1.0  Identify the users of financial statement

2.0  Indicate the purpose of financial statement analysis

3.0  Identify the types of financial statement analysis procedures

4.0  Assess the liquidity, profitability, efficiency and solvency of a business by applying the financial statement analysis

5.0  Explain the limitation and constraints of ratio analysis.

6.0  Define “profit margin” and “asset turnover”

7.0  What is the relationship which links ROCE, profit margin and asset turnover?

8.0  How is the ratio “ return on total long-term capital” calculated

9.0  Describe two methods of calculating a gearing ratio

10.0  List three advantages of debt capital over equity capital

11.0  Define “interest cover”

12.0  Define “ price earning ratio”

1.0  Distinguish the activities of a service business from a merchandizing business 

2.0  Describe the accounting cycle for a merchandizing business

3.0  Explain how to journalize the entries for merchandize transaction using the perpetua inventory system and the periodic inventory system including purchases, sales, discount, returns, transportation costs and transaction for both buyer and the seller

4.0   Explain how to calculate the cost of goods sold using the perpetual inventory system and the periodic inventory system

5.0  Distinguish between the multiple step income statement and the single step income statement

6.0  Explain the component of Financial Statements of merchandizing bsiness

7.0  Explain how to prepare the closing entries.

Multiple Choice Questions ( with answers(below))

1. The lower of cost or market method for valuing inventories
a. Recognizes reductions in the values of inventories held by a corporation in the period in which the decline in value occurs
b. Recognizes increases in the values of inventories held by a company in the period in which the increase in value occurs
c. Recognizes reductions in the values of inventories held by a company in the period in which the goods are sold
d. All of the above

2. The method of inventory accounting that, during periods of rising periods, results in a balance sheet valuation for inventories that is between the LIFO and FIFO values is the
a. Weighted-average method
b. First-in, first-out method
c. Last-in, first-out method
d. Specific identification method

3. The method of inventory accounting that has been adopted by a majority of companies use in part to the lower income taxes its use creates during periods of rising period is the
a. Last –in, first –out method
b. Specific identification method
c. First-in, first-out method
d. Weighted-average method

4. The method of inventory accounting which results in balance sheet values that are closest in the cost of replacing the inventories in periods of changing prices is the
a. First-in, first-out method
b. Specific identification method
c. Last-in, first-out method
d. Weighted average method

5. The method of inventory accounting which specifically identifies units sold and expenses their costs against the revenues generated from their sale is the
a. Specific identification method
b. Last-in, first-out method
c. First-in, first-out method
d. Weighted average method

Answers:
1 to 5 = answer (a)

Multiple Choice Questions (with answer(below))

1. Which of the following is a form of the balance sheet equation?
a. Assets=Liabilities+(Paid in Capital + Retained Income)
b. Assets+ Liabilities= Owners’ Equity
c. Assets + Owner’s Equity =Liabilities
d. Assets-Paid in capital = Liabilities-Retained income

2. _________ are distributions of assets that reduce ownership claims
a. Dividends
b. Assets
c. Expenses
d. Retained income

3. When revenues are recognized as earned and expenses are recognized as incurred, a company is using
a. The accrual basis of accounting
b. The cash basis of accounting
c. Both of these
d. Neither of these

4. The effect of purchasing inventory using trade credit on the balance sheet equation is to
a. Increase assets and increase liabilities
b. Decrease assets and increase liabilities
c. Increase assets and increase liabilities
d. Increase assets and increase owners’ equity

5. Retained income is represented in the company’s balance sheet by:
a. The balance in the inventory account
b. The balance in the plant and machinery account
c. The balance in the cash account
d. All of the assets less the liabilities and paid up capital

6. Owners’ equity in sole proprietorships and partnerships differs from that for corporations in that
a. They do not separate retained income from the owner’s paid in capital accounts
b. They separate retained income from paid in capital while corporations have only one ownership equity account
c. They reflect the sum of assets and liabilities rather than the difference
d. All of the above.

7. The principle that uses the dollar as an unchanging yardstick for measuring transaction is referred to as:
a. The stable monetary unit assumption
b. The conservatism convention
c. The going concern assumption
d. Revenue recognition

8. The practice of accounting for revenue when goods or services are delivered to customers is referred to as:
a. Revenue recognition
b. Historical cost assumption
c. Stable monetary unit assumption
d. Cost recovery

9. The practise of relating costs and revenue to a particular period for which the measurement of income is derived is known as:
a. Matching principle
b. Going concern assumption
c. Conservatism convention
d. Revenue recognition

10. The practise of carrying forward assets such as inventories, prepayments, and equipment to be recovered in cash inflows ( or reduced cash outflows ) in future period is known as :
a. Cost recovery
b. Revenue recognition
c. Matching principle
d. Conservatism convention

11. Cash, accounts receivables, inventories, deposits, prepaid expenses
a. Are current assets on the balance sheet
b. Are liabilities on the balance sheet
c. Are classifications of stockholders’ equity
d. None of the above

12. Goodwill, patents, trademarks and copyrights are
a. Intangible assets which are non- current assets
b. Current assets
c. Current liabilities
d. Long-term liabilities

13. Accounts payable, accrued liabilities and income tax payable are:
a. Current liabilities
b. Fixed assets
c. Stockholders’ equity
d. Long-term liabilities

14. Accounts in the stockholders’ equity section of the balance sheet may include
a. Common stock, preferred stock, paid-in capital in excess of par, treasury stock and retained earnings
b. Cash, accounts receivable, inventories, prepaid expenses and other current assets
c. Accounts payable, accrued liabilities and income tax payable
d. Machinery, equipment, buildings, land and leasehold improvements

15. The item on the income statement found by deducing cost of sales and other operating expenses from sales is
a. Income from operations
b. Gross profit
c. Net income
d. Earnings per share

16. The item required to be shown at the very bottom of the income statement is
a. Earnings per share
b. Net income
c. Income from operations
d. Gross profit

Answers : 1 to 16 all a except for 5 which is d

Multiple choice question

1. In making managerial decisions, relevant information is
a. Future cost that differ between alternatives
b. Future costs that do not differ between alternatives
c. Past costs that differ between alternatives
d. Past costs that do not differ between alternatives

2. The role of historical data from the accounting system in making managerial decisions is
a. To assist in making productions that inputs to a decision model
b. To serve directly as inputs in decision models
c. To assist in making predictions about other information needed for making decisions
d. All of the above

3. The tracing or reassigning of costs to one or more cost objectives is referred to as:
a. Cost allocation
b. Historical costing
c. Step up costing
d. Cost apportionment
e. All of the above

4. The three main categories of manufacturing costs are:
a. Direct materials, direct labor and factory overheads
b. Direct labor, indirect labor and overtime premiums
c. Raw materials, work in progress and finished goods
d. Raw materials, direct labor and finished goods

5. According to economic theory, costs play a role in price determination when
a. The company operates in an industry characterized as having imperfect competition
b. A company is selling commodities such as wheat and rice
c. Perfect competition exists
d. All of the above

6. When a multiproduct plant is being operated at capacity, the products which should be emphasized are those that provide
a. The highest contribution margin per unit of the limited resource
b. The highest contribution margin per unit of product
c. The highest contribution margin per sales dollar
d. The highest contribution margin ratio

Answer:
1 to 6 = a

Multiple choice question

1. A cost that changes abruptly at intervals of activity because the resources and the costs come in indivisible chunks is called a(n):
a. Step cost
b. Activity cost
c. Allocated cost
d. Apportioned cost

2. The _________ portion of a mixed cost varies proportionately with activity within the relevant range.
a. Variable
b. Indivisible
c. Fixed
d. Semi-fixed

3. Managers influence cost behavior through their:
a. Technology decisions
b. Product and service decisions
c. Capacity decisions
d. All of above

4. In the cost function equation Y=F + VX, Y represents the:
a. Total cost at the X level of activity
b. Fixed cost at the Y level of activity
c. Variable cost per unit of activity X
d. Variable cost at the F level of activity

5. _______ is the formal method of analysis used by managers to identify appropriate cost drivers and their effects on the costs of making a product or providing a service.
a. Activity Analysis
b. Cost analysis
c. Crystal grazing
d. Life costing

6. The food & beverage section of ABC Ltd incurred the following costs for March 20XX:
Monthly Cost March 20XX ($)
Supervisor’s salary $ 2,000
Hourly workers’ wages & benefits $10,903
Food $ 11,357
Equipment depreciation & rental $ 9,100
Supplies $ 2,750
Total F & B costs $36,110
The F & B section served 10,505 meals during the month. Using an account analysis to classify costs, the cost function for ABC Ltd’s Food & beverage section is :
a. $11,100+$2.381 per meal
b. $4,000 + $3.222 per meal
c. $6,105 +$3.039 per meal
d. $11,100+$2.381 per meal

Answers:
1 a; 2 a; 3 d; 4 a; 5 a; 6 a

Draw the axes. The horizontal axis the sales volume and the vertical axis is dollars of cost and revenue.

Step 2:

Plot sales volume. Select a convenient sales volume and plot a point for total sales dollars at that volume. Then draw a line between the origin and the point.

Step 3:

Plot the fixed expenses. It should be a horizontal line intersecting the vertical axis at the level of fixed costs

Step 4:

Plot variable expenses. Determine the variable expenses at some volume level. Add this amount to fixed expenses and plot the point. Then draw a line from the intersection of the vertical axis to this point. This line represents total expenses, and the difference between the fixed expenses line and this new line represents the variable expenses.

Step 5:

Locate the break-even point. The break-even point is where the total expenses line crosses the sales line.

Multiple choice question

1. Accounting reports which are used by managers to compare actual results to budgeted performance in order to perform management by exception are called:
a. Exceptional reports
b. Performance reports
c. Budgets
d. General ledgers  

2. Which of the following should be considered in the selection of an accounting system?
a. Costs of buying and operating the system
b. Improved decision-making power resulting from the system
c. Behavorial effect of the systems on managers
d. All of above

3. Accounting systems should be designed to answer which of the following types of questions?
a. Scorecard, attention directing, and problem solving
b. Who, what, when, where, why and how
c. Social implication of environmental policy
d. Philosophical ones

4. The major users of accounting information are:
a. Internal managers for non routine decisions
b. Internal managers for planning and control purposes
c. External parties for making decisions about the company
d. All of these 

5. The functions of planning for control, evaluating and consulting, and government reporting are typically assumed within organizations by:
a. The company treasurer
b. The company controller
c. The company vice-president of marketing
d. External auditors 

6. Revenues are expected to exceed expenses in which phases of the product life cycle?
a. Mature market
b. Phase-out
c. Product development
d. Introduction to market
e. Both a and b 

7. Individuals whose main function in organizations is to assist operating managers in decision making are working in:
a. Staff roles
b. Line roles
c. Operating roles
d. Chief executive roles 

8. Trends that are causing changes in management accounting today include:
a. Advances in technology
b. Increased global competition
c. A shift from a manufacturing to a service-based economy
d. All of the above 

Answers:
1 b ; 2 d ; 3 a ; 4 d ; 5 b : 6 e ; 7 a ; 8 d

1.0  If output VAT exceed input VAT, the difference can be reclaimed from Custom and Excise. True or false?

2.0  What are the two rates of VAT which may be applicable to taxable outputs?

3.0  Give two examples of expenditure on which input VAT is not recoverable

4.0  A business purchased goods valued at $400. VAT is charged at 15%. What is the double entry to record the purchase? 

1.0    List three factors which might help to create goodwill in a business

2.0    Why is it unusual to record goodwill as an asset in the accounts?

3.0    What is purchased goodwill?

4.0    What two methods of accounting for purchased goodwill are permitted by Accounting Standards

5.0    What is the required accounting treatment for expenditure on research

6.0    In what circumstances may development expenditure be capitalized?