T1. 3 DOYLE CH 1 PG 7 - 8

Question 1

What are the key points in managing investment in non-current assets?

Answer 1

A business must have NCA to provide satisfactory service to customers.
Too large an investment in NCA can result in inefficient use of assets

Question 2

What are the 4 key rules for managing cash?

Answer 2

eparate cash handling from recording transactions – Prevents theft and false entries.
Bank all cash receipts daily – Reduces the risk of cash being stolen.
Require approval for payments – Senior employees must approve payments, and larger payments need two approvals to prevent fraud.
Prepare cash budgets continuously – Ensures the business has enough cash to pay debts when due

Question 3

Appropriate Management of Inventory

Answer 3

Separate handling of inventory from recording inventory transactions – Prevents theft and false accounting entries.
Store inventory in a secure location with restricted access – Reduces the risk of theft.
Use a perpetual inventory system – Helps track fast- and slow-moving stock items and prevents stock shortages.

Question 4

Appropriate Management of Accounts Receivable

Answer 4

Conduct credit checks on new customers – Ensures only reliable customers are given credit.
Impose credit limits on new customers – Reduces the risk of unpaid debts.
Send monthly statements to all debtors – Summarizes transactions and reminds them of amounts owed.
Follow up overdue accounts immediately – Contacts debtors and requests payment.
Separate recording of debtor transactions from cash handling – Prevents theft and false accounting entries.

Question 5

Appropriate Management of Liabilities (Debt) and Equity

Answer 5

Assets are obtained through capital or debt – Money can come from the owner or loans.
Loans must be repaid on time – Prevents financial penalties and maintains financial health.
Interest must be paid on loans – Adds to business expenses.
Debt levels must not be excessive – Ensures financial stability and ability to meet repayment obligations.