Week 2

Question 1

Assets =

Answer 1

Liability + Equity

Question 2

What is Double-entry bookkeeping?

Answer 2

Enter each transaction twice as a credit and then debit

Question 3

Financial Accounting

Answer 3

EXTERNAL

• Annual reports of the company’s situation
• Publichsed to shareholders and the public
• Must be audited
• Used by investors to make investment decisions

Question 4

Management Accounting

Answer 4

INTERNAL

• More up to date information
• Typically has company confidential information
• Used to monitor and measure performance
• Supports decision making

Question 5

IFRS

Answer 5

International Financial Reporting Standard

Question 6

Market Capitalisation

Answer 6

Share price X number of shares

Question 7

Earnings Per Share

Answer 7

Profit divided by number of shares

Question 8

Prices Earnings Ratio

Answer 8

Profit divided by Market Cap

Question 9

Beta

Answer 9

Volatility compared to rest of market

Question 10

What should financial information be?

Answer 10

Relevant and a faithful representation

-Comparibility, verifiability, timeliness and understandability

Question 11

What is management accounting used for?

Answer 11

Analyzing information to advise business strategy and drive sustainable business success

Question 12

When does management accounting focus on?

Answer 12

Present

Question 13

Comparison of mangement accounting reports compared to financial reports

Answer 13

Management accounting reports are finer grained than financial reports and include analysis of costs,profitability, optimisations,risk management

Question 14

Process of planning and control

Answer 14

Objectives -> Strategic Decisions -> Operating Decisions

Question 15

Three methods of budgeting for operating decisions

Answer 15

Top-down approach, participatory approach, bottom-up approach

Question 16

Top-down Approach

Answer 16

Senior-managers tell lower levels what is expected

Strategy over operations

Question 17

Participatory Approach

Answer 17

Budget negotiated between different units

Compromise between strategy and operations

Question 18

Bottom-up approach

Answer 18

Lower levels tell senior managers what they need

Operations over strategy

Question 19

5 reasons to budget?

Answer 19

Promotes forward thinking
Motivate managers to perform better
Provide a basis for a system of control
Help co-ordinate parts of the business
Provied a system of authorisation

Question 20

Avoidable costs

Answer 20

Costs an organisation could eliminate by choosing an alternative

Question 21

Sunk costs

Answer 21

Costs that are unavoidable: In effect already incurred, no matter what a manager does

Question 22

Cost centre definition

Answer 22

Identifiable part of an organisation to which costs can be assigned and aggregated

Question 23

How are costs aggregated?

Answer 23

Group of inviduals, element, nature, function or behaviour

Question 24

What are the different types of costs?

Answer 24

Fixed, variable (proportional to activity), semi-variable or semi-fixed

Question 25

Total Cost

Answer 25

Fixed Cost + Variable Cost

Question 26

Profit formula

Answer 26

π = pq - (F+wq)

• π = profit
• p is sales price
• F is fixed costs
• w is variable costs per unit sold
• q is quantity sold

Question 27

Break-even point

Answer 27

Uses internal measures such that companies keep looking and moving forward

Question 28

Net positive profit

Answer 28

p > w + (F divided by q)

Question 29

Break-even point

Answer 29

p = w + (F divided by q)