CONFIDENTIAL AC/TEST/JULY 2022/ACC466

UNIVERSITI TEKNOLOGI MARA

TEST 2

COURSE : FINANCIAL AND MANAGEMENT ACCOUNTING

COURSE CODE : ACC466
TIME : 1 3/4 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consist of three (3) questions.

2. Answer ALL questions in English.

3. Discussion is strictly prohibited.

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QUESTION 1

1. What is best to describe Financial Statements

A. No regulatory requirement on cost accounting. (Main users are only the internal
users.)
B. No standard reporting formats. Many different types of report depending on the
nature of business and the specific information needs of the management.
C. Historical in nature but it all depends on management’s judgement.
D. Strict regulatory control is being imposed on Financial Accounting especially
those that are listed in the Bursa Malaysia. (Users of financial accounting
comprise of internal and external users.)

2. Financial accounting is ______

A. a discipline of accounting that mainly deals with the keeping of accounting

records to enable the preparation of accounting reports.
B. the process of tracking, recording and analyzing costs associated with the
products or activities of an organization.
C. reporting of accounting information (format, time horizon, report timing and
Regulatory requirements)
D. All of the above

3. Which of the following is incorrect?

A. Statement of Financial Position and Statement of Profit or Loss form part of the
financial statement of a business.
B. Statement of Financial Position illustrates the accounting equation
C. Statement of Financial Position and Statement of Profit or Loss is referred to
internal and external users.
D. Statement of profit or loss illustrates the extended accounting equation

4. Financial accounting information ________.

A. should be incomplete in order to confuse competitors

B. should be prepared differently by each company
C. provides investors guarantees about the future
D. summarizes what has already occurred

5. External users of financial accounting information include all of the following except
________.
A. lenders such as bankers
B. governmental agencies such as the IRS
C. potential investors
D. employees of a business
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6. Which of the following would not be an example of a user who may rely on general
purpose financial reports?

A. Henry who is given RM5 000 on his 18th birthday by his grandfather to invest
in the share market.
B. Singh who manufactures sugar free muesli bars hopes to secure long term
sales contracts with school canteens all over the county.
C. Milly who runs a successful organic food café is keen to expand into the food
truck industry by obtaining finance via crowdfunding.
D. Vanessa who owns a fishing and camping store is keen to expand her product
range by approaching his suppliers to ask about increasing his credit.

7. Which of the following statements about enhancing qualitative characteristics of

financial statements is not correct?

A. Fair values of assets that cannot be verified in an active market should not be
disclosed in the financial statements.
B. The financial statements of similar entities adopting different asset
measurement bases can be adequately compared.
C. The value of invoices not yet received from suppliers for services should be
estimated at financial year end for reporting purposes.
D. Financial statements should be presented with the assumption that a
reasonable and informed third person will know how to analyse financial
information.

8. Which of the following statements are TRUE of limited liability companies?

i. The company’s exposure to debts and liability is limited
ii. Financial statements must be produced
iii. A company continues to exist regardless of the identity of its owners

A. i and ii only
B. ii and iii only
C. i and iii only
D. i, ii and iii

9. Which of the following are differences between sole traders and limited liability
companies?
i. A sole trader’s financial statements are private and never made available to third
parties; a company’s financial statements are sent to shareholders and may be
publicly filed
ii. Only companies have share capital
iii. A sole trader is fully and personally liable for any losses that the business might
make
iv. Drawings would only appear in the financial statements of a sole trader

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A. i and iv only
B. ii and iii only
C. ii, iii and iv
D. i, iii and iv

10. Razlan and Rozana are twins and set up a business known R&R Financial Consultant.
The business dealing with a professional financial and economic advisory. They hire
an accountant clerk, Hazimah to prepare their accounts. At the same, they plan to
outsource Azlina from Azlin & Zailan Associates as their legal advisor. Based on the
above scenario, who is/are the person responsible for the management and control of
R&R Financial Consultant?

A. Razlan, Rozana, Hazimah and Azlina

B. Razlan and Azlin & Zailan Associates
C. Azlina, Razlan and Rozana
D. Razlan and Rozana

11. Which type of the business organization relies on the concept of separate legal entity?

i. E-smart Tech Limited Company

ii. Hassan Supermarket
iii. Azlan Azlin & Partners
iv. Maimunah Stationeries

A. ii,iii,iv
B. i
C. ii & iv
D. i & iii

12. It is an exclusive right granted for a new creation of a merchandise or a new process
or idea for new technical solution. The right will protect the product or process being
imitated by others, used or sold without the owner's consent.

The above statement is referring to

A. Trademark
B. Patents
C. Goodwill
D. Copyright

13. This information must be relevant in that it influences the decisions of users. This
influence occurs when information helps the reader to predict future income and cash
flows. This refers to_____

A. Timeliness

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B. Relevance
C. Going concern
D. Reliability

14. Which of the following calculates a sole trader’s net profit for a period?
A. Closing net asset + drawings – capital introduced – opening net assets
B. Closing net assets – drawings + capital introduced – opening net assets
C. Closing net assets – drawings – capital introduced – opening net assets
D. Closing net assets + drawings + capital introduced – opening net assets

15. Which TWO of the following items must be disclosed in the note to the financial
statements for intangible assets?
i. The useful lives of intangible assets capitalised in the financial statements
ii. A description of the development projects that have been undertaken during
the period
iii. A list of all intangible assets purchased or developed in the period
iv. Impairment losses written off intangible assets during the period

A. i and iv
B. ii and iii
C. iii and iv
D. i and ii

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QUESTION 2

Statement of Profits or Loss and Other Comprehensive Income

for the year ended31 December 2020 (extract)

2020
RM’000
Revenue 826.00
Cost of sales -395.00
Gross Profits 431.00
Other revenues 23.00
Administrative expenses -114.00
Selling and Distribution expenses -32.00
Finance Cost -22.00
Taxation -68.00
Net Profits 218.00

Statement of Financial Position as at 31 December 2020 (extract)

2020
(RM’000)

Non-Current Assets 2,600

Current Assets
Inventories 210
Trade Receivables 180
Banks 120
Total 3,110
Ordinary Shares 1,500
Retained Earnings 142

Non-Current Liabilities 700

Current Liabilities
Trade Payables 400
Accruals 368
Total 3,110

Additional information:
1. All sales were done on credit terms.
2. The opening inventory for 2020 was RM290,000.
3. Trade Receivables on 1 January 2020 was RM180,000.

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Required:

a. The management of Cantik Sdn Bhd is evaluating the financial performance of the
company by comparing the ratios for two consecutive years. Compute the following
ratios for year 2020:

i. Net Profit Margin

ii. Inventory Turnover Ratio
iii. Trade Receivables Collection Period (assume 360 days in a year)
iv. Debt Ratio
v. Times interest earn
vi. Quick ratio

(6 marks)

b. Below is the performance of the company for the year 2021.

Net profit margin 26.48%

Inventory turnover ratio 1.75 times
Average collection period 88.5 days
Debt ratio 38%
Times interest earn 16 times
Quick ratio 0.64

Based on the answers in (a), comment on the type of ratios below. The comment
should consist of trend (increase or decrease), interpretation and brief analysis.

i. Profitability
ii. Management Efficiency
iii. Leverage

(7 marks)
c. State two (2) recommendation that can be done by Diamond Sdn Bhd to increase its
quick ratio.
(2 mark)

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QUESTION 3

The following is the trial balance extracted from the books of M2Y Enterprise as at 31
December 2021.

Debit (RM) Credit (RM)

Land 300,000
Machinery 148,600
Furniture 20,400
Discount allowed 5,200
Rental received 60,450
Drawings 7,820
Carriage outwards 9,000
Commission revenue 20,560
Administrative expenses 6,600
Capital 240,000
Cash at bank 150,000
Cash in hand 15,600
Accounts payable 40,950
Advertising expenses 15,600
Carriage inwards 5,600
Accounts receivable 25,800
Allowance for doubtful debts as at 1 January 2021 1,780
Insuranse expenses 15,780
Loan from ALBA Bank 150,000
Purchases 128,600
Rental expenses 24,000
Copyright 5,000
Repairs 5,200
Return inwards 4,400
Return outwards 5,810
Sales 447,572
Sundry expenses 8,200
Inventory as at 1 January 2021 65,600
Duty on Purchase 8,360
Wages and salaries 45,200
Water and electricity 13,040
Accumulated depreciation as at 1 January 2021
- Machinery 59,440
- Furniture 7,038
1,033,600 1,033,600

Additional information:

1. Inventory as at 31 December 2021 was valued at RM 30,000.

2. Loan from ALBA Bank was taken on 1 September 2021 and the interest at 9%
per annum has not yet been paid.

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3. Accrued rental received was RM10,600 and RM2,000 of wages and salaries
were still outstanding on 31 December 2021.

4. RM3,000 of insurance expenses was paid for January and February 2022.

5. The business has not yet received a commission of RM1,500 for services rendered
in December 2021.

6. The owner took goods worth RM1,200 for his personal use.

7. Latifah, one of the credit customer was in financial difficulties and the balance in
her account of RM3,560 need to be written off . the allowance for doubtful debts
is provided at the rate of 5% on the net account receivables balance.

8. Depreciation for the year is to be provided as follows:

Machinery 20% straight line method
Furniture 15% reducing balance method

Required:

a. Statement of Profit or Loss for the year ended 31 December 2021.

(18 marks)
b. Statement of Financial Position as at 31 December 2021.
(12 marks)

Note 1: Use vertical format presentation for both statements and show all calculations.
Note 2: Calculate to the nearest RM.
(Total: 30 marks)

(TOTAL MARKS: 60)

END OF QUESTIONS

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