RQF Question Paper

4UFM

Finance for Managers

Tuesday 5 December 2017, Morning

1. Examination duration: 2 hours

2. The marks for each question are shown in brackets; use this as a guide on how much time to spend on each
question.

3. Read the instructions at the top of each section carefully. All workings must be shown.

4. No books, dictionaries, notes or any other written materials are allowed in this examination.

5. Calculators, including scientific calculators, are allowed provided they are not programmable and cannot
store or recall information. All other electronic devices, including mobile phones and smart watches, are not
permitted.

6. Candidates who break ABE Examination Regulations will be disqualified from the examinations.

7. Question papers must not be removed from the examination room.

Section A 20 × 1 mark 20 marks

Section B 3 × 10 marks 30 marks

Section C 2 (of 3) × 25 marks 50 marks

Total: 100 marks

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 Section A – 20 marks
(20 multiple choice questions × 1 mark)

Select one correct answer from the four options on each of the following 20 questions

1. A local retail store has provided the following financial information at the year-end:
Dr Cr
$ $
Sales ?
Purchases 45,000
Opening Inventory 25,000
Bank overdraft 3,500
Wages and salaries 12,000
Bad debts 500
Rent and rates 6,500
Trade receivables (debtors) 3,000
Trade payables (creditors) 500
Capital 23,000
92,000 92,000

What is the value of the retail store’s sales?

A. $50,000

B. $65,000

C. $80,000

D. $95,000

2. Which of the following details assets and liabilities at the year-end?

A. Cash budget

B. Income statement (Trading and Profit and Loss Account)

C. Statement of cash flows

D. Statement of Financial Position (Balance Sheet)

3. What compares budgeted and actual costs incurred?

A. Cash flow forecasts

B. Financial statements

C. Ratio analysis

D. Variance analysis

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 4. Revenue should only be recognised when the exchange of goods or services takes place.
Which of the following accounting concepts does this define?
A. Business entity

B. Consistency

C. Money measurement

D. Realisation

5. Revenue should be recognised when it is earned and not when money is received.
Which of the following accounting concepts does this define?
A. Double entry

B. Matching

C. Money measurement

D. Consistency

6. In the accounts of a sole trader, where should the expenses be entered?

A. Appropriation Account

B. Income Statement (Profit and Loss Account)

C. Trading Account

D. Statement of Financial Position

7. Non-current assets are valued at their net book value in a Statement of Financial Position.
Which accounting concept is being applied?
A. Accruals

B. Historical cost

C. Money measurement

D. Prepayments

8. Which of the following defines capital expenditure?

A. Additional capital invested into a business organisation.

B. A credit entry recording owners’ equity.

C. An amount of money that is expensed immediately.

D. Money spend on non-current (fixed) assets.

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 9. A business organisation has the following assets and liabilities:
$
Land and buildings 160,000
Fixtures and fittings 35,000
Total current assets 10,000
Closing inventory 2,000
Total current liabilities 4,000
Long–term liabilities 24,000
Which of the following is the liquid (acid-test) ratio?
A. 2.0 : 1

B. 2.5 : 1

C. 4.0 : 1

D. 5.0 : 1

10. Which of the following calculates the net realisable value of an item?

A. Estimated resale value of the inventory + selling or distribution costs.

B. Estimated resale value of the inventory – selling or distribution costs.

C. Estimated resale value of the inventory × selling or distribution costs.

D. Estimated resale value of the inventory / selling or distribution costs.

11. Which of the following are cash outflows for a sole trader?
1. Capital invested by the owner
2. Drawings earned by the owner
3. Purchase of fixtures and fittings

A. 1 and 2

B. 1 and 3

C. 1, 2 and 3

D. 2 and 3

12. Which concept is applied when accounting for a provision for depreciation?

A. Accruals

B. Historic cost

C. Prudence

D. Money measurement

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 13. For a motor manufacturer, motor vehicles that are partly completed at the year end are classified as:

A. Consumables

B. Goods for resale

C. Raw materials

D. Work-in-progress

14. Which of the following inventories would appear in the Statement of Financial Position (Balance Sheet) of
a manufacturing business?
1. Raw materials
2. Work-in-progress
3. Consumables
4. Finished goods

A. 1, 2 and 3

B. 1, 3 and 4

C. 2, 3 and 4

D. 1, 2, 3 and 4

15. Which of the following are included in an Income Statement (Trading and Profit and Loss Account)?
1. Cost of sales
2. Profit for the year
3. Equity

A. 1 and 2

B. 1 and 3

C. 1, 2 and 3

D. 2 and 3

16. Which of the following will calculate closing inventory value?

1. FIFO
2. AVCO
3. JIT

A. 1 and 2

B. 1 and 3

C. 1, 2 and 3

D. 2 and 3

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 17. Which of the following ratios measures efficiency?

A. Current ratio

B. Gross margin

C. Inventory turnover

D. Return on capital employed

18. Which of the following contains only current assets?

A. Cash, trade receivables (debtors), bank overdraft

B. Inventory (stock), trade receivables (debtors), cash

C. Inventory (stock), cash at bank, land and buildings

D. Motor vehicles, bank overdraft, trade receivables (debtors)

19. Which of the following would be most relevant when assessing the profitability of a business?

A. Current ratio

B. Gearing

C. Liquid (acid-test) ratio

D. Return on capital employed

20. Which of the following calculates margin of safety?

A. Actual output in units + Break-even output in units

B. Actual output in units – Break-even output in units

C. Actual output in units × Break-even output in units

D. Actual output in units / Break-even output in units

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 Section B – 30 marks
(3 × 10 marks each = 30 marks total)

Answer all questions

21 (10 marks)
Explain the role and duties of an auditor in relation to the production of company accounts.

22 (10 marks)
Discuss the usefulness of the FIFO (First In First Out) and LIFO (Last In First Out) methods of inventory
valuation.

23 (10 marks)
Electrical Warehouse Company has provided the following financial information for the year ending
30 April 2017.
$
Credit sales 1,060,000
Credit purchases 500,000
Trade receivables 30,000
Trade payables 60,000

a. Calculate the following ratios for Electrical Warehouse:

i. Trade receivables days (2 marks)
ii. Trade payables days (2 marks)
b. Assess the efficiency of Electrical Warehouse. (6 marks)

Section C
(2 of 3 × 25 marks each = 50 marks total)

Answer TWO questions only

24 (25 marks)
Discuss the reasons why companies need to depreciate the cost of their non-current (fixed) assets.

25 (25 marks)
Differentiate between marginal costing and absorption costing.

26 (25 marks)
Compare and contrast financial and management accounting.

End of question paper

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