Questions and Answers of Cambridge International AS And A Level Accounting

Give two examples of debit entries in a partner's current account.
Give two examples of credit entries in a partner's current account.
Identify two types of structural change to a partnership.
Explain why it is necessary to revalue the assets of a partnership when a structural change takes place.
Define the term 'goodwill'.
Goodwill is the purchase of existing customers. True/False?
Non-current assets $30 000; current liabilities $8000; purchase price $50000. What is the value placed on goodwill?
Explain the term 'inherent goodwill'.
Explain how inherent goodwill should be shown on a statement of financial position.
Under what circumstances might a partnership be dissolved?
A partnership is dissolved.a. Which account should be debited if a partner takes over the inventory of the business?b. Which account should be credited if a partner takes over one of the business
After dissolution a partner has a debit balance on his capital account. Will he pay or receive cash from the partnership bank account?
From the following list identify the items that could be found on the debit side of a realisation account:bank balancediscounts alloweddiscounts receiveddissolution costsinventorynon-current
Identify from the list the items that could be found on the credit side of a realisation account.
Explain the circumstances when a partnership would be dissolved.
Explain how a loss on realisation should be treated.
A and B share profits and losses in the ratio 2:1. Profit on realisation is $24000; balance at bank is $9000. Explain how the profit and bank balance are shared between A and B.
Purchase consideration $84000, made up of $12000 cash; $50 000 seven per cent debentures and 20000 ordinary shares of $1 each. What is the value of one ordinary share?
Explain why the owners of a partnership might turn their business into a private limited company.
What is meant by 'limited liability'?
Directors are the owners of a limited company. True/False?
Explain why shareholders appoint directors to run a limited company.
Private limited companies can have their shares quoted on a recognised stock market. True/False?
A private limited company could have 35 shareholders. True/False?
Private limited companies cannot sell their goods in another country. True/ False?
Private limited companies can only issue shares to relatives. True/False?
Which type of businesses file their annual financial statements with the Registrar of Companies?
Only profitable companies must file their annual financial statements with the Registrar of Companies. True/False?
What is the term used to describe a dividend that is paid part way through a financial year?
A limited company must always pay an interim dividend. True/False?
Ordinary dividends must be greater than preference dividends. True/False?
A public limited company could have 3500 shareholders. True/False?
Explain to a potential investor the difference between the return on debentures and the return on ordinary shares.
Ordinary shareholders must own a minimum of 100 shares in order to have a vote at a company's AGM. True/False?
Profit from operations is only earned by privately owned hospitals and clinics. True/False?
What expenses might be found under the heading of financial costs?
Name two sets of people who should receive the annual financial statements of a limited company.
What is shown in a statement of changes in equity?
Explain why dividends paid are shown in a statement of changes in equity.
Finance costs and tax paid are shown as deductions in a statement of changes in equity. True/False?
Name two ways in which a limited company can raise finance.
Give another term used for the nominal value of a share.
Name two components of the equity of a limited company.
The two types of shares that pay a fixed dividend are preference and debentures. True/False?
What does the term 'cumulative' mean when applied to a preference share?
Authorised share capital is one of the terms applied to the shares issued by a limited company. True/False?
Another name for a rights issue is a bonus issue. True/False?
Both a rights issue and a bonus issue of shares are offered only to existing shareholders. True/False?
Explain one difference between a rights issue and a bonus issue of shares.
Why is the price quoted for a rights issue of shares generally lower than the current market price?
What does the term 'maintaining reserves in their most flexible form' mean?
Explain the difference between revenue reserves and capital reserves.
Shares issued through a rights issue are more valuable to a shareholder than shares given in a bonus issue. True/False?
Identify one revenue reserve.
Identify one capital reserve.
Explain how the reserves identified in your previous two answers were created.
Explain the main difference between a rights issue of shares and a bonus issue of shares.
Companies may reduce their capital if the value of their shares falls on the stock market. True/False?
Bonus shares can be issued out of revenue reserves. True/False?
Bonus shares can be issued out of capital reserves. True/False?
Gross profit $30000; administrative expenses $10000; interest payable $8000. Calculate profit from operations and profit before tax.
A reserve is money saved by a limited company for use in times of financial hardship. True/False?
Give one example of a revenue reserve and one example of a capital reserve.
Give an example of an intangible non-current asset.
Land is an example of a tangible non-current asset. True/False?
How should redeemable preference shares due for repayment in 20 years' time be classified in the statement of financial position?
How should seven per cent debentures due to be redeemed in five months' time be classified?
Cash flows show details of how profits have been earned. True/False?
Legally, sole traders must prepare a statement of cash flows. True/False?
In year 1 a business has a provision for depreciation of $200. In year 2 the provision is increased to $240. What is the cash flow resulting from the change in provision?
Non-current assets cost $50000; they have an estimated life of ten years. Depreciation is provided at $5000 per annum. How much cash is set aside as depreciation in order to replace the assets in the
A sole trader makes drawings during a year of $8900. How would these drawings be shown on a cash flow statement?
Which of the following transactions would result in a flow of cash into a business?a. Purchase of a machineb. Sale of a vehiclec. Increase in inventoriesd. Increase in payablese. Capital introduced
Explain two reasons why a company might need to raise finance.
A company wishes to purchase more land in order to extend its manufacturing base. The finance director believes that he should negotiate an overdraft facility with the company's bankers. Do you
'Debentures' is another name for preference shares. True/False?
Identify two problems that might occur if a company embarks on a marketing policy that is aimed at doubling sales revenue.
Explain the difference between a bank overdraft and a bank loan.
Explain how a company might benefit from issuing ordinary shares rather than issuing debentures.
Explain how company directors might be able to predict the need for additional finance in the future.
Why are results converted into ratios?
Give an example of a profitability ratio.
What do liquidity ratios tell us?
Give an example of a liquidity ratio.
Give the formula for calculating the profit margin.
Give the formula for calculating inventory turnover.
How is average inventory calculated?
Bima makes a gross profit ratio of 54 per cent. Is this good or bad?
Mary's average collection period is 42 days; her average payment period is 19 days. Explain whether or not this is a good or a bad policy.
Identify two limitations of using ratios as an evaluation of performance.
Identify a direct cost incurred in the manufacture of a pair of shoes.
Identify an indirect cost incurred in their manufacture.
Identify a direct cost incurred in the manufacture of the bread you may have eaten yesterday.
Identify an indirect cost incurred in their manufacture.
Identify a sunk cost incurred by your school or college.
Number of units produced 200. Total costs involved in their production $7500. Calculate the cost per unit.
Give an alternative name for absorption costing.
Identify one example of a cost centre.
Identify one use of absorption costing.
Tick the appropriate box to indicate whether the expense should be allocated or apportioned to the appropriate cost centre: Overhead Direct wages Heating and lighting Direct materials Insurances Cost

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