Statement of Cash Flows

Multiple Choice

Which ONE of the following is a correct statement?

A. An increase in inventories will cause a positive cash flow
B. An increase in trade receivables will cause a positive cash flow
C. Expenditure on non-current assets will cause a positive cash flow
D. An increase in trade payables will cause a positive cash flow
Correct answer

In addition to cash flows from operating activities, the other main headings on the
statement of cash flows are cash flows from ……………………. and cash flows from ……………
activities.
A. financial investment: taxation
B. non-operating: financing
C. investing: non-operating
D. investing: financing
Correct answer

Starting with the profit before taxation (after interest), it is necessary to ………………….. the
annual depreciation charge when working towards cash flows from operating activities.
A. ignore
B. reduce
C. deduct
D. add
Correct answer

The Budgeting Process

A budget is
A. a planning tool.
B. a control tool.
C. a means of communicating goals to the firm's divisions.
D. all of the above.
Correct answer

Which of the following is an advantage of the budgeting process?

A. Budgeting provides resource information for decision making.
B. Budgeting provides a standard for performance evaluation.
C. Budgeting improves communication and coordination within the organization.
 D. all of the above
Correct answer

January February March

Sales 50,000 ? 80,000
Production 52,000 64,000 78,000
Feedee Company has budgeted sales and production (in units) over the next three months as follows:
There are 10,000 units on hand on January 1. A minimum of 20 per cent of the next month's sales in units
must be on hand at the end of each month. April sales are expected to be 70,000. Budgeted sales for
February would be.

A. 64,000.
B. 78,000.
C. 60,000.
Correct answer
D. 52,000.

Financial Statements
(£‘000)
Statement of Financial Position
Share capital 1,000
Reserves 7,100
Non-current liabilities 4,200
Income statement
Revenue 17,610
Gross profit 12,600
Profit before interests and tax 2,520
Profit for the year 1,890

The financial statements of Lomax Printing limited for 2013 include the following:

Compute the Return on Capital Employed for the year.

A. 20.49%
Correct answer
B. 15.37%
C. 31.11%
D. 23.33%

The financial statements of Lomax Printing limited for 2012 include the following:
 (£’000)
Statement of Financial Position
Share capital 1,000
Reserves 6,900
Non-current liabilities 3,150
Income statement
Revenue 15,390
Gross profit 9,450
Profit before interests and tax 2,310
Profit for the year 1,733

Compute the Operating Profit Margin for the year.

A. 15%
Correct answer
B. 11.26%
C. 61.4%
D. 21.94%
The financial statement of XYZ plc for 2014 includes the following:

2014
Statement of financial position
2,000
Share capital
Reserves 10,700
Non-current liabilities 5,000
Income statement
Revenue 20,000
Gross profit 14,500
Profit before interest and tax 3,050
Profit for the year 2,150

What the Return on shareholders’ fund for the year.

A. 16.93%
Correct answer
B. 20.09%
C. 12.15%
D. 30.71%
Introduction to Accounting and Finance
Consider the following two statements concerning management accounting:

1. Management accounting tends to place more emphasis on providing objective, verifiable

information than financial accounting.

2. Management accounting tends to place less emphasis on providing reports of a non-financial

nature than financial accounting.

Which ONE of the following combinations concerning the above statements (true/false) is
correct?
a. Statement 1 Statement 2
b. True True
B.
a. Statement 1 Statement 2
b. True False
C.
a. Statement 1 Statement 2False True
D.
a. Statement 1 Statement 2
b. False False
Correct answer

Which ONE of the following types of business do not have a limited liability?
A. Sole Trader
Correct answer
B. Limited Liability Partnership
C. Limited Liability Company
D. None of the above

Accounting primarily exists to help user ……………….

A. decision making
Correct answer
B. understanding
C. analysis
D. evaluation

Management accounting
A. provides relevant information to managers.
B. provides relevant information to meet specific needs of persons inside the
organisation.
C. provides a framework to evaluate information in light of an organisation's goals.
 D. all of the above
Correct answer

Which ONE of the following is the second stage of an accounting information system?
A. Information communication
B. Information identification
C. Information recording
Correct answer
D. Information reporting

................ is concerned with the collection, measurement, and communication of events in

financial terms.
A. Management
B. Business
C. Accounting
Correct answer
D. Finance

Which branch of accounting is MOST concerned with the collection of detailed financial data for use in
planning and controlling an entity?
A. Management accounting
Correct answer
B. Auditing
C. Financial accounting
D. Taxation

Which user group is likely to be most interested in the growth of the wealth of an enterprise,
and the profit relative to the money tied up in the enterprise?
A. Investors
Correct answer
B. Customers
C. Lenders
D. Employees

The following are recognised as objectives of financial accounting EXCEPT

A. Option 1
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 measure the likely risks and returns associated with an enterprise.
Correct answer
C. To support informed judgments and decisions by users.
D. 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 choices among alternative courses of action.

Accounting can be seen as part of the total............................. system of the business.

A. computer
B. information
Correct answer
C. financial
D. commercial

The primary purpose of financial accounting is to:

A. ensure that all companies are audited every year.
B. help users make decisions about the organization.
Correct answer
C. maximize the amount of profit a company has earned.
D. enable a reporting condition to be imposed on all companies.

Which ONE of the following is part of the roles played by accounting in decision-making
within an organization
A. What prices should we charge for our products or services?
B. Will the cost of new employees be lower than the income they will generate?
C. Should we be expanding into bigger premises?
D. All of the above

Which of the following statements is NOT one of the financial statements?

A. Bank statement.
Correct answer
B. Cash flow statement.
C. Income statement
D. Statement of financial position
Apart from profit maximisation, the following are other objectives of a company EXCEPT
A. Getting a huge debt finance
Correct answer
B. Corporate survival
C. Reducing borrowing level
D. Reaching a target market share
Which ONE of the following is the second stage of an accounting information system?
A. Information communication
B. Information identification
C. Information recording
Correct answer
D. Information reporting

Which of the following is not a branch of accounting?

A. Management Planning
Correct answer
B. Auditing
C. Financial Management
D. Bankruptcy and liquidation

Balance Sheet
Which of the following cannot be a non-current liability?
A. A loan repayment in 6 months' time
Correct answer
B. A loan repayment in 6 years’ time
C. A loan from a friend payable in 5 years' time
D. A bulding society loan payable in 5 years' time

Which ONE of the following best describes a non-current asset?

A. It does not meet the definition of a current asset
Correct answer
B. It will be held for more than a year.
C. It has a physical substance
D. It is held for a fixed term

What are the three major financial statements?

A. statement of cash flows, income statement and statement financial position
Correct answer
B. statement of cash flows, equity statement and statement financial position
C. statement of cash flows, equity and statement financial position
D. Equity, assets and liabilities

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
Correct answer
B. a bright colour
C. must be tangible
D. must be movable
The claims of a company are:
A. Equity and liabilities
Correct answer
B. Equity and assets
C. Assets and liabilities
D. Current assets and current liabilities

The accounting equation is written as:

A. Assets = Equity + Liabilities
Correct answer
B. Assets = Equity - Liabilities
C. Assets = Equity / Liabilities
D. Assets = Equity * Liabilities

A statement of financial position aims to meet various user needs. Which ONE of the following user needs
does it NOT aim to meet?
A. Reveal how profit for the period was generated
Correct answer
B. Assess the relationship between assets and claims
C. Provide a basis for assessing the wealth of the business
D. Assess how business was financed and how funds were deployed.

What are the three major financial statements?

A. statement of cash flows, income statement and statement of financial position
Correct answer
B. statement of cash flows, equity statement and statement of financial position
C. statement of cash flows, equity and statement of financial position
D. Equity, assets and liabilities

According to the accounting equation, why is profit for the period added to equity?
A. Because the residual profit belongs to the owners
Correct answer
B. Because it is a liability
C. Because it is an asset
D. Because it is an extraordinary item
What are the two main classifications of assets?
1. Tangible assets
2. Current assets
3. Fictitious assets
4. Non current assets

A. 2 and 4
Correct answer
B. 1 and 2
C. 2 and 3
D. 1 and 4

What is the definition of a non current asset?

A. An asset that does not meet the definition of a current asset
Correct answer
B. An asset that is dangerous to the business
C. An asset that is unavailable
D. An asset that can be touched

The information required to calculate the depreciation of an asset does NOT include …………….
A. The fair value of other assets.
Correct answer
B. The fair value of the asset.
C. The useful life of the asset.
D. The depreciation method.

Inventory costing methods includes the following EXCEPT …………….

A. weighted average revenue.
Correct answer
B. first in, first out.
C. weighted average cost.
D. last in, first out.
James & James ltd. has listed the following amounts in its statement of financial position:
Cash £10,000
Buildings£75,000
Trade payables£25,000
Loans payable within one year£15,000
Trade receivables£55,000
Plant and equipment£30,000
Inventories£60,000
What is the amount of current liabilities?
A. £40,000
Correct answer
B. £95,000
C. £125,000
D. £100,000
Black Co., a manufacturer, has listed the following amounts in his statement of financial position:
Cash £10,000
Buildings£75,000
Trade payables£25,000
Loans payable within one year£15,000
Trade receivables£55,000
Plant and equipment£30,000
Inventories£60,000
What is the amount of current assets?
A. £180,000
B. £125,000
Correct answer
C. £255,000
D. £150,000

If the non-current assets figure of a business is £55,000, current assets figure is £22,000 and total liabilities
figure is £13,500, its equity would amount to:
A. £63,500
Correct answer
B. £41,500
C. £90,500
D. £29,500

A list of equity and liabilities for a business at the end of its first year's trading are presented here.

Share capital £120,000

Share premium £50,000
Bank overdraft £30,000
Retained earnings £40,000
Long term bank loan £150,000
Loan from friend £60,000
Trade payables £10,000

What is the value of the total assets end of that year?

A. £460,000
Correct answer
B. £373,000
C. £323,000
D. £293,000

A list of assets and liabilities for a business at the end of its second year's trading are presented here.

Plant and machinery £120,000

Inventories £50,000
Bank overdraft £30,000
Trade receivables £40,000
Long term loan £60,000
Buildings £150,000
Cash £10,000

What is the value of the equity at the end of that year?

A. £340,000
B. £260,000
C. £320,000
D. £280,000
Correct answer

Plant and machinery £120,000

Inventories £50,000
Bank overdraft £30,000
Trade receivables £40,000
Long term loan £60,000
Buildings £150,000
Cash £10,000

A list of assets and claims for a business at the end of its second year's trading are presented here.

What is the value of the current assets end of that year?

A. £100,000
Correct answer
B. £130,000
C. £370,000
D. £280,000

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. £12,000
Correct answer
B. £9,000
C. £25,000
D. £10,000
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. £18,000
B. £20,000
Correct answer
C. £25,000
D. £15,000

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 2
B. 1 and 3
C. 1 and 4
D. 2 and 4
Correct answer

A list of equity and liabilities for a business at the end of its first year's trading are presented here.
Share capital
Share premium
Bank overdraft
Retained earnings
Long term bank loan
Loan from friend
Trade payables
What is the value of the total equity end of that year?
A. £4,000
Correct answer
B. £3,000
C. £2,000
D. £9,000

Plant and machinery £20,000

Inventories £5,000
Bank Overdraft £3,000
Trade receivables £4,000
Long term loan £6,000
Buildings £10,000
Cash £10,000

A list of assets and claims for a business at the end of its second year's trading are presented here.

What is the value of the non-current liability end of that year?

A. £6,000
Correct answer
B. £13,000
C. £3,000
D. £8,000
If the non-current assets figure of a business is £35,000, current assets figure is £17,000 and total liabilities
figure is £16,000, its equity would amount to:
A. £36,000
Correct answer
B. £44,500
C. £97,500
D. £28,500

Income Statements
The conventional view of depreciation is that it is necessary because
A. it will help to provide a conservative figure of profit for the year
B. a portion of the cost of non-current assets is matched with the income they help
generate
Correct answer
C. cash needs to be set aside to replace the asset
D. non-current assets can be reported at the amount they are worth

The way to adjust purchases to arrive at the cost of sales figures is to:
A. subtract both opening and closing inventories
B. add opening inventories and subtract closing inventories
Correct answer
C. subtract opening inventories and add closing inventories
D. add both opening inventories and closing inventories

Which ONE of the following is the correct definition of the profit, or loss, for a period?
A. The difference between receipts and payments
 B. The difference between receipts and expenses
C. The difference between revenues and expenses
Correct answer
D. The difference between revenues and payments

Accounting for depreciation is concerned with ……………… the expense of owning the asset.
A. reducing
B. allocating
Correct answer
C. maximizing
D. minimizing

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. Opening of goods for resale
C. Purchase of goods for resale
D. Telephone and postage expenses

Which ONE of the following would be recognised as an expense in the current financial period?
A. A payment made in the current financial period to hire a machine that will be used at the
beginning of the next financial period.
B. An invoice received for gas used in the last quarter of the current accounting period, but which is
not paid until the next financial period.
Correct answer
C. An invoice for printing, owing at the end of the previous period, but paid in the current financial
period.
D. A cash payment made during the current financial period, but relating to the first three months’
rent due for the next financial period.

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.
Correct answer
D. Depreciation is an allocation of the cost of non-current assets to the accounting periods benefiting
from their use.

Which of the following statements about the income statement is not true?
A. Income in the income statement represents all the revenue earned during the financial period.
 B. Income – expenditure = the profit or loss for the financial period.
C. Expenditure in the income statement represents all the cash paid out during the financial period.
Correct answer
D. Expenditure in the income statement represents all the expenses incurred during the financial
period.

With the straight line method of depreciation, the amount of depreciation for each year of the useful life an
asset is:
A. The same
Correct answer
B. Varies
C. Decreases
D. Increases

With the reducing balance method of depreciation, the amount of depreciation for each year of the useful
life an asset:
A. Stays the same
B. Reduces
Correct answer
C. Halves each year
D. Increases

Money measurement problems include the following except …………….

A. Monetary value
Correct answer
B. Goodwill and brands
C. Human resources
D. Monetary stability
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. £77,300
B. £219,600
Correct answer
C. £222,100
D. £200,220

During the financial year end of 31 December 2011, a business paid a trade subscription of £3,000 for the
6 months ended 31 March 2012. If the trade subscription was £500 per month, what figure is shown in the
income statement for the year to 31 December 2011?
 A. £2,000
B. £1,000
C. £3,000
D. £1,500 correct answer

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. £7,000
B. £5,000
Correct answer
C. £6,000
D. £9,000

If sales are £20,000, opening inventory is £10,000, purchases for the year are £15,000 and closing
inventory is £11,000, what is the gross profit?
A. £10,000
B. £6,000
Correct answer
C. £8,000
D. £9,000

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
Correct answer
B. £126,300
C. £120,000
D. £145,000

Company Alpha pays 5% sales commission to staff. During the year sales are £200,000 and actual amount
paid out to the staff as sales commission is £8,000. How much should be recorded as total sales
commission for the year?
A. £10,000
Correct answer
B. £8,000
C. £100,000
D. £80,000

A firm pays its rent quarterly in advance (on 1 January, 1 April, 1 July and 1 October). The total rent for
the year is £36,000. How much is recorded as rent for October in the monthly financial accounts?
A. £3,000
 Correct answer
B. £12,000
C. £6,000
D. £9,000

A firm pays its rent quarterly in advance - £6,000 per quarter during 2016. It also pays £7,500 on 15
December 2016 for the first quarter of 2017. What is the amount of rent recorded in the Profit and Loss
account for the Year ending 31 December 2016?
A. £24,000
Correct answer
B. £31,500
C. £18,000
D. £25,500

Accounting for Limited Liability Companies

Which ONE of the following is false?
A. Directors elect auditors
Correct answer
B. Shareholders elect directors
C. Directors account to shareholders
D. Shareholders elect auditors

In a limited liability company, shareholders limit their losses to which ONE of the following?
A. What they had paid, or had agreed to pay, for their shares
Correct answer
B. The equity figure shown on the company’s statement of financial position
C. Their share of the total liability of the company
D. The nominal value of their shares

KK plc is listed on the London Stock Exchange. To which ONE of the following are the auditors
of this company primarily accountable?
A. Option 1
a. The London Stock Exchange
B. The company's shareholders
Correct answer
C. The UK Government
D. The company's directors

Which ONE of the following is not normally considered the right of an ordinary shareholder?
A. Option 1
 a. An interest in the profits earned by the company
B. An involvement in the day-to-day running of the company
Correct answer
C. Voting rights at meetings
D. An interest in the net assets of the company

Limited liability companies (LLCs) generally possess no more than two of the following four (desirable)
characteristics: (1) limited liability, (2) centralized management, (3) unlimited life, and (4) the ability to
transfer ownership interest without prior consent of the other owners.
The two characteristics most likely to be ABSENT in LLCs are __________.
A. Option 1
a. centralized management and the ability to transfer ownership interest without prior
consent of the other owners
B. unlimited life and the ability to transfer ownership interest without prior consent of the other
owners
Correct answer
C. limited liability and centralized management
D. centralized management and unlimited life

When creditors of an enterprise have claims only on the assets owned by the enterprise,
and not on the assets of the owners of the enterprise, that enterprise is:
A. an unlimited liability company
B. a partnership
C. a limited liability company
Correct answer
D. a sole proprietorship
Preference shares:
A. have specific maturity dates
B. have voting rights
C. pay a specific return to investors
Correct answer
D. offer investors the same level of risk than ordinary shares

Consider the following comments regarding the position of auditors of limited companies:
i.The audit opinion applies to all parts of the annual report
ii.Auditors have responsibility to detect all errors in the annual report
iii.The government appoints the auditors of public limited companies
Which of the following is/are correct?
A.
(i) and (ii)
B. (iii) only
C. (i), (ii) and (iii)
D. None of the above
Legal disclosure requirements imposed on limited companies act primarily to safeguard the interests of:
i.Employees
ii.The general public
iii.Shareholders
iv.Long-term lenders
Which of the following is/are correct?
A. (ii) and (iv) only
B. (i), (ii) and (iii) only
C. (i), (ii) and (iv) only
D. (iii) and (iv) only

Which ONE of the following is true?

A. Directors elect auditors
B. Shareholders elect directors
Correct answer
C. Auditors account to directors
D. The government elects auditors

In a limited liability company, shareholders limit their losses to which ONE of the following?
A. What they had paid, or had agreed to pay, for their shares
Correct answer
B. The equity figure shown on the company’s statement of financial position
C. Their share of the total liability of the company
D. The nominal value of their shares

Fatima plc is listed on the London Stock Exchange. To which ONE of the following are the directors of
this company primarily accountable?
A. The London Stock Exchange
B. The company's shareholders
Correct answer
C. The UK Government
D. The company's auditors

Which ONE of the following is normally considered the right of an ordinary shareholder?
A. An interest in participating in board meetings
B. An involvement in the day-to-day running of the company
C. Voting rights at meetings
Correct answer
D. An interest in the net profit of competitors

Financial Markets
…………………… is an example of a money market security.
A. Treasury Bills
 B. Certificate Of Deposit
C. Repurchase Agreements
D. All of the above
Correct answer

………………… is a market where participants are able to buy, sell, exchange and speculate on
currencies.
A. Forex market
Correct answer
B. Money market
C. Equity market
D. All of the above
Which of the follow markets specialises in very short-term debt?
A. Money market
Correct answer
B. Bond Market
C. Derivative market
D. None of the above
Another name for the interest rate paid on bonds is ……………………
A. dividend
B. coupon
Correct answer
C. yield
D. none of the above

Intro to Corp. Finance and Financial Market

The generally-accepted key financial objective of a business is assumed to be:
A. maximisation of profit
B. maximisation of sales revenue
C. maximisation of return on capital employed
D. enhancement/maximisation of the wealth of the owners
Correct answer

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
Correct answer
D. none of the above

All of the following are roles of a finance manager except

A. be the company’s financial controllers
 B. set out how the company should be financed
C. perform annual audit of the company’s financial statement
Correct answer
D. responsible for the company’s financial planning process

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 both profit and cash flow.
B. Value or discounted cash flow is less ambiguous than profit.
Correct answer
C. Value takes account of depreciation.
D. Profit is too concerned with the longer term.

The following are activities which exclusively come within the scope of corporate financial decision-
making EXCEPT
A. How much should be invested?
B. How much is to be allocated to the marketing budget?
Correct answer
C. Which type of finance should be chosen?
D. How much finance should be raised?

Essay
--Outline the benefits of Introductory Accounting and Finance for Business module to your chosen new
business (maximum word count of 250).

Tips: (1) state your new business name, three objectives, and three values (10 marks)
(2) within the context of your chosen new business, state and discuss the three major decisions you can
make (18 marks).

Example of a correct response

My chosen new business name is Triple B Transport Ltd. The business provides transportation services of
goods across the world. Triple B operates four days a week, throughout the year, and the business head
office is in Kent, UK.
Objectives
1. To provide an efficient goods transportation service
2. To exceed customers' expectations
3. To provide cost-effective service
Values
1. Integrity
2. Timeliness
3. Prudence

The three major decisions to make are as follows:

Managerial decision – helps to make cost-related decisions on the running of transport routes, e.g., daily
fuel costs.
Financial decision – helps to make plans for further sources of funding for the transport business, e.g., loan
opportunities.
Investment decision – helps to decide on new investment, e.g., buying a new fleet of vehicles.
Note You are expected to discuss the three major decisions in detail.

State and briefly describe with examples three sources of finance for a limited liability company
(maximum word count of 120).

Example of a correct response

 Shares Ordinary shares (equities) – holders are the main risk-takers and are given voting rights
 Preference shares – holders are given a right to a fixed dividend before ordinary shareholders
receive a dividend.
 Reserves – profits or gains made by the company and form part of the shareholders’
equity.Revenue reserves (arises from generating revenue; retained trading profits and gains)
 Capital reserves (arises from issuing shares at above their nominal values, and revaluing
(upwards) non-current assets)
 Borrowing - money from lenders to supplement fund raised through share issues and ploughed-
back profits, usually on a long-term basis.Long-term loans from a bank (a secured loan on assets
of the company for a period of time, e.g. ten years).

Explain, with examples the following accounting terms:

 Cost of sales
 Stock exchange market
 Operating profit
 Assets
 Claims

Example of a correct response

Cost of sales – is the cost of goods that were sold during the period. The cost varies from business to
business as the cost of sales for each individual sale is identified at the time of the transaction, e.g. the cost
of inventory for a period.
Stock exchange market – acts as both an important primary and secondary capital market for public
companies, e.g. the London Stock Exchange.
Primary market – enables companies to raise new finance.
Secondary market – enables investors to sell their securities (including shares and loan stocks) with ease.
Operating profit – is the resulting figure when operating expenses (overheads), incurred in running the
business are deducted from the gross profit, e.g., salaries and wages, rent, stationery etc.
Assets – resources held by a business, e.g. building, inventories etc.
They are characterised by:
Probable future of economic benefit
Benefits must arise from past transaction or event
Business right to control the resources
Capable to measure in monetary terms
Claims – obligations of the business to provide cash or some other form of benefit to an outside party.
They will normally arise as a result of the outside party providing assets for use by the business, e.g.,
equity and liabilities.
Outline the benefits of Accounting and Finance for Business module to your chosen university degree
programme (maximum word count of 150).
Tips: (1) state your programme
(2) List three benefits and describe each benefit.

Example of a correct response

My programme is Transport Management. This module helps Transport Managers to make:

1. Managerial decision – helps to make cost-related decisions on the running of transport routes, e.g.
daily fuel costs.
2. Financial decision – helps to make plans for further sources of funding for the transport business,
e.g. loan opportunities.
3. Investment decision – helps to decide on new investment, e.g. buying a new fleet of vehicles.
Note: You are expected to discuss this further in the context of your degree programme.

State and briefly describe with examples three external sources of finance for a limited liability company
(maximum word count of 150).

Example of a correct response

 Shares - Capital contributions by the ownersOrdinary shares (equities) – holders are the main risk
takers and are given voting rights
 Preference shares – holders are given a right to a fixed dividend before ordinary shareholders
receive a dividend.
 Reserves – Part of the shareholders’ equity.Capital reserves (arises from issuing shares at above
their nominal values.
 Borrowing - money from lenders to supplement fund raised through share issues and ploughed-
back profits, usually on a long-term basis.Long-term loans from a bank (a secured loan on assets
of the company for a period of time, e.g. ten years). Note that other valid sources are acceptable.

State and describe with examples three internal sources of finance for a limited liability company
(maximum word count of 150).

Example of a correct response

 Reserves – profits or gains made by the company and revaluing (upwards) non-
current assets)Revenue reserves (arises from generating revenue; retained trading
profits and gains)
 Inventory level deduction –proper management of inventorybudgeting future demand
 Financial ratios
 Recording and reordering systems
 Levels of control
 Inventory management models
 Materials requirements planning (MRP) system
 Just-in-time (JIT) stock management

Explain, with an example the following financial markets terms (maximum word count of 300).
1. Money market
2. Equity market
 3. Forex market
4. Derivative market

Example of a correct response

Money Market – is a subsection of the fixed income (bonds) market.

 The difference between the money market and the bond market is that the money market
specialises in very short-term debt securities (debt that matures in less than one year).
 It is also called cash investments because of their short maturities.
 It trades in very high denominations, which limits access for the individual investor.
 The key interest rate traded in this market is called the London Interbank Offered Rate (LIBOR).
 Examples: Treasury Bills, Certificate Of Deposit, Repurchase Agreements (Repos).

The equity market is where shares are issued and traded, either through exchanges or over-the-counter
markets.
 Also known as the stock market
 It is one of the most vital areas of a market economy because it gives companies access to capital
and investors a slice of ownership in a company with the potential to realise gains based on its
future performance.
 There is no guarantee of any capital repayment or dividend income in the future.
 It is risky with the possibility of high rates of return in the future. The market is split into two
main sectors:
¤ Primary – New issues are first offered
¤ Secondary – Subsequent trading
The forex market – is one of the foreign exchange markets where participants can buy, sell, exchange and
speculate on currencies.
 It is considered to be the largest financial market in the world.
 The average daily turnover is more than $5.3 trillion (US dollar) per day.
 It is made up of forex brokers, banks, central banks, hedge funds and investors.
Two levels are involved: the interbank market and the Over The Counter (OTC) market.
¤ The Interbank market is where large banks trade currencies.
¤ OTC is where individuals trade through brokers and online platforms.
The derivative market – is a security whose price depends on or derived from one or more underlying
assets.
 The derivative itself is merely a contract between two or more parties.
 Most common underlying assets include stocks, bonds, commodities, currencies, interest rates and
market indexes.
 It was developed to allow investors to manage or exploit risk.
 Most common types - Futures contracts, forward contracts, options and swaps.

State and briefly describe with examples three external and three internal sources of finance for a limited
liability company (maximum word count of 300).

Example of a correct response

External Sources
 Shares - Capital contributions by the ownersOrdinary shares (equities) – holders are the main risk-
takers and are given voting rights
 Preference shares – holders are given a right to a fixed dividend before ordinary shareholders
receive a dividend.
 Reserves – This is part of the shareholders’ equity.The capital reserves arise from issuing shares
above their nominal values.
  Borrowing - money from lenders to supplement funds raised through share issues and ploughed-
back profits, usually on a long-term basis.Long-term loans from banks are secured loans on the
company’s assets for a period, e.g. ten years.
 Finance leases – a form of lending to access assets through an arrangement where a bank or
financial institution will buy the asset and lease it to the business
 Hire purchase agreements - a form of credit used to acquire an asset.
 Securitisation – involves bundling together illiquid financial or physical assets of the same type
to provide financial backing for an issue of bonds
 Bank overdraft – enables a business to maintain a negative balance on its bank account. E. g.
Business bank account overdraft.
 Debt factoring - involves outsourcing the business’s trade receivables management to a specialist
sub-contractor.
 Invoice discounting – the institution provides a loan based on a proportion of the face value of a
business’s credit sales outstanding.
Internal Sources
 Reserves – profits or gains made by the company and revaluing (upwards) non-current
assets)Revenue reserves (arises from generating revenue; retained trading profits and gains)
 Inventory level deduction –proper management of inventorybudgeting future demand
 Financial ratios
 Recording and re-ordering systems
 Levels of control
 Inventory management models
 Materials requirements planning (MRP) system
 Just-in-time (JIT) stock management
 Tighter credit control - This could include decisions on the following Which customers should
receive credit?
 How much credit should be offered?
 What length of credit is it prepared to offer?
 Whether discounts will be offered for prompt payment
 What collection policies should be adopted
 How the risk of non-payment can be reduced
 Trade payables payment delays -

Outline the benefits of introductory Accounting and Finance for Business module to your chosen
university degree programme (maximum word count of 300).
Tips:
1. state your programme.
2. state three benefits and describe each benefit.

Example of a correct response

Sample Answer
My programme is Transport Management. This module helps Transport Managers to make:

1. Managerial decision – helps to make cost-related decisions on the running of transport routes, e.g.
daily fuel costs.
2. Financial decision – helps to make plans for additional funding sources for the transport business,
e.g. loan opportunities.
3. Investment decision – helps to decide on a new investment, e.g. buying a new fleet of vehicles.

List and explain four main features of limited companies.

Explain with examples, the three business decisions that organisations do make using accounting and
finance information (maximum word count is 120).

Example of a correct response

1. Managerial decision – helps to make cost-related decisions on the running of transport

routes, e.g. daily fuel costs.
2. Financial decision – helps to make plans for further sources of funding for the transport
business, e.g. loan opportunities.
3. Investment decision – helps to decide on new investment, e.g. buying a new fleet of vehicles.
Note: You are expected to discuss this further.

Reflective Essay
Reflect on your Six-Week Project activities and narrate your personal experience (maximum word count
of 500, with 10% leeway).
Ensure that your reflection answers the following questions.
1. What was your role in the Six-Week Project?
2. What were your contributions to the project?
3. What did your experience of the Six-Week Project teach you about your potential future
profession/career?
4. What skills and values have you developed/identified during/or are you developing after the
project?

Example of a correct response

Sample Answer
I am the … (name your cast role) in the Six-Week Project. The project is about acting and producing a
short film. In the short film, my group members and I made a financial decision relating to an objective
change in our workplace. The name of our company is Priority Ltd, and the company needs to change its
objective from cost minimisation to quality focus. Therefore, we are asked to execute our company’s
objective change plan.

I contributed to… (narrate your contributions to the project) during the project.

My engagement in the project has taught me… (narrate the lessons you learnt in the Six-Week Project).
It also prepares me for my future career in the following ways… (narrate how you think the project has
prepared you for your future profession/career).

The skills and values acquired during the Six-Week Project include… (enumerate and describe the skills
and values you acquired during the Six-Week Project).
I am also developing/or developed my skills and values in the following areas… (enumerate and describe
the skills and values you are developing/or developed on reflecting on the Six-Week project).

In summary, the Six-Week Project provides… (summarise the key points of your experience when you
engaged with the Six-Week Project).

Note that the above sample answer is a guide and should not replace your reflections. Make sure you
narrate your experience of when you engaged with the Six-Week Project and answer the
above FOUR questions listed.