Financial managemen -Answer.doc

Financial management/accountancy (B category)

Question 1: Which of the following items appears only in the balance sheet and not in the profit and loss account?

Answers:

·         A: capital

·         B: depreciation

·         C: stocks

·         D: wages and salaries

The correct answer is A

Question 2: What is the value of a firm’s stock at 31/12/2000 after the following operations (LIFO - last in, first out):

-Stock at 1/1/2000 – 400 units @ € 100

-Purchase 5/2/2000 – 30 units @ € 80

-Purchase 8/9/2000 – 20 units @ € 60

-Sale 7/10/2000 – 60 units @ € 130

Answers:

·         A: € 39 000

·         B: € 37 600

·         C: € 35 800

·         D: € 40 000

The correct answer is A

Question 3: Which of these statements is not correct?

Answers:

·         A: Any loss is shown in the profit and loss account

·         B: The purchase value of fixed assets is shown in the balance sheet

·         C: Bank interest owed is shown as a liability in the balance sheet

·         D: Accumulated depreciation is shown in the profit and loss account

The correct answer is D

Question 4: Which stock valuation method gives the highest value during a strongly inflationary economic cycle?

Answers:

·         A: FIFO (first in, first out)

·         B: LIFO (last in, first out)

·         C: weighted average cost

·         D: NIFO (next in, first out)

The correct answer is A

Question 5: Which of the following is not one of the basic principles governing the general budget of the European Communities?

Answers:

·         A: the principle of unity

·         B: the principle of equilibrium

·         C: the principle of annuality

·         D: the principle of subsidiarity

The correct answer is D

Question 6: The Community directive on the annual financial statements of certain types of companies adopted by the Council in 1978 is known as:

Answers:

·         A: the Tenth Directive

·         B: the Fourth Directive

·         C: the Fifth Directive

·         D: the Ninth Directive

The correct answer is B

Question 7: In December of year N your company made some purchases that were paid in January N+1. This means that:

Answers:

·         A: your profit for year N ending at 31 December is overstated

·         B: your profit for year N+1 is understated

·         C: (a) and (b) are both correct

·         D: neither (a) nor (b) is correct

The correct answer is D

Question 8: Which of the following statements is correct?

Answers:

·         A: Durable goods purchased by a firm to enable it to pursue its activities are fixed assets

·         B: Goods bought for resale "as is" amount to intangible fixed assets for the firm

·         C: Commitments to third parties constitute capital

·         D: Commitments to third parties are entered under capital as reserves

The correct answer is A

Question 9: Company Y buys software costing € 8 000, with an estimated lifespan of three years, which it pays by cheque. Before the transaction, the fixed-asset "software" account showed a debit of € 5 000, while the "bank" account showed a positive balance of € 20 000. After this operation, the two accounts will look as follows:

Answers:

·         A:
 

·         B:
 

·         C:
 

·         D:
 

The correct answer is B

Question 10: Which of the following statements is correct?

Answers:

·         A: Depreciation is a way of spreading the cost of a fixed asset over its expected lifetime

·         B: When a fixed asset is sold for less than its net book value, the firm realises a gain

·         C: Depreciation is considered as a profit that is booked to the following year

·         D: Depreciation is deducted from the value of stocks

The correct answer is A

Question 11: The effect of a payment to creditors is normally:

Answers:

·         A: assets decrease: owner’s equity decreases

·         B: assets decrease: owner’s equity increases

·         C: assets increase: liabilities decrease

·         D: assets decrease: liabilities decrease

The correct answer is D

Question 12: A hotel’s payroll expenses for the year totalled € 700 000, representing 35% of its total income. The hotel’s total income and net income were ________ and ______, respectively.

Answers:

·         A: € 245 000 ; € 70 000

·         B: € 2 000 000 ; € 70 000

·         C: € 2 000 000 ; unknown

·         D: € 245 000 ; unknown

The correct answer is C

Question 13: The Publications Office is expanding. The estimated cost of required new equipment is € 30 000. As a result, annual sales are forecast to increase by € 40 000 and related expenses by  €  30 000. The payback period is:

Answers:

·         A: 1 ½ years

·         B: 2 years

·         C: 3 years

·         D: None of the above

The correct answer is C

Question 14: On 1st January 2000 a company buys a machine for € 10 000. It depreciates the machine at 20% per annum on a linear scale, with a residual value of € 500. On 1st January 2002 it sells the machine for € 4 800. What is the profit or loss?

Answers:

·         A: € 2 000 loss

·         B: € 1 400 loss

·         C: € 1 000 profit

·         D: € 800 profit

The correct answer is B

Question 15: The objective of consistency is to provide assurance that:

Answers:

·         A: There are no variations in the format and presentation of financial statements

·         B: Substantially different transactions and events are not accounted for on an identical basis

·         C: The auditor is consulted before material changes are made in the application of accounting principles

·         D: The comparability of financial statements between periods is not materially affected by changes in accounting principles without disclosure

The correct answer is D

Question 16: In order to prepare correct financial statements of a company, an accountant must:

Answers:

·         A: review agreements with financial institutions for restrictions on cash balances

·         B: understand the accounting principles and practices of the company's industry

·         C: interview key personnel concerning related parties and subsequent events

·         D: perform ratio analysis of the financial data of comparable prior periods

The correct answer is B

Question 17: Which of the following statements is not correct

Answers:

·         A: VAT is a form of sales tax

·         B: VAT is a form of income tax

·         C: VAT is used in part to fund the European Union

·         D: VAT exists in all Member States

The correct answer is B

Question 18: An agreement between two EU companies to compensate each other with reciprocal goods and services and no invoices is:

Answers:

·         A: tax evasion

·         B: used in historical cost accounting

·         C: used to save administrative costs

·         D: considered a normal accounting practice

The correct answer is A

Question 19: Fraud in a computer environment is increased most when:

Answers:

·         A: employees are not trained

·         B: program documentation is not available

·         C: transaction history is not available

·         D: employee performance appraisals are not given

The correct answer is C

Question 20: At the end of year N, you have the following figures for a given product:

Initial stock € 15 000

Sales € 55 000

Final stock € 25 000

Purchases € 30 000

What is the purchase cost of the goods sold?

Answers:

·         A: € 15 000

·         B: € 20 000

·         C: € 25 000

·         D: €30 000

The correct answer is B