Law For Accounting 2

Question 1

Which three of the following must be present in order to create a valid contract for sales of goods not made by deed?

Answer 1

A. CONSIDERATION
B. Invitation to treat
C. AGREEMENT
D. INTENTION TO CREATE LEGAL RELATIONS

Question 2

Which of the following describes a contract that is illegal from the moment it is made?

Answer 2

A. Irresponsible
B. VOID
C. Unenforceable
D. Voidable

Question 3

You promise to pay someones debt if they don’t pay. Which of the following is true in regard to the proposed guarantee so that it will be enforceable in a court of law?

Answer 3

A. It can be made oral only
B. It must be implied in the contract
C. It must be by a trust deed
D. IT MUST BE EVIDENCED IN WRITING

Question 4

On 19th April Martin offered to sell his new laptop computer to Tom for £135, stating that his offer had to be accepted by an appropriate method of communication. Tom posted a letter of acceptance on 21 April but the letter arrived very late. Marlin sold the laptop to kana.

1. Does the postal rule apply?
2. Is there a contract between Martin and Tom

Answer 4

1. Yes
   Martin stated he wanted acceptance in an appropriate form of communication, therefore once letter was posted offer was accepted
2. Yes
   There was an agreement of offer and acceptance where tom accepted the offer by posting the letter.

Question 5

Cloe employs Mark to build a new kitchen to her house. Mark completes the job except to put a second small window as specifically requested by cloe. Which of the following best describes the legal position?

Answer 5

Mark is entitled to the payment of contract price less a reasonable amount for the omission made.

Question 6

True or false

1. Anticipatory breach requires an act to take place to enforce a contract
2. Jill purchased a ticket for a concert that was eventually cancelled, due to a fire that destroyed the concert hall. This is an example of discharge of a contract by frustration?

Answer 6

True
In order for the contract to take place an agreement must take place between the parties

True
There was a change in circumstance after contract is made which neither party is at blame which renders it impossible for it to take place or deprives the contract

Question 7

Some exclusion clauses are rendered void and others subject to the reasonableness test under the unfair contract terms act 1977. In a contract between the buyer and the seller for the supply of goods and services, is a clause limiting liability for breach of the condition relating to description void?

Answer 7

Yes

Under the provisions of the UCTA, no clause or notice can restrict or enable liability from breach of contract

Question 8

Which two of the following are correct in relation to a contract made by an agent acting within his authority?

Answer 8

A. THE THIRD PARTY CAN SUE ON CONTRACT

B. THE PRINCIPAL CAN BE SUED ON CONTRACT

Question 9

Samuel entered into a contract with johns caterers. Samuel used to be an agent of of bryans restaurant which john didnt know.
The invoice was sent to Bryans restaurant for urgent settlement.

1. Can John’s caterers demand payment for Brians restaurant?
2. Under the operation of law, can there be an agency by holding out or estoppels?

Answer 9

1. Yes
   They were not informed that agent is not acting for Bryan anymore
2. Yes
   This would prevent Bryan from saying he is not liable and the catering company should have been informed that the agency service had been terminated.

Question 10

Antique dealer scenario.

1. Does the chair collectors action amount to ratification of the contract ?
2. Is the seller able to insist on the return of the chair?

Answer 10

1. Yes
   Ratification was done in deed when antique dealer bought the chair
2. No
   The antique dealer had paid full price for the chair

Question 11

True or false

1. The agent owes a duty to his principal not to create a conflict of interest
2. There is no requirement in law that an agent is expected to behave in a professional manner in exercising the care and skill necessary to perform well

Answer 11

1. True
   It is agents duty not to put himself in a situation where his own interests conflict with those of the principal
2. False
   It is agents duty to act in a professional manner and exercise skill and care necessary to perform well.

Question 12

Not actual source of authority

Answer 12

Apparent authority

Question 13

Exceeding the budget scenario

Can the local newspaper company enforce the contract?

Answer 13

P had no authority and the company didn’t know this but knew he was a partner

Question 14

Which of the following is not ingredients need to be shown by the claimant in order to succeed in action for negligence?

Answer 14

A. That the defendant owed him a duty of care

B. THAT THE DAMAGE WAS NOT TOO REMOTE

C. That the claimant suffered injury, damage or loss

D. Defendant was in breach of contract.

Question 15

Which two of the following are NOT factors to be taken into account in determining a duty of care exists in cases of professional misstatement?

Answer 15

The state of knowledge of recipient

The status of recipient

Question 16

True or false

1. When an agent makes a contract with a third party it is assumed that the principal will not become liable to the party only the agent
2. An employer will not be vicariously liable for the negligent act of an employee who did not discharge his duties effectively

Answer 16

1. False
   The agent is representing the principal, therefore be becomes liable
2. False
   Vicarious liability means an employer is responsible for the acts of his employees in relation to his job

Question 17

Inventory hugely overstated. The clients income statement showed an increased profit when it should have been a huge loss. Which of the following statement is true?

Answer 17

A. Client can sue the company for the because of the purpose of vicarious liability

Question 18

Every company must keep accounting records and produce accounts

Which two documents are not required to be retained by a public limited company?

Answer 18

The records of statistical information to local authority

Management accounting records

Question 19

True or false

1. A public limited company must appoint a company secretary who has the relevant qualification as provided by the companies act
2. A company secretary does not have the power to contract on behalf of the company in respect of the administrative operations including employment

Answer 19

1. True
   All public companies need to have a company secretary
2. False
   Company secretary has power to contract on behalf of company in respect of its administrative manner. For example, employing staff and managing the office.

Question 20

True or false

1. A shadow director represents someone whose directions or instructions the directors are accustomed to act.
2. A director cannot be removed from office even if a bankruptcy order is filed against that person

Answer 20

1. True
   Save persons by providing information in a professional manner

E. G lawyer or accountant

2. False
   When a director breaches his duty his contract is void
   The only way to resolve bankruptcy is disqualification.

Question 21

Ben is the managing director of Hidedays ltd.
under the articles of associations all directors and members need agreement in general meeting by ordinary resolution to incur expenditure in excess of £70,000.
Ben acquired non-current assets from gold ltd for £82,000 without the consent given in a general meeting.

Which of the best summarises the legal position of gold ltd?

Answer 21

1. Hidedays ltd is bound because ben had actual authority to enter into a contract
2. The company that sold the office furniture to ben cannot enforce the contract although it acted in good faith
3. Gold ltd provided the office furniture can enforce the contract because it dealt with hidedays ltd in good faith
4. Hidedays ltd is not bound because ben had acted beyond his authority

Question 22

Favour ltd is expanding its business activities and required additional finance to sustain its growth. The company allotted shares to one of the shareholder at 75p per share where the nominal value per share is £1

Which of the following best describes the legal position?

Answer 22

A. The allotment is valid because directors can use their discretion to determine the amount to receive for the company

B. The allotment is valid because it is done within the powers granted to directors

C. The allotment is invalid because the directors have allotted the shares at a discount below its nominal value

D. The allotment is invalid because as it is a principle of company law that the wished of the majority shareholders prevail.

Question 23

True or false

1. All directors must act in accordance with the company’s constitution and exercise powers only for the purpose for which they are conferred.
2. A majority of directors must not accept a benefit from a third party so as to avoid a conflict of interest.

Answer 23

1. True
   If they don’t infringe this rule and exercise their power for collateral purpose then the transaction will become invalid.
2. False
   They can accept a benefit from a third party as long as it doesn’t result in a rise of conflict in interest

Question 24

Which three of the following can he exercise as a minority member in a general meeting

Answer 24

1. Registration of a limited company as an unlimited company by individual members
2. Notice of members resolutions if minority members have 5% or more of voting rights
3. Variation of class rights if minority members have 15% or more of class shares

Question 25

Which three will call a general meeting of a company?

Answer 25

5% of members Board of directors Court on the application of directors or members

Question 26

How much notice is required to be given by a public limited company for the holding of general meetings?

Answer 26

14 days

Question 27

Fairwell limited has issued share capital of £750,000 | Which of the following best describes those shares?

Answer 27

A. The equity share capital including rights issues B. The preference share capital permitted to vote C. Shares that have been issued or allotted including share issues to subscribers on the formation of the company. D. Loan capital of the company with fixed charge entitlements.

Question 28

True or false 1. A bonus issue is additional free shares given to existing shareholders in proportion to their existing holdings 2. A rights issue is where a company request from existing shareholders, a payment for shares above their market value in proportion to their existing holdings

Answer 28

1. True These types of shares are given fully paid for and no cash caused for from shareholders 2. False Rights share is additional shares given to existing members, which is usually pre rota of their existing shares.

Question 29

True or false 1. Listed shares under the CREST system which is an approved operator of an electronic system allow shareholders to hold and transfer shares with a written document of shares. 2. All companies are not obliged to permit paperless transfers of shares?

Answer 29

1. False As stated in the article it is not a requirement that shareholders should transfer and hold shares with a written document of transfer 2. True Some need to pass an ordinary resolution as stated in the act.

Question 30

Rodha wants to purchase shares with a nominal value of 25p each in a public limited company 1. Can she pay for those shares by performing a service, for example acting as an advisor to the company? 2. Dickson wants to pay 15p now and pay the remainder at a later date. Can this be done?

Answer 30

1. No When buying a share it must be paid in money or moneys worth 2. Yes As long as the company receives An undertaking pay that they will receive the payment at a later date

Question 31

In a compulsory distribution of a company’s assets in which order will the following receive and payments due to them? Rates outstanding to the local council Shareholders Liquidators fee Floating charge

Answer 31

Liquidators fee Rates outstanding to the local council Floating charge Shareholders

Question 32

True or false 1. An LLP has a separate legal personality from that of its members whose liability are limited. 2. An LLP must have 24 members before it commences trading

Answer 32

1. True The limited liability partnership act 2010 separates them from their members. 2. False An LLP needs to a maximum of two members to be formed

Question 33

Disclosures made in respect of three of the following matters are qualifying disclosure. Which three?

Answer 33

1. Ventilation required for a room with no window 2. Three fire exits doors are blocked by folders in the place of work 3. Adequate workplace between staff in office has not been provided. 4. An employee has been absent from work for a long time

Question 34

Which of the following is NOT one of the specified ways in which the statutory offence of fraud may be committed under the fraud act 2006?

Answer 34

1. Fraud committed jointly by CEO and finance director 2. Fraud by failing to disclose information 3. Fraud by false misrepresentation 4. Fraud by abuse of position

Question 35

Is an offence of bribery committed in the following situations 1. A principal audit assistant is requested not to amend the trade receivable reconciliation records of a client in return for £85 2. In an inspection the financial director offers the inspector of HMRC a very small financial reward for not charging the correct penalty for undisclosed information

Answer 35

1. Yes An exchange of financial gain or advantage has been performed by the assistant 2. Yea An exchange of financial gain or advantage has been performed by the HMRC INSPECTOR.

Question 36

The money laundering regulations act 2007 came into effect on December 2007 and applied to relevant persons. Which one of the following does not apply to relevant persons?

Answer 36

1. Accountants and tax advisors 2. Manufacturers 3. Estate agents 4. High value dealers selling good for cash over 15,000 Euros.

Question 37

Which three of the following conditions are an essential element in a contract of service

Answer 37

1. Mutuality 2. Personal service 3. Responsibility 4. Control

Question 38

Which two of the following need not to be included in a written contract of service ?

Answer 38

1. The date on which the employment commences 2. Details of academic qualifications 3. The names of the employer and employee. 4. Employees’ HMRC tax code and national insurance number

Question 39

Which three of the following do constitute a duty owed by the employer towards his employee under common law?

Answer 39

1. To pay reasonable remuneration 2. To indemnify employees 3. Health and safety 4. To provide private family accommodations

Question 40

What is the usual remedy for wrongful dismissal.

Answer 40

1. Injunction 2. To be reinstated 3. Damages 4. Specific performance

Question 41

True or false 1. An employee must have been dismissed, laid off or put in short time working in order to be able to claim 2. An employee must have been continuously working for at least 24 months with the same employer

Answer 41

1. True Requirement of act if placed in short time working can claim 2. True They must be employed for at least 2 years.

Question 42

True or false 1. A statutory redundancy payment is based on an employees age and length of service and is calculated in the same way as the basic award in unfair dismissal cases 2. Redundancy is treated as a form of unfair dismissal

Answer 42

1. True This allows them to claim remedies for unfair dismissal 2. False Its is treated as a form of fair dismissal for