are three service departments, K, L and M. Costs have been allocated to the
For the factory in Question 37.1, what would be the costs of the following jobs given that the direct labour costs per hour are: Dept A £5; B £4; C £6; D £7?Data from Question 37.1In a factory,
How do you think this is done?
A manufacturer is producing five types of job, each in a separate production department P, Q, R, S and T. In addition, there are two service departments F and G. Costs have been allocated to the
How would you split the cost of cutting up the cow between joint products?
(a) Define the term equivalent production and state when the principle is used.(b) During May 20X1, M Wurzel & Co. Limited’s output was 4,000 finished items plus 600 partly finished items. There
(a) What is meant by the term equivalent production?(b) At Earith Industries at the beginning of April there were no partially finished goods on hand. During the month, 6,000 completed units were
(a) Explain the difference between the terms overhead allotment, overhead apportionment and overhead absorption.(b) Why are estimated figures used in calculating overhead absorption rates?(c) The
Kalmo Ltd offers a subcontracting service in assembly, painting and packing. Components are supplied by customers to the company, the required operations are then carried out, and the completed work
(a) What is meant by the term ‘specific order costing’?(b) In what ways does specific order costing differ from process costing?(c) The Acme Shelving Co. Ltd manufactures shelving brackets in
Horden Products Ltd manufactures goods which could involve any or all of three production departments. These departments are simply entitled A, B and C. A direct wages cost percentage absorption rate
What does this statement concerning the harm budgets may bring to an organisation remind you of from earlier chapters?
(a) Explain the following terms as used in process costing:(i) Normal losses(ii) Abnormal losses(iii) Equivalent production(iv) Joint cost(v) Split-off point.(b) In process costing, it is neither the
What is the relationship between the sales budget, the production budget and the materials purchase budget?
Using the data provided below, what production levels should be set for each month? Units 20X2 (a) Stocks levels wanted at the end of each month Jul 138 160 (b) Expected sales each month (c) The
For the year ended 31 December 20X7, the quantities of units sold are expected to be:The opening stock at 1 January 20X7 will be 144 units. The closing stock desired at 31 December 20X7 is 150
(a) For each of the following, state three reasons why a firm may wish to keep:(i) A minimum stock level of finished goods, and(ii) An even level of production in the face of fluctuating demand.(b)
Draw up a cash budget for F. Jack showing the balance at the end of each month, from the following information for the six months ended 31 December 20X4:(a) Opening cash (including bank) balance on 1
Herbert Limited make a single product, whose unit budget details are as follows:Additional information:1. Unit sales are expected to be:2. Credit sales will account for 60 per cent of total sales.
What other disadvantages do you think there might be in waiting until the last minute to arrange a loan of this type?
Took comes to see you in March 20X6. He is full of enthusiasm for a new product that he is about to launch on to the market. Unfortunately his financial recklessness in the past has led him into
Mtoto Ltd operate as wholesale ‘cash and carry’ stores and in addition to its main store have two other depots. The company’s summarised balance sheet as at 31 August 20X1 was as follows.Over
Belinda Raglan owns a clothing factory. Trading over the last two years has been very successful and she feels that having achieved good results it is now time to request an increase in the overdraft
David Llewelyn has been advised by his bank manager that he ought to provide a forecast of his cash position at the end of each month. This is to ensure that his cash inputs will be sufficient to
Ian Spiro, formerly a taxi-driver, decided to establish a car-hire business after inheriting £50,000.His business year would be divided into budget periods each being four weeks.He commenced
Sales are expected to be: January 70, February 40, March 50, April 120, May 140 and June 70. The stock level must not fall below 120 units, which is the level at the end of May, and an even
How can an entity have control of another entity when it does not own over 50% of the voting share capital?
How should unincorporated subsidiaries be treated when preparing consolidated financial statements?
The following statements of financial position were drawn up immediately after Dad Ltd had acquired control of Son Ltd. You are to draw up a consolidated statement of financial position. Dad
Prepare a consolidated statement of financial position from the following statements of financial position of Pop Ltd and Junior Ltd which were drawn up immediately after Pop Ltd had acquired the
Draw up a consolidated statement of financial position from the following statements of financial position which were drawn up as soon as Pa Ltd had acquired control of Sonny Ltd. Pa Statement of
Draw up a consolidated statement of financial position from the statements of financial position of Papi Ltd and Child Ltd that were drafted immediately after the shares in Child Ltd were acquired by
Papai Ltd acquired all the shares in Sister and Son Ltd and then the following statements of financial position were drawn up. You are to prepare a consolidated statement of financial position. Papai
Parental Ltd acquires 75% of the shares in Children United Ltd. Statements of financial position are then drafted immediately. You are to draw up the consolidated statement of financial position.
Pops and Mom Ltd buys 60% of the shares in Kids Ltd. You are to draw up the consolidated statement of financial position from the following statements of financial position constructed immediately
Parents Ltd acquires 90% of the shares of Sonny Jim Ltd. The following statements of financial position are then drafted. You are to draw up the consolidated statement of financial position. Any gain
After Papai and Mamae Ltd acquired 70% of the shares of Siblings Ltd the following statements of financial position are drawn up. You are to draw up the consolidated statement of financial position.
Immediately after Pop and Family Ltd had acquired control of Twin One Ltd and Twin Two Ltd the following statements of financial position were drawn up. You are to draw up a consolidated statement of
Immediately after Parental Acquisition Ltd had acquired control of Daughter One Ltd and Daughter Two Ltd the following statements of financial position were drawn up. You are to draw up a
Immediately after Pai, Mae and Co Ltd had achieved control of Sibling 1 Ltd and Sibling 2 Ltd the following statements of financial position are drawn up. You are to draw up the consolidated
Dad Ltd buys 100% of the shares of Daughter Ltd on 31 December 2015. The statements of financial position of the two companies on 31 December 2016 are as shown. You are to draw up a consolidated
Parents Pleasure Ltd bought 60% of the shares of Triplet Enterprise Ltd on 31 March 2017. The statements of financial position of the two companies on 31 March 2018 are as follows. You are to draw up
Parents Ltd bought 52% of the shares in Offspring Ltd on 31 October 2017. From the following statements of financial position you are to draw up the consolidated statement of financial position as at
Parental Dream Company Ltd buys shares in Sibling 1 and Sibling 2 on 31 December 2017. You are to draft the consolidated statement of financial position as at 31 December 2018 from the following:
Parent plc bought 40,000 shares in Subsidiary 1 Ltd and 27,000 shares in Subsidiary 2 Ltd on 31 December 2015. The following statements of financial position were drafted as at 31 December 2016. You
Prepare a consolidated statement of financial position from the following details as at 31 March 2016.During the year, Parent sold goods which had cost £2,300 to Subsidiary for £2,900. None of
The following information relates to Heather Limited and its subsidiary, Thistle Limited.1 Heather LimitedRetained profits as at 31 March 2018 £700,000.80,000 ordinary shares were purchased in
Draw up a consolidated statement of financial position as at 31 December 2017 from the following:At the date of the statement of financial position, Daughter Ltd owes Mum and Dad £2,200. During the
Prepare a consolidated statement of financial position from the following details as at 31 March 2016.At the date of the statement of financial position, Sibling B owed Sibling A £1,000 and Parents
You are presented with the following summarised information relating to Block plc for the year to 30 September 2018:Additional information:1 Block purchased 80% of the share capital of Chip on 1
You are presented with the following information from the Seneley group of companies for the year to 30 September 2016:Additional information:(a) The authorised, issued and fully paid share capital
You are to draw up a consolidated statement of financial position as at 31 December 2018 from the following:At the date of the statement of financial position, Son 1 owed Pa and Mum £2,500 and Son 2
The following summarised information relates to the Pagg group of companies.1 Pagg acquired its shareholding in Ragg Ltd for £3,000 on 1 April 2012. Ragg’s retained profits balance at that time
Why do you think this may be done – is there any benefit in calculating goodwill on these pre-control investments?

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