Practice Test 1 - Solutions PDF

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Warning: TT: undefined function: 32Paper FABFOUNDATIONS IN ACCOUNTANCYAccountant inBusinessPractice Test 1Jan-Jun 2020Time allowed: 2 hoursThis paper is divided into two sections:Section A – ALL 46 questions are compulsory andMUST be attemptedSection B – ALL SIX questions are compulsory andMUST be a...

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Accountant in Business Practice Test 1 Jan-Jun 2020

Time allowed: 2 hours This paper is divided into two sections: Section A – ALL 46 questions are compulsory and MUST be attempted Section B – ALL SIX questions are compulsory and MUST be attempted

Do not open this paper until instructed by the supervisor. This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper FAB

FOUNDATIONS IN ACCOUNTANCY

Section A – ALL 46 questions are compulsory and MUST be attempted. 1.

Which of the following organisations would rely most heavily on value for money indicators and efficiency rather than information on performance and profitability? A A pension fund B A private accountancy college C A small retailer D A local authority Not-for-profit organisation (2 marks)

2.

Which TWO of the following are examples of connected stakeholders? A B C D

A pressure group A supplier A shareholder An executive director (2 marks)

3.

In relation to data protection laws, which TWO of the following should be classified as personal data? A The accountant’s opinion of Abdul, the finance director B The payment record of Hardy Limited, a customer C The absence record of Cheryl, an employee Personal data is information about a living individual, including expression of opinion about him/her, but not data about organization. (2 marks)

4.

The legal concept of _____ protects employees against arbitrary dismissal; that is dismissal without good reason. Which of the following correctly completes the sentence above? A B C

Constructive dismissal Wrongful dismissal Unfair dismissal (1 mark)

5.

Northland, Southland, Eastland and Westland are four countries in Asia. The following economic statistics have been produces for the year 20x8: Country Change in GDP (%) Balance of payments current account ($m) Change in consumer prices (%) Change in working population employed (%)

Northland Southland -0.30 +2.51 +550.83 -350.47 +27.5 -4.76

Eastland -0.55 -150.9

Westland +2.12 +220.39

+2.25 +1.76

+2.15 -8.76

+15.37 +3.78

Which country experienced stagflation in the relevant period?

A Westland B Eastland C Northland D Southland Stagflation is situation, which arises where there is a combination of unacceptably high unemployment and unacceptably high inflation. (2 marks) 6.

Which types of goods tend to be bought and used together? A B C D

Complements Inferior goods Substitutes Giffen goods (2 marks)

7.

Which TWO of the following are reasons for the increased participation of women in the labour force? A B C D

Increase in the average age that women decide to have children Increase in male dominated boards Growth of the service sector Fewer part-time jobs (2 marks)

8.

A rapid expansion in the use of broadband technology by consumers has the most impact on which of the following business processes? A B C D

Order processing and distribution Terms negotiated with suppliers Quality management control Use of advanced manufacturing techniques (2 marks)

9.

In which of the following structures would an employee be responsible to both the sales department manager and the manager for product Alpha? A Matrix structure B Product structure C Functional structure A matrix structure is a hybrid – in this case mixing functional and product structures, leading to dual responsibility. (1 mark)

10. JKL Co is a multinational organisation that produces pharmaceuticals. These are all manufactured in different countries and each manufacturing facility has its own executive organisation that operates autonomously. This is an example of which type of organisational structure? A Product B Functional C Matrix D Divisional Divisional structure where a business is divided into autonomous regions or product businesses. (2 marks) 11. TECA Co has to decide whether to replace its physical retail outlets with a call centre. This decision relates to which component of the marketing mix? A B C D

Price Promotion Place Product (2 marks)

12. The payables ledger section of the finance team relies on the purchasing department to do which TWO of the following? A To advise them of all purchase orders B To confirm the validity of invoices received from suppliers C To inform them of payments received The purchasing department advises the payables ledger staff of purchase orders and confirms the validity of invoices when they are received from suppliers. IT is the cashier’s role to inform the payables ledger team and purchasing department of payments made. (2 marks) 13. Which of the following systems is most relevant to the work of a procurement manager? A B C

A just-in-time system that will reduce inventories of raw materials An internet-based customer order fulfillment system An advanced manufacturing system that will reduce the length of the working capital cycle D A satellite tracking system that will monitor and record deliveries of finished goods A procurement manager is responsible for purchasing. Therefore, the system most relevant to a procurement manager is to do with ordering inventories. (2 marks)

14. The accounting statements drawn up by a management accountant for monthly management meetings do not need to comply with company law or accounting standards. Is this statement true or false? A True B False The accounting statements drawn up by management accountant are often prepared and presented very differently from those of the financial accountant. They are prepared for internal decision-making purposes. (1 mark) 15. A company’s published accounts will include an auditor’s report. To whom is the audit report addressed? A To the management B To the shareholders The external auditors report to the shareholders on the stewardship of the directors. (1 mark) 16. To whom do the external auditors of a company owe a duty of reasonable care and skill? A The shareholders as a collective body B The directors C The company and individual shareholders D Existing and potential investors The external auditors report to the members of the company and so owe a duty of reasonable care and skill to the shareholders as a collective body. (2 marks) 17. A manager who can manage their time well is able to recognise and distinguish which tasks are _____ and _____. Which TWO words correctly complete this sentence?

A Necessary B Important C Urgent Time is scarce resource. One of the problems managers have in allocating their time comes from determining what tasks are important and distinguishing these from urgent tasks. (2 marks)

18. Stephan is planning his work for the day. Once Stephan has decided what has to be done what should he now do in order to manage his time effectively? A Work on the most complex task first in order to get it out of the way B Deal with all matters marked as ‘urgent’ in his in-basket C Set priorities and schedule the work according to these priorities D Work on the tasks that others are pressurizing him to complete In order to work effectively Stephan should set priorities and schedule the work according to those priorities. (2 marks) 19. Joanne works in the human resources department of CBA Co. One of her roles is to offer advice to employees of the company who are experiencing personal difficulties such as stress, personal relationship problems and other matters affecting their work. Joanne provides guidance on a one-to-one and confidential basis, often referring employees to consultants or organisations that can provide specialist advice. What is Joanne’s role in CBA Co? A Mentor B Coach C Counsellor D Buddy Counselling is a way of helping a person to help him or her self. Therefore, Joanne’s role is that of a counsellor. (2 marks) 20. Two departments have requested a new photocopier, but the company cannot afford two machines. The proposed solution is to provide a shared access to a single new copier and place the copier between the two departments. What type of conflict resolution is this? A Win-lose B Lose-lose C Win-win Lose-lose means that neither party gets what they really wanted, and includes the notion of compromise, as in this case. (1 mark) 21. Adam, Boris, Chow and Dev all work from home. Boris, Chow and Dev all report to the same manager at the company’s head office. Adam reports to Boris and has no communication with the manager at head office. Boris, Chow and Dev never contact one another directly. Any communications between them take place through their manager. Which of the following represents the pattern of communication described above? A

The Y

B C D

The circle The wheel The chain (2 marks)

22. Which TWO of the following are found within the first level of Schein’s determinants of culture? A Norms of behaviour B Relationships between managers and staff C Attitudes The first level contains the observable, express or explicit elements of culture – behavior, artifact and attitudes. 23. Hai is the minister responsible for the organization of the civil service in his country. Historically the civil service has been organized as a tightly controlled, bureaucratic structure. He would like each department within the civil service to become focused on deliverables emanating from their formal objectives and capable of responding to changing priorities quickly and efficiently. Hai wants the civil service to become more accountable for results with department managers being judged by their performance in well-defined spheres of activity. With reference to Handy’s cultural typologies what change in the organization is Hai seeking to achieve? A From a person culture to a task culture B From a role culture to a task culture C From a role culture to a power culture D From a task culture to a role culture The civil service is currently ‘a highly controlled, bureaucratic structure’. This is a role culture. Hai wants to make it focus on results, which is a task culture. Therefore, Hai is seeking to change the civil service from a role culture to a task culture. (2 marks) 24. DEF Co operates in a country where the government has adopted a principle-based approach to regulation. Companies are encouraged to adhere to generally accepted good standards of corporate governance. DEF Co wishes to reappoint two of its non-executive directors to the board for a third term of three years. It believes that this is in the best interest of the company and its shareholders. However, the code of practice applicable to listed companies such as DEF Co states that non-executive directors should serve a maximum of two terms of three years. What action should DEF Co take? A B C

Seek permission from the government to reappoint the non-executive directors Reappoint the non-executive directors and make no reference to this in its annual report Appoint new non-executive directors to replace those who have served two terms of three years

D

Reappoint the non-executive directors and explain the reasons for its actions in the annual report A principle-based approach to regulation means that it is up to the company to decide how to act in this case so it cannot approach the government for permission. As DEF Co believes that it is in the best interests of the company and its shareholders to reappoint these non-executive directors then it should do so. However, as this is in breach of the code of practice DEF Co should disclose this breach and explain its reasons in the annual report. (2 marks) 25. Which of the following organisations would be best able to adopt a wide span of control in its structure? A

A hospital offering general care, outpatient services and accident and emergency services B A call centre in which multi-skilled workers are employed to carry out a wide variety of tasks C A university offering degree programmes in all arts and science disciplines D A factory in which many workers are employed to carry out homogeneous tasks A wide span of control is displayed by a flat organisation. A factory in which many workers are employed to carry out similar tasks is an example of a flat organisation. The other options display a narrow span of control due to multi-skilled worker, specialisation or departmentalisation. (2 marks) 26. Which TWO of the following are examples of connected stakeholders? A B C D

Lenders Executive directors Employees Shareholders (2 marks)

27. The following statements refer to the role of the International Federation of Accountants (IFAC). Are each of the statement true of false? (Tick at the appropriate box) True (i)

False

IFAC is responsible for promoting ethical education standards True

(ii) IFAC is responsible for preparing and publishing global accounting standards False (2 marks) 28. The economic forecast produced by the government of Ruritania predicts that the total aggregate demand in the country will be $200 billion by the end of the current year. The Ministry of Finance has now received the following revised figures that will affect the original forecast: Activity

Change in values

Consumer spending Total government expenditure on capital projects Imports The purchases of industrial buildings, plant and machinery Total expenditure by local government Exports

($ billion) -15 +10 +7 +8 +7 +4

Which of the following is the level of aggregate demand when adjusted for these figures? A $214 billion B $251 billion C $207 billion D $210 billion Factors that will increase aggregate demand. Government spending + Purchases of industrial buildings, plant & machinery + Local government spending + Exports = 10 + 8 +7 + 4 = 29 Factors that will decrease aggregate demand: Reduced consumer spending + imports = 15 + 7 = 22 Adjusted aggregate demand 200 + 29 – 22 = $207 billion (2 marks) 29. What type of unemployment arises when there are jobs available, but information on job opportunities is not available to all those who are unemployed? A Structural B Frictional C Seasonal Poor communication of opportunities makes it difficult to quickly match workers and jobs – friction in the labour market. (1 mark) 30. Market research for product Alpha suggests that a 10% drop in price would lead to a 12% increase in quantity demanded. Which of the following describes the demand for product Alpha? A Price elastic B Price inelastic The price elasticity is calculated as 12/10 = 1.2. Since this is greater than 1, demand for the product is price elastic (note – since price and quality move in opposite directions, this should really be -1.2, but the minus sign is usually ignored) (1 mark)

31. Which TWO of the following would cause a good’s demand curve to shift to the right? A A rise in household income B A fall in the price of complements C An expected fall in the price of the goods D A decrease in the population A shift in the demand curve to the right indicates demand is increasing at all prices. This could be caused by a rise in household income or a fall in the price of complements An expected fall in the price of the goods or a decrease in the population would cause demand to fall and move the curve to the left. (2 marks) 32. A government has forecast the following future trends. Which TWO of these are social and demographic trends? A Rapid increase in household incomes B Increased demand for organic and environmentally friendly products C Significant increases in single person households D Increase revenues from personal taxation Social and demographic trends reflect changes in consumers’ values and behaviour. (2 marks) 33. Efon is a trainer with a large insurance company. He is involved in a project that will enable trainees to obtain quotations for insurance policies by inputting data from clients and other variables into a program on their laptop computers. The program also has a learning and development facility through which trainees can progress through a series of modules, all of which include structured tasks that test their problem-solving abilities. The system that Efon is using in the training project is which of the following? A B C D

A management information system A decision support system A data warehouses An executive information system (2 marks)

34. Which of the following statements is correct in relation to the informal organisation? A

Communications through the informal organization will always be slower than through formal communication channels B The informal organization has only a negative effect on the organization and its objectives C Individuals may communicate horizontally more effectively through the informal organization D Rumours do not circulate through the informal organisation The informal organization consists of social relationships, informal communication networks, behavioural norms and power or influence structures, which may by-pass formal organizational arrangements. This may have a positive or negative effect on the organization depending on how it is managed. Communications through the informal

organization may be faster or slower than through formal channels and rumours will certainly circulate through the informal organization. (2 marks) 35. Which of the following is an advantage of a matrix structure in an organisation? A Consistency in decision taking B Greater flexibility in deployment of skills C Precise definition of roles in individual jobs D Less difficulty in coordinating work activities A matrix structure works across functional and product or customer or project organisation. This leads to greater flexibility in deployment of skills. (2 marks) 36. According to Handy, which cultural stereotype is shapes by the interests and talents of individuals? A Existential culture B Role culture C Task culture An existential culture (or person culture) is found in an organisation whose purpose is to serve the interests of the individuals within it. Such organisations depend on the talent of the individuals. (1 mark) 37. BCD Co is a listed company. Its board of directors is reviewing the composition of the audit committee. Which of the following statement is consistent with generally accepted best practice in relation to the composition of the audit committee? A

A minimum of one member of the committee should have expertise in financial management B The majority of members of the committee should have professional auditing experience C The finance director should be the chairman of the committee D All members of the committee should have experience of financial management As part of the work of the audit committee is to review internal audit and internal controls, it is best practice to have at least one member of the committee with expertise in financial management. (2 marks) 38. Non-executive directors should have no business, financial or other connection with the company, apart from fees and shareholdings. Is this statement true or false? A B

True False

NED should remain independent. They are not employees. Whilst they take part in decision-making at board meetings, they do not take part in the day-to-day running of the company. (1 mark) 39. Which of the following supports the marketing function by analyzing and projecting the costs and revenues of a new product and assessing the overall implication s of introducing the product for the organisation? A Financial controller B Treasury manager C Management accountant D Financial accountant This type of work forms part of the job function of a management accountant. (2 marks) 40. The finance director of a company is concerned that the company will not have sufficient cash available at the end of the month to pay the staff’s wages unless he arranges an overdraft with the bank. Which of the following will be most useful to the finance director in working out whether he needs to ...