BSc Business and Marketing Framework

Level 4

Introductory to Accounting and Finance for Business – TCA1

November 2020

Answer ALL questions.

There are 25 questions (multiple choice & short answer questions, reflective & true/false) in

this test.

Tick only ONE answer per question for multiple-choice, short answer and true/false

questions.

All questions (except one reflective question) carry 3.75 marks each, and the reflective

question is 10 marks(making the examination out of 100).

The time allowed: 50 Minutes

Mark:
Student ID:100021651
(to be ratified by
Exam Board)
Student Name: Cristian Mazur
 Question 1
Explain with examples, the three business decisions that organisations do make using
accounting and finance information (maximum word count is 120).

10 points  

Accounting and finance play an essential role in the management of any business.
Companies operate on money, and if you don't control that money, you don't control your
business.
1. Financing Decision
In budgeting, you anticipate revenues and use that knowledge to make decisions about
how to maintain and grow your business.
2. Investing Decision
By reviewing your company's financial records, you can see not only where the money
went but what good it did in the long run.
3. Managerial/working capital Decision

The finance manager must ensure that the firm has enough cash at hand to meet
its obligations at each point in time. Has opportunities, pays enough dividents.

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Question 2
What is the definition of a non-current asset?
(a) An asset that can be touched
(b) An asset that does not meet the definition of a current asset
(c) An asset that is dangerous to the business
(d) An asset that is unavailable
3.75 points  
Question 3
The accounting equation is written as:
(a) Assets = Equity + Liabilities
(b) Assets = Equity – Liabilities
(c) Assets = Equity * Liabilities
(d) Assets = Equity / Liabilities

3.75 points  
Question 4
For a particular item to be treated as an asset, for accounting purposes, which of the
following characteristics it should have?
(a) A probable future benefit
(b) a bright colour
(c) must be tangible
(d) must be movable

3.75 points  
Question 5
Which of the following cannot be a non-current liability?
(a) A loan repayment in 6 months' time
(b) A loan repayment in 6 years’ time
(c) A loan from a friend payable in 5 years' time
(d) A building society loan payable in 5 years' time

3.75 points  

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Question 6
The information required to calculate the depreciation of an asset does not include …………….
(a) The fair value of other assets
(b) The fair value of the asset
(c) The useful life of the asset
(d) The depreciation method

3.75 points  
Question 7
With the straight-line method of depreciation, the amount of depreciation for each year of
the useful life an asset is:
(a) The same
(b) Varies
(c) Decreases
(d) Increases

3.75 points  
Question 8
Which of the following statements about the income statement is not true?
(a) Income – expenditure = the profit or loss for the financial period.
(b) Income in the income statement represents all the revenue earned during the
financial period.
(c) Expenditure in the income statement represents all the cash paid out during the
financial period.
(d) Expenditure in the income statement represents all the expenses incurred during the
financial period.

3.75 points  
Question 9
The calculation of gross profit of a trader includes three of the following elements – but
which is the one that is NOT included?
(a) Sales revenue
(b) Telephone and postage expenses
(c) Opening of goods for resale
(d) Purchase of goods for resale

3.75 points  

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Question 10
Which of the following statements does NOT describe the function of depreciation?
(a) Depreciation is an application of the accruals basis of accounting, matching the cost
of using non-current assets in the business to the accounting periods benefiting from
their use.
(b) Depreciation is a deduction from the cost of a non-current asset which is charged as
an expense each year in the income statement.
(c) Depreciation represents a loss in value of non-current assets and aims to provide a
realistic current market value for non-current assets at each statement of financial
position date.
(d) Depreciation is an allocation of the cost of non-current assets to the accounting
periods benefiting from their use.
3.75 points  
Question 11
Accounting for depreciation is concerned with ……………… the expense of owning the asset.
(a) Allocating
(b) Minimizing
(c) Maximizing
(d) reducing
3.75 points  
Question 12
Wagodstus Limited has the following income statement figures for the financial year ended
31 May 2017: Revenue: £25,000, Cost of sales: £15,000, Distribution and selling costs:
£3,000, Administration expenses: £2,000.
What is Wagodstus Limited’s operating profit for the year ended 31 May 2017?
(a) £5,000
(b) £9,000
(c) £6,000
(d) £7,000
3.75 points  
Question 13
Fred runs a general store and has the following income statement balances in his books at
31 December 2013: opening inventory: £25,000, wages: £45,000, sales: £275,000,
purchases: £130,000, heat and light: £15,000, closing inventory: £28,700.
What is Fred’s gross profit for the year ended 31 December 2013?
(a) £148,700
(b) £126,300
(c) £120,000
(d) £145,000
3.75 points  

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Question 14
A trader commenced business on 1 January 2011 reports the purchases and sales for the
year to 31 December 2011 as £426,500 and £688,400 respectively. The total administrative
expenses were £112,200 and selling expenses were £2,500. The cost of good remaining
unsold at the end of the year was £72,400.
What is the operating profit for the first year of operation?
(a) £200,220
(b) £222,100
(c) £219,600
(d) £77,300
3.75 points  
Question 15
Apart from profit maximisation, the following are other objectives of a company except
(a) Getting a huge debt finance
(b) Corporate survival
(c) Reducing borrowing level
(d) Reaching a target market share
3.75 points  
Question 16
Which ONE of the following is the second stage of an accounting information system?
(a) Information recording
(b) Information identification
(c) Information communication
(d) Information reporting
3.75 points  
Question 17
The following are recognised as objectives of financial accounting EXCEPT
(a) To provide information about the reporting entity's financial performance and
financial position that is useful to present and potential investors for assessing the
stewardship of the entity's management and for making economic decisions.
(b) To provide quantitative information, primarily financial in nature, about economic
entities that is intended to be useful in making economic decisions and in making
resolved choice among alternative courses of action
(c) To measure the likely risks and returns associated with an enterprise
(d) To support informed judgments and decisions by users.
3.75 points  

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Question 18
The main purpose of management accounting and reporting is to:
(a) provide information for internal decision making
(b) determine costs of production processes
(c) set budgets against which actual costs can be compared
(d) plan the activities of an enterprise in the future
3.75 points  
Question 19
Which of the following statements is not a financial statement?
(a) Bank Statement
(b) Cash flow statement
(c) Income statement
(d) Financial position statement

3.75 points  
Question 20
Which ONE of the following is true?
(a) Directors elect auditors
(b) The government elects auditors
(c) Auditors account to directors
(d) Shareholders elect directors
3.75 points  
Question 21
Deciding on the amount or rate to pay as dividend is an example of
(a) a financing decision
(b) an investing decision
(c) a managerial decision
(d) none of the above
3.75 points  
Question 22
Which of the following is a legitimate reason why firm value (or shareholder wealth)
maximization is preferred to profit maximization as the ideal goal for the firm?
(a) Value takes account of depreciation.
(b) Value takes account of both profit and cash flow.
(c) Value or discounted cash flow is less ambiguous than profit.
(d) Profit is too concerned with the longer term.

3.75 points  

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Question 23
Puppy Co., a manufacturer, has listed the following amounts in his statement of financial
position:
Cash £1,000
Buildings £5,000
Trade payables £2,000
Loans payable within one year £1,000
Trade receivables £5,000
Plant and equipment £3,000
Inventories £6,000
What is the amount of total assets?
(a) £15,000
(b) £20,000
(c) £18,000
(d) £25,000
3.75 points  
Question 24
Paulo ltd. has listed the following amounts in its statement of financial position:
Cash £1,000
Buildings £5,000
Trade payables £2,000
Loans payable within one year £1,000
Trade receivables £5,000
Plant and equipment £3,000
Inventories £6,000
What is the amount of current assets?
(a) £25,000
(b) £9,000
(c) £10,000
(d) £12,000
3.75 points  

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Question 25
Peter has been trading since January 2000, and on 2 July 2017 paid for trade payables £1,000
from the business bank account. How should this transaction be accounted for?
1. Debit bank account £1,000
2.  Credit bank account £1,000
3. Credit trade payables £1,000
4. Debit trade payables £1,000

(a) 1 and 3
(b) 2 and 4
(c) 1 and 2
(d) 1 and 4

3.75 points  
-End of questions-

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