accounts data bank

Chapter 7

Other accounts

1.The following balances are taken from the trial balance of the XYZ Manufacturing company:

£000

Raw material purchases 48

Direct labour 25

Direct expenses 8

Indirect labour 25

Indirect expenses 6

Transportation costs 4

The prime cost of production is:

(a) £116 000.

(b) £112 000.

(c) £81 000.

(d) £106 000.

2.Which of the following statements regarding manufacturing accounts is correct?

(a) All manufacturing companies must prepare a manufacturing account.

(b) Amanufacturing account is useful as an aid to financial reporting for manufacturing companies.

(c) Amanagement accounting system is needed to produce a manufacturing account.

(d) Manufacturing accounts are always produced annually by manufacturing companies.

3.Direct expenses are those which can be identified with particular products.

Which of the following items is a direct cost?

(a) The rent of the factory in which products are made.

(b) The wages of the production supervisor.

(c) A royalty paid to the holder of a patent after each item is produced.

(d) The cost of the glue used to attach labels to the products.

4.At the end of an accounting period a business has valued its work in progress closing stock by

including the following items:

£000

Raw material cost in WIP 150

Carriage costs of the above goods 10

Production wages associated with this stock 20

Production overheads associated with this stock 30

Administration costs 5

Which is the correct figure for the valuation of closing stock?

(a) £150 000.

(b) £180 000.

(c) £210 000.

(d) £215 000.

5.The XYZ manufacturing company has the following balances in its trial balance at the year end:

£000

Prime cost of manufacture 3450

Factory overheads 236

Work in progress at start of year 126

Selling overheads 56

Bank interest 89

In addition, work in progress at the end of the year is valued at £267 000.

Which is the correct figure for the cost of manufactured goods?

(a) £3 545 000.

(b) £3 831 000.

(c) £3 690 000.

(d) £3 601 000.

6.Manufacturing profit is sometimes added to the cost of goods manufactured before it is transferred

to the trading account in order to compare more fairly the total cost with prices which would be

charged by another manufacturer. Which of the following statements regarding this approach is

correct?

(a) The profit taken is deducted from the total profit earned by the business.

(b) The profit taken is realized because the goods have been finished.

(c) The value of stocks of unsold finished goods will need to be adjusted to remove the profit element.

(d) Manufacturing profit is added for reasons of control.

7.Which of the following statements is true?

The main accounts of a debating society will consist of the following:

(a) An income and expenditure account and a balance sheet.

(b) A trading account, a profit and loss account and a balance sheet.

(c) A profit and loss account and a balance sheet.

(d) A trading account, an income and expenditure account and a balance sheet.

8.A profit-making service sector entity records what is originally contributed by its shareholders in

which account?

(a) Income and expenditure.

(b) Accumulated fund.

(c) Capital.

(d) Members’.

Chapter 8

Cash flow statements

1.Cash flow statements are required by:

(a) Company law.

(b) The shareholders of a company.

(c) The auditors of a company.

(d) Financial Reporting Standard No 1.

2.XYZ Ltd made an operating profit in 2001 but has increased its overdraft during the year. Which of

the following factors could explain this:

(a) Taking extended periods of credit from its suppliers.

(b) Additional investment in purchased fixed assets.

(c) Reducing its depreciation charge for the year.

(d) Reducing the period of credit allowed to its customers.

3.The following balances have been extracted from the financial statements of XYZ Ltd at its year

end 31 December 2001:

£000

Operating profit before depreciation and tax 235

Depreciation 47

Taxation 56

Debtors 67

Creditors 56

Stocks 70

Balances at 1 January 2001 were

Debtors 50

Creditors 60

Stocks 55

Which of the following represents the net cash flow from operations for 2001?

(a) £224 000.

(b) £168 000.

(c) £271 000.

(d) £199 000.

4.In a cash flow statement a bonus issue will:

(a) be included in cash flow from investing activities.

(b) be included in cash flow from financing activities.

(c) not appear as no cash flow occurs as a result of a bonus issue.

(d) be included as part of cash flow from operations.

5.In a cash flow statement the payment of a preference dividend will:

(a) Be included under financing activities.

(b) Be included under investing activities.

(c) Be included under returns on investments and servicing of finance.

(d) Be included under net cash flow from operations.

6.The main reason for a company preparing a cash flow statement is:

(a) To comply with legal requirements.

(b) To show the financial position of the company at the end of a period.

(c) To show the profit or loss of the company for the period.

(d) To show, in a standard format, the sources and uses of cash during the period.

110 Accounting for Non-Accounting Students, 5th edition,Lecturer’s Guide. © Pearson Education Limited 2001