Theory

Question 1

What is a Levy?

Answer 1

Money collected from members to fund the buying of new fixed assets

Question 2

What is a life membership?

Answer 2

Fee paid by a member entitling him/her to use the club’s facilities for life

Question 3

what is a subscription?

Answer 3

a fee paid by the members which goes towards the day-to-day running of a club

Question 4

what is a non-cash item?

Answer 4

It is an expense or a gain that affects profit but not cash e.g. Depreciation (as it doesn’t involve money being spent)

Question 4

what is a non-cash item?

Answer 4

It is an expense or a gain that affects profit but not cash e.g. Depreciation (as it doesn’t involve money being spent)

Question 5

What is Financial Reporting Standard (FRS)?

Answer 5

A standard is prepared by the regular authorities. It is best practice in accounting which allows accounts to be compared from year to year and from company to company.

Question 6

what is a principal budget factor?

Answer 6

a factor that limits outputs and therefore prevents continuous expansion

Question 7

why do we prepare a flexible budget and what does it show?

Answer 7

-to compare budgeted costs and actual costs at the same activity level
-to compare like with like
-to help in controlling costs or to plan product levels

Question 8

what is an adverse variance?

Answer 8

where actual costs exceed budgeted costs

Question 9

what are controllable costs?

Answer 9

costs that can be controlled by the manager of a cost centre

Question 10

what are uncontrollable costs?

Answer 10

costs over which the manager of a cost centre has no control and therefore cannot be held responsible for variances in these costs e.g rates to the local authority

Question 11

what is a cash budget?

Answer 11

a forecast or plan of cash inflow and cash outflow over a period

Question 12

what are the advantages of cash budgets?

Answer 12

-highlights whether enough cash will be available to meet future needs
-helps to give advance knowledge so that an overdraft can be arranged if shortfall occurs
-helps to predict future surpluses so that short-term investments can be made

Question 13

what is a capital budget?

Answer 13

a budget that deals with any planned capital expenditure e.g purchase of fixed assets and planned capital receipts e.g sale of fixed asset

Question 14

examples of principal budget factors:

Answer 14

-supply of materials
-availability of labour
-capacity of the plant
-availability of capital

Question 15

what is a master budget?

Answer 15

a summary of all the other budgets and provides an overview of the operations for the planned period

Question 16

what does a master budget for a manufacturing account consist of?

Answer 16

-budgeted manufacturing account
-budgeted trading account and profit and loss account
-budgeted balance sheet

Question 17

what is a cash budget?

Answer 17

a plan or forecast that summarises the expected inflows and outflows of cash during a period

Question 18

what is contribution used for?

Answer 18

it is put towards paying off the fixed costs

Question 19

how do you calculate contribution?

Answer 19

sales - variable costs

Question 20

what is meant by the term sensitivity analysis?

Answer 20

it is a technique used by management accountants to show the effect on profit brought about changes in the following: selling price, sales volume, variable costs, fixed costs

Question 21

outline why budget control is necessary in an organisation:

Answer 21

-draw up a plan of performance-budgets are roadmap for the business
-identify areas of responsibility to provide direction and motivation to staff to achieve targets
-to identify future costs and revenue in order to plan cash inflows and outflows and control costs

Question 22

what is meant by a favourable variances?

Answer 22

when actual costs are less than budgeted costs

Question 23

explain how a favourable variances might arise in a manufacturing firm

Answer 23

-the purchase of price of raw materials is less than expected because of economies of scale
-less labour hours (lower wage costs) were required due to improved productivity from employees

Question 24

what is a financial reporting standard?

Answer 24

a rule that must be applied to all financial statements in order to give a true and fair view of the company’s financial position. It sets out best practice in accounting that allows accounts to be compared from year to year and from company to company

Question 25

distinguish between a cash gain and non cash gain:

Answer 25

cash gain- increases profit and cash, e.g investment income
non-cash gain- increases profits but not cash, e.g profit on sale of fixed asset

Question 26

what is a levy?

Answer 26

a payment made to a club by its members to fund a special project such as a clubhouse extension. It must be used for the purpose for which it is collected

Question 27

what is a life membership?

Answer 27

where a club member pays a fee that entitles her/him to use the facilities of the club for the rest of her/his life

Question 28

explain two fundamental accounting concepts

Answer 28

prudence- when preparing accounts, caution should be exercised. Possible losses must be recorded immediately but income must not be recorded until it is reasonably certain

consistency- items must be treated in the same way from one accounting period to the next

Question 29

what is an exceptional item?

Answer 29

a material item of significant size. It is a profit or loss that must be shown separately in the P+L because of its size

Question 30

what is an audit?

Answer 30

the independent examination of, and the expression of opinion on the financial statements of an enterprise by an appointed auditor