Purpose of accounting

Question 1

What does planning involve

Answer 1

Budgets/targets/limits of expenditure

Cash flow forecasts to predict amount/timing of cash flow in a period of time

Question 2

What does monitoring involve

Answer 2

Monitoring costs/output levels and comparing actual expenditure to budgets(targets or limits)
Forecasts for profits/profitability
Ensuring cash flow targets are met

Question 3

What does controlling involve

Answer 3

Inventory control:
reorder quantities and avoid holding too much stock that may become obsolete
Capital expenditure(e.g purchase of new machinery)

Question 4

Internal actions against fraud

Answer 4

Monitoring expense claims

Monitoring shrinkage or wastage levels of inventory

Question 5

External actions against fraud

Answer 5

Validate new suppliers
Check records
Work with external auditors

Question 6

Tools used to aid performance measurement

Answer 6

Variance analysis(comparing budgeted figures against actual figures)
Ration analysis(looking at figures in relation to each other to allow better interfirm and intrafirm comparisons)
Benchmarking(comparing the businesses performance to those considered to be performing at their best)

Question 7

What are trade receivables

Answer 7

Money owned by the business but not yet received(caused by selling on credit)
Involves clear payment terms
Rules/procedures for late payments
Credit control(chasing late payments)

Question 8

What are trade payables

Answer 8

Money owed by the business but not paid yet(caused by buying on credit)
Contract with suppliers
Relies on data being accurate on invoices