Deck 1: The Role of Accounting in Business

Question 1

Which of the following statements are correct? A.Financial reporting is concerned with the provision of information to interested parties outside the business. B. Management accounting is concerned with the provision of information for use within the business for decision-making and control.

A)B only
B)Both of them
C)A only
D)Neither of them

Answer 1

Both of them

Question 2

Which two of the following statements about value added tax (VAT) are correct? A.VAT on sales is known as input tax B. If output tax exceeds input tax, money is due to the HMRC C. If input tax exceeds output tax, money is due to the HMRC. D. VAT on purchases is known as input tax
Which pair of statements is correct?

A)A + C
B)A + B
C)C + D
D)B + D

Answer 2

B + D

Question 3

Sale and Boothman Limited prepares VAT returns quarterly.In the quarter ended 30 June 20X5, the company's total sales before VAT were £150 000.All sales are subject to VAT at the standard rate (assume standard rate = 20%).In the same period purchases of £85 000 were recorded, excluding VAT.Some of the purchases are VAT exempt, and the total recorded for VAT on purchases was £8450. What is the total amount due to be paid to HMRC in respect of the quarterly VAT liability?

A)£30 000
B)£13 000
C)£21 450
D)£8450

Answer 3

£21 450

Question 4

Which of the following statements is correct?

A)A partnership has the advantage of limited legal liability
B)Partnerships pay corporation tax on their profits
C)The partnership structure ensures that business risks are shared between the partners
D)The partnership structure is unsuitable for most sectors of business activity

Question 5

Which one of the following statements about audit is correct?

A)All companies in the UK require an annual audit.
B)Auditors are required to determine whether or not the financial statements of the company present a true and fair view.
C)The Partnership Act requires that partnerships should appoint an auditor.
D)In practice, the HMRC expects that sole traders' financial statements should be audited.

Question 6

Which of the following statements is correct?

A)Companies in the UK are not liable to VAT
B)Capital gains tax applies to individuals and to companies
C)Company directors pay corporation tax on their salaries
D)Partnerships are taxed according to the provisions of the Partnership Taxes Act, which is updated annually

Question 7

Which of the following statements is correct? A sole trader:

A)Pays corporation tax on business profits
B)Must register his/her business as a separate legal entity
C)Must provide a profit share to employees
D)Is liable personally for the consequences of any legal action against the business

Question 8

Which one of the following statements best describes stewardship? The stewardship function requires directors of limited companies to:

A)resist demands from employee representatives for increases in wages and salaries.
B)be accountable to shareholders for managing the company's resources.
C)provide management accounting information to shareholders to demonstrate accountability.
D)publish management accounting information on a regular basis.

Question 9

Which of the following statements is correct?

A)Small limited companies are under no obligation to file information at Companies House
B)In a small company, directors share any profits equally between themselves
C)The ownership of shares in small limited companies can, by law, be spread between no more than four people
D)Limited companies of all sizes are obliged to file information at Companies House.

Question 10

Two of the following statements are correct: A.Capital gains tax applies to both individuals and companies. B. Value added tax (VAT) is administered by HMRC. C. Sole traders are exempt from any requirement to charge VAT on sales. D)Corporation tax is charged on the profits of companies and partnerships but not on the profits of sole traders.
Which statements are correct?

A)B + D
B)C + D
C)A + C
D)A + B

Question 11

Blythe, Smithers & Co is a partnership providing architectural services.In the three- month period ended 30 April 20X4, the business recorded output tax of £23 000 on sales of £115 000.What was the total amount of money receivable from clients in respect of the billings for the three-month period?

A)£23 000
B)£138 000
C)£115 000
D)£92 000

Question 12

Which of the following is an indirect tax?

A)Capital gains tax
B)Value added tax
C)Income tax
D)Corporation tax

Question 13

Which one of the following statements best describes management accounting? Management accounting:

A)assists investors to understand how the business's managers reach their decisions.
B)is the principal mode of communication between a company's management and its shareholders.
C)assists managers in controlling the activities of the business.
D)is the means by which managers are made accountable to shareholders for their stewardship of the business.

Question 14

Which one of the following statements about the appointment of limited company directors is correct? New directors are appointed by:

A)a committee of directors and shareholders.
B)the company's managing director or chief executive officer.
C)the company's shareholders.
D)a committee of existing directors.

Question 15

Which of the following statements is correct?

A)People generally require professional advice on the formalities involved in setting up a limited company
B)A drawback of the partnership form of business is that partners are obliged to share profits equally
C)A disincentive to setting up as a partnership is the obligation to make financial information public
D)Most limited companies are restricted by law to a maximum of 20 shareholders