QUESTION ONE

$($Please attempt ALL questions in this section. Each sub$-$question carries $3$ marks$)$

A$)\text{'}$An asset is similar to an expense'. Do you agree? Provide three $(3)$ cogent reasons for

your response.

B$)$ An accountant prepared a statement of financial position for a business using the

horizontal layout. In the statement of financial position, the capital of the owner was

shown next to the liabilities. This confused the owner, who argued: $"$My capital is my

major asset and so should be shown as an asset on the statement of financial position."

How would you explain this misunderstanding to the owner?

C$)$ The Managing Director of a manufacturing concern once said, "since the main object

of our firm is to know the annual profit, there is no need retaining the cost accounting

staff, let us pay them off and retain only the financial accounting staff in order to reduce

the administrative costs." Provide three $(3)$ cogent reasons to the Managing Director

why the cost accounting staff should be retained.

D$)$ What is the difference between the direct and indirect methods, of deducing cash flow

from operating activities

E$)$ Some businesses operate on a low net profit margin $($for example, a supermarket chain$).$

Does this mean that the return on capital employed from the business will also be low?

Provide cogent reasons for your response.

F$)$ Distinguish between job costing and process costing.

G$)$ Distinguish between a cost unit and a cost centre

H$)$ Describe three $(3)$ costs associated with excessive stock holding

I$)$ Why is the net present value $($NPV$)$ method of investment appraisal considered to be

theoretically superior to other methods of investment appraisal found in the literature?

J$)$ A budgetary system is a system for preparing budgets and producing control reports

for the purpose of budgetary control. Briefly describe three budgetary systems that are

used in organisations.