accounts data bank

Question # 00004123 Posted By: spqr Updated on: 11/25/2013 09:15 PM Due on: 11/30/2013
Subject Accounting Topic Accounting Tutorials:
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Chapter 9

Interpretation of accounts

1.Which of the following is not an essential prerequisite to permit the successful use of financial

statements for ratio analysis?

(a) The accounts should use comparable accounting policies.

(b) The accounts should be drawn from similar types of organizations.

(c) The accounts should be available for several accounting periods.

(d) The accounts used should not include forecast financial information.

2.The current ratio is an indicator of which following characteristic of an organization?

(a) The current level of profitability.

(b) The future level of profitability.

(c) The investment potential.

(d) The liquidity in the short term.

The following data was extracted from the records of XYZ Ltd at 31 December 2001 and is to be

used for Questions 3 and 4.


Sales 2500

Cost of sales 1200

Stock at 31 December 2001 350

Stock at 1 January 2001 300

Debtors 340

Creditors 400

3.The debtors collection period in days was?

(a) 43.

(b) 45.

(c) 50.

(d) 58.

4.The rate of stock turnover was?

(a) 3.5 times.

(b) 3.7 times.

(c) 6.3 times.

(d) 7.7 times.

5.For a limited company, return on capital employed is most likely to be calculated by using which of

the following methods?

(a) Net profit as a percentage of the average of the opening and closing borrowings.

(b) Net profit as a percentage of the average of the opening and closing capital.

(c) Net profit as a percentage of the average of the opening and closing total assets.

(d) Net profit as a percentage of the average of the opening and closing fixed assets.

6.The following balances were extracted from the records of XYZ Ltd:

2001 2002

£000 £000

Sales 3000 4000

Gross profit 600 720

Gross profit percentage 20% 18%

Which of the following is the most likely reason for the fall in the gross profit percentage despite

the increase in sales in 2002?

(a) An increase in selling prices.

(b) A decrease in the costs of purchasing raw materials for the business.

(c) Offering higher discounts to customers to secure extra sales.

(d) An increase in wages and salaries.

Chapter 10

Disclosure of information

1.A limited company is under a legal duty to disclose information to parties external to the company.

To which of the following groups does this requirement mainly apply?

(a) Banks.

(b) Customers.

(c) Shareholders.

(d) Suppliers.

2.Which of the following best describes the measures which have been taken to stop the practice

known as ‘creative accounting’?

(a) Creative accounting has been made a criminal offence.

(b) The Companies Act forbids directors from engaging in creative accounting.

(c) The Stock Exchange conditions of listing prohibit the practice.

(d) The regulatory system has been altered and accounting standards have been changed to discourage

the practice.

3.Directors of a limited company are under an obligation to?

(a) Send financial statements to employees.

(b) Send summary financial statements to all shareholders.

(c) File copies of the financial statements with the registrar of companies.

(d) Produce financial statements which are correct in all respects.

Accounting for Non-Accounting Students, 5th edition,Lecturer’s Guide. © Pearson Education Limited 2001113

Chapter 11

The annual report

1.Which of the following statements regarding the Chairman’s report in an annual report is correct?

(a) The report is required by the Companies Act.

(b) The report is subject to an audit by the external auditors of the company.

(c) Accounting standards define the format of the Chairman’s report.

(d) There are no controls over the format or content of the Chairman’s report and it is not subject to

statutory audit.

2.Which of the following items is unlikely to be found in the directors’ report for a limited company?

(a) A description of the accounting policies of the company.

(b) Details of corporate donations to charities.

(c) Details of corporate donations to political parties.

(d) Details of the company’s health and safety policy.

3.An audit of most limited company financial statements is required because:

(a) The Cadbury Report into corporate governance recommended that one should be undertaken.

(b) The shareholders of a company usually request one.

(c) It is required by the Companies Act.

(d) Banks or other lenders usually request one to be carried out.

4.B Ltd is a subsidiary of A plc if?

(a) A owns all of the shares in B.

(b) A is in a position to exercise ‘dominant influence’ over the financial and operating policies of B.

(c) A owns the assets of B.

(d) A has given a substantial loan to B secured on B’s assets by a debenture.

5.A group of companies must prepare consolidated accounts when which of the following situations


(a) A parent company has one or more subsidiary companies.

(b) When a parent company has overseas subsidiaries.

(c) When a parent company trades from the same address as its subsidiaries.

(d) When a company has a participating interest in another associated company.

6.When a company’s financial statements have been audited, an audit report will be prepared. If this

is unqualified the auditors will report that the financial statements:

(a) Are certified correct.

(b) Contain no material errors.

(c) Comply with the Companies Act.

(d) Present a true and fair view and comply with the Companies Act.

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