Questions and Answers of Cambridge International AS And A Level Accounting

Auditors have to be shareholders of the company.’ Is this statement true or false?
Explain the difference between external and internal auditors.
Explain the difference between the duties of directors and the duties of external auditors.
Directors are responsible for the keeping of financial records and the preparation of the annual financial statements. How can shareholders be guaranteed that the records are prepared in an objective
Explain whether or not a shareholder can become a director of a limited company.
Value of Jorge’s net assets taken over $129 000; purchase consideration paid by Bandi $200 000. Calculate the value of goodwill and state how it should be shown in the statement of financial
Value of Adnan’s net assets taken over $560 000; purchase consideration paid by Baldeep $500 000. Calculate the value of goodwill and state how it should be shown in the statement of financial
Rollo sells his business net asset value $250 000 to Sukhdev for a purchase consideration of $300 000. Calculate the value of goodwill for both Rollo and Sukhdev.
Make a list of reasons why one business might wish to purchase another business.
Explain the difference between a consignee and an agent.
Mahmood makes sales of $3400 net of 6% commission. What was the value of sales before commission was deducted?
Joint ventures are a temporary type of partnership.’ Is this statement true or false?
Only two parties can be involved in a joint venture.’ True or false?
Give the formulae for each of the following ratios: (a). Earnings per share (b). Price/earnings ratio (c). Dividend yield (d). Dividend cover
Explain two advantages of using a computerised system of record keeping.
Explain two disadvantages of computerising financial record keeping.
Explain the term ‘gearing.
Why might a potential investor have concerns about investing in a highly geared company?
Explain what the price/earnings ratio tells us.
The absorption of overheads using labour hours is a much more accurate method of absorbing overheads than using machine hours.’ Do you agree?
Sales ledger expenses $900; number of sales invoices processed 200. Calculate the cost driver rate per order.
Identify two costs that might be included when determining the selling price of a product that would not be included when valuing inventory.
Identify five functions of budgeting.
Explain the term ‘master budget’
Explain why the preparation of a cash budget is vital to the decision making of any business.
Is depreciation entered in a cash budget? Explain your answer.
List three items that might appear in a budgeted income statement but would not appear in a cash budget.
Identify two principal budget factors that could prevent the desired outcomes for a business.
Explain what is meant by a flexed budget.
What are the effects on the profits of a business of adverse variances and favourable variances?
During 1 month a business had a favourable sales volume variance of $2000 and an adverse sales price variance of $1000. Calculate the total sales variance and state whether actual profits have
Identify two factors that could have caused: (a). An adverse direct materials usage sub-variance (b). A favourable direct labour rate sub-variance.(c). An adverse sales volume sub-variance.
Explain the term ‘capital rationing’.
What is the difference between payback and discounted payback?
Write down the formula for calculating accounting rate of return.
Identify two advantages of using payback as a method of investment appraisal.
The initial investment in a project is $200 000 and the project requires additional working capital of $40 000. Calculate the average investment in the project.
Write down the formula for calculating the internal rate of return on a project and identify each component.
A project yields a negative net present value. Identify two reasons why the managers of a business might still go ahead with the scheme.
What does the internal rate of return represent?
(a). What is a debenture? (b). How is debenture interest paid accounted for in the financial statements?
Debentures are shares that pay a fixed dividend each year.’ Is this statement true or false?
(a). Explain the difference between capital and revenue reserves. (b). When money is withdrawn from reserves, how may it be used?
Explain the purpose of a statement showing changes in equity.
(a). What is an intangible non-current asset? (b). What is meant by the amortisation of an intangible non-current asset?
Only larger limited companies are required to prepare a statement of cash flows as part of their financial statements.’ Is this statement true or false?
A statement of cash flows is used to calculate profit.’ Is this statement true or false?
A statement of cash flows will indicate whether or not the business requires a bank overdraft in a few months’ time.’ Is this statement true or false?
Premises have been revalued from $400 000 to $500 000. Calculate the amount to be shown in a statement of cash flows and state under which heading this event would be shown.
During 2013 last year’s final dividend of $32 000 and this year’s interim dividend of $14 000 were paid. This year’s final dividend of $40 000 has been proposed. Under which heading in a
Explain how net debt is calculated.
A company that has made an operating loss for a year does not need to prepare a statement of cash flows. However, it must resume preparing a statement when it moves back into profitability.’ Is
Explain why there is a need to have internationally recognised International Accounting Standards.
Explain the terms ‘derecognition’ and ‘carrying amount’.
Which of the two purposes of accounting are fulfilled by the use of budgeting?
When preparing a manufacturing account, what are the components of the prime cost?
(a) Identify two costs that are always included as part of prime cost. (b) Identify two costs that are always included as factory overheads.
What are royalties and in which section of a manufacturing account would you find them?
A business charges goods to its warehouse at factory cost plus 25%. It had no opening inventory and closing inventory at the end of year 1 was valued at a transfer price of $3000. At the end of year
What is the name given to a club’s capital account?
(a). Explain the term ‘additional activity’. (b). Identify two additional activities that might be undertaken by a swimming club.
Prepare a subscriptions account from the following information: Cash received in the year for subscriptions Subscriptions unpaid at start of year Subscriptions paid in advance at start of
Identify one advantage and one disadvantage that a club would hope to gain when operating a life membership scheme.
Subscriptions in arrears and subscriptions paid in advance are both treated as current liabilities.’ Is this statement true or false?
To which account is an excess of income over expenditure transferred?
Authorised share capital is another name for paid-up share capital.’ Is this statement true or false?
How are the dividends paid by a company accounted for?
How does a share premium account arise and what may it be used for?
Explain the term ‘participating preference shares’.
On which side of the trial balance would you expect to find the following balances: motor vehicles; returns outwards; carriage inwards; carriage outwards; sales; discounts received?
What is a personal account?
(a) Name two nominal accounts. (b) In which ledger would you find nominal accounts?
(a) Explain why ledgers are divided into three parts. (b) What are the names of each of the three parts?
After extracting a trial balance for the year ended 31 December 2014: (a) There is a debit balance of $3500 on the telephone account and an unpaid bill covering the 3 months to 28 February 2015
A business has trade receivables of $100 000 at its financial year end. There are no irrecoverable debts, but for the past 3 years 2% of its receivables have not been received. The statement of
What do you understand by the business entity concept?
Explain the term ‘historic cost’ and why it is widely used.
(a) Explain the difference between capital expenditure and revenue expenditure. (b) Why is it important to distinguish between capital expenditure and revenue expenditure?
Which accounting concept is used when providing depreciation of a non-current asset?
Identify a non-current asset that is not depreciated.
Identify three methods of depreciating non-current assets.
Explain the term ‘depreciation’.
The straight-line method of providing depreciation will provide the necessary funds to purchase a replacement asset before the reducing balance method.’ Is this statement true or false?
The debit side of an account totals $230 and the credit side totals $360. What is the amount shown in the trial balance and is this a debit or a credit entry?
What is the main function of preparing a trial balance?
Calculate the difference in aggregate (total) depreciation charged on a non-current asset costing $40 000 at the end of 2 years when depreciation is calculated at 25% per annum using the
Explain the term ‘carrying amount’.
A vehicle is purchased for $50 000. It has an estimated life of 8 years, at which time it is thought that it will have a trade-in value of $2000. Calculate the annual depreciation charge using the
A machine is purchased for $80 000. It is expected that it will have a trade-in value of $8000 at the end of its useful life. Depreciation will be provided at 40% per annum using the reducing balance
An asset was shown in the ledger at a cost of $18 000. Aggregate depreciation on the asset amounted to $14 500. The asset was sold for $3200. Calculate the profit (or loss) on disposal.
A piece of equipment was purchased on 1 June 2011 for $62 000. It was thought that it could be used for 5 years and then sold for scrap valuing $2000. The equipment was sold for $16 000 on 31 May
Explain why a trial balance that ‘balances’ may not necessarily be free of errors.
List the six types of error that are not revealed by the trial balance.
Explain the difference between an error of commission and an error of principle.
A trial balance has debit balances totalling $147 000 and credit balances of $149 000. Despite further checks, you are unable to find the error(s). Which account would you open and which posting
Identify the type of error involved in each of the following cases. (a) Returns outwards have been credited to the purchases account. (b) Purchase of a stapling machine costing $5.68 has
The following errors have been discovered after the preparation of a trial balance. Show the journal entries necessary to correct these two errors. (a) Purchases of $123 from Wong have been
Explain the term ‘lodgement’
When preparing a bank reconciliation statement, unpresented cheques must always be entered in the trader’s cash book.’ Is this statement true or false?
A cash book shows an entry for cheque number 2975 as $32.78. The bank statement shows the entry for cheque number 2975 as $23.78. Which amount is deemed to be correct?

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