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Paper F1: Accountant in Business

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Paper F1: Accountant in Business

ACCA Paper F1 Accountant in Business (AB)


Published by Tony Surridge Online Limited in 2011

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Paper F1: Accountant in Business

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Contents
Copyright statement For the ladies only Why study from a computer screen? 10 Golden Rules for a Computer-based Examination Syllabus The structure of the syllabus Intellectual levels Learning hours Guide to exam structure Guide to examination assessment Aim Main capabilities Relational diagram of main capabilities Rationale Detailed syllabus Approach to examining the syllabus Computer Based Exams Study guide A. Business organisation structure, governance and management B. Key environmental influences and constraints on business and accounting History and role of accounting in business Specific functions of accounting and internal financial control Leading and managing individuals and teams Recruiting and developing effective employees This link is live for this Free Sample

ACCA Paper F1 Accountant in Business

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C. D.

E. F.

This link is live for this Free Sample

The syllabus outline and our pathway through it (2 screens). Diagnostic Test 1 Diagnostic Test 2 Diagnostic Test 3 Diagnostic Test 4 50 Quickies Test Questions Questions Questions Questions Questions Answers Answers Answers Answers Answers The first 25 Questions and Answers of Diagnostic Test 2 are live for this Free Sample

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Paper F1: Accountant in Business

The syllabus outline and our pathway through it . Syllabus section A Main topic Sub-topic Pages Questions Business organisation structure, governance and management The business organisation and its structure The formal and informal business organisation Organisational culture in business Stakeholders of business organisations Information technology and information systems in business Committees in the business organisation Business ethics and ethical behaviour Governance and social responsibility in business B Key environmental influences and constraints on business and accounting Political and legal factors Macro-economic factors Social and demographic factors Technological factors Competitive factors C History and role of accounting in business The history and function of accounting in business Law and regulation governing accounting Financial systems, procedures and IT applications The relationship between accounting and other business functions Answers

23 30 32 34 38 41 43 45 116 118 124 125 125 150 151 158 158

53 66 74 80 86 96 98 102 129 132 143 143 144 162 163 177 178

Click to the next screen to continue our pathway

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Paper F1: Accountant in Business

The syllabus outline and our pathway through it . Syllabus section D Main topic Sub-topic Pages Questions Specific functions of accounting and internal financial control Accounting and finance functions within business Internal and external auditing and their functions Internal financial control and security within business organisations Fraud and fraudulent behaviour and their prevention in business E Leading and managing individuals and teams Leadership, management and supervision Individual and group behaviour in business organisations Team formation, development and management Motivating individuals and groups F Recruiting and developing effective employees Recruitment and selection, managing diversity, and equal opportunity Techniques for improving personal effectiveness at work and their benefits Features of effective communication Training, development, and learning in the maintenance and improvement of business performance Review and appraisal of individual performance Answers

183 190 193

205 219 224

199 242 246 247 248 287

234 255 268 271 273 303

290

310

293 295

316 325

299

333

When you meet someone better than yourself, turn your thoughts to becoming his equal. When you meet someone not as good as you are, look within and examine your own self. Confucius
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Paper F1: Accountant in Business

Computer Based Exams


Exam format Each exam is of two hours duration; contains 50 questions (40 two-mark questions and 10 one-mark questions); is out of 90 marks with a pass mark of 50%; and contains question types: one and two mark MCQ's, one and two-mark multiple response questions, two-mark multiple response matching questions and two-mark number entry questions. CBE question types Multiple choice (MCQ) (two marks) - where you are required to choose one answer from four options by clicking on the appropriate radio button'. Multiple choice (MCQ) (one mark) - where you are required to choose one answer from either two or three options by clicking on the appropriate radio button'. Multiple response (two marks) - where you are required to select more than one response from the options provided by clicking the appropriate tick boxes (typically choose two options from four). Multiple response (one mark) - where you are required to select more than one response from the options provided by clicking the appropriate tick boxes (typically choose two options from three). Multiple response matching (two marks) - where you are required to indicate a response to a number of related statements by clicking on the 'radio button' which corresponds to the appropriate response for each statement. Number entry (two marks) - where you are required to key in numerical responses to a question shown on screen. For information on ACCA Computer Bases Exams (CBEs) refer to the ACCA website.

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Accountant in Business
DIAGNOSTIC TEST 2

SAMPLE
QUESTION PAPER
Time allowed: 2 hours All FIFTY questions are compulsory and MUST be attempted

Do NOT attempt this test until you are ready for the test.

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - QUESTIONS

Which of the following are owners of a limited company? A B C D Founder members Founder, family and friends (the 3 Fs) Stakeholders Shareholders

(1 mark)

At what stage of the strategic planning process should a company carry out a position (or situation) analysis? A B C D When crafting a mission statement When formulating strategic objectives When converting strategic objectives into executive targets When converting executive plans into action plans

(2 marks)

The amount of decentralisation that occurs in a firm is not affected by which of the following? A B C D Location of employees Nature of the work Size of organisation Management style

(2 marks)

In universities an academic faculty is usually organised into departments and courses, where teaching staff report both to subject specialists and programme managers, depending upon their particular subject specialism and on which course they teach. According to Charles Handys four cultural stereotypes, this type of organisation describes A B C D Power culture Role culture Task culture Person culture

(2 marks)

5.

The term networking is most associated with what type of organisational structure? A B C D Matrix Functional Entrepreneurial Line and staff

(2 marks)

6.

The stories of entity creation, such as difficulties the founder had to face and how he/she resolved them often form a part of organisational culture. Is this statement true or false? (1 mark)

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - QUESTIONS

Which one of the following is an example of a internal stakeholder? A B C D A company providing an out-sourcing service A shareholder A supplier An employee

(2 marks)

Which of the following are qualities of information that is useful for decision making purposes? (ii) (ii) (iii) (iv) (v) (vi) A B C D Relevant Authoritative Complete Received in time Precise to the 2 decimal places. Low cost (i), (ii) (iii) (i), (ii), (iii) and (iv) (i), (ii), (iii), (iv) and (v) (i), (iii), (iii), (iv), (v) and (vi)

(2 marks)

The duties of the committee secretary include which of the following? A B C D Making notes/Issuing documents/Fixing date, time, location/Maintaining order Making notes/Issuing documents/Preparing minutes/Taking a vote Issuing documents/Fixing date, time, location/Ascertaining the consensus view/Preparing minutes Fixing date, time and location/Making notes/Issuing documents/Preparing minutes (2 marks)

10

In order to secure contracts for ones employer it is ethically acceptable to pay bribes to foreign government officials. Is this statement true or false? A B True False

(1 mark)

11

Employing lobbyists to put the organisations case directly to ministers or civil servants is a legitimate method of influencing government policy in the interests of a business. Is this statement true or false? A B True False

(1 mark)

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - QUESTIONS

12

Which of the following types of legislation provide greater employment opportunities in large companies? A B C D Laws on health and safety in the workplace Laws on minimum payments to employees Laws to prevent discrimination in the workplace Laws making it more difficult to dismiss employees unfairly

(2 marks)

13

Inflation has a number of causes and solutions. Which of the following scenarios describes cost-push inflation? A At the time of the annual pay negotiations, a trade union anticipates a raising of inflation during the next year and demands an increase in wages for their members that will compensate them for this expected increase in the cost of living The underlying cost of factors of production (raw materials and labour) increases and this is reflected in an increase in output prices as firms seek to maintain their profit margins. Demand for goods and services in the economy grows faster than the ability of the economy to supply these goods and services, i.e. too much money is chasing too few goods The national currency weakens thus increasing the cost of imports in a country where imports are significant to the economy (2 marks)

B C D

14

A regressive tax is one which: A B C D takes a higher proportion of income in tax as incomes increase takes a higher proportion of a high salary than a low salary takes the same proportion of income as tax across all income levels takes a higher proportion of a low salary than a high salary (2 marks)

15

The ageing population trend in many European countries is caused by an increasing birth rate and a decreasing mortality rate. Is this statement true or false? A B True False

(1 mark)

16

Outsourcing is often associated with which business processes? A B C D Acquiring overseas companies Sourcing data from outside the entity Relocating call centres overseas Telecommuting, i.e. setting up systems where employees work from home

(2 marks)

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - QUESTIONS

17

Which of the following best describes a cost leadership strategy in a price sensitive market? A B C D Products are priced low but are of inferior quality Competitors quality is matched or exceeded at a lower cost Products are of superior quality Prices are slightly above those of competitors

(2 marks)

18

As described in Michael Porters Value Chain, which of the following is not an example of Support Activities? A B C D Human Resource Management Procurement Technology Development Inbound logistics

(2 marks)

19

In a very large company working capital management would probably be the responsibility of the: A B C D Finance director Chief accountant Treasurer Management accountant

(2 marks)

20

When projecting financial forecasts both financial and non-financial data is required. Is this statement true or false? (1 mark)

21

Who is responsible for the production of financial statements that give a true and fair view? A B C D The audit committee The Board of Directors The external auditor The finance director

(2 marks)

22

The major objective of the International Accounting Standards Board (IASB) is to ensure consistency in . Which two words correctly complete this sentence? A Corporate reporting B External auditing C Financial control D Internal auditing

(1 mark)

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - QUESTIONS

23

Tax mitigation involves which of the following? A B Taking all legal steps to reduce ones tax liability without frustrating the lawmakers intentions Reducing tax liabilities by exploiting loopholes in the law (1 mark)

24

Failure to maintain proper accounting records is: A B C D a civil offence both a civil and a criminal offence neither a civil nor a criminal offence a criminal offence

(2 marks)

25

To make sure that an inventory check is effective which of the following needs to be done? A B C D People independent of stores work should count all the items High volume/fast throughput items should receive most attention Inventory checking should be performed at one particular time during the year There should be a systematic approach to counting the items

(2 marks)

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Accountant in Business
DIAGNOSTIC TEST 2

SAMPLE
ANSWER GUIDES

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OVERVIEW OF ANSWERS FOR DIAGNOSTIC TEST 2


Question number 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Marks available 1 2 2 2 2 1 2 2 2 1 1 2 2 2 1 2 2 2 2 1 2 1 1 2 2 Answer D B B C A TRUE D B D B A C B D B C B D C TRUE B A B B D 90 2 hours Question number 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Marks available 2 2 1 2 2 2 2 2 2 2 2 2 1 2 2 2 2 2 2 2 2 2 2 2 2 Answer B D TRUE

Total marks available : Time allowed :

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C D A D D B D B B A C B A D A C D D A D D 17

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TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

Answer: D Shareholders own a limited company.

Q
2

Answer B A position analysis is carried out in order to formulate strategic objectives.

Q
3

Answer: B The nature of the work tends to influence a managers span of control. Work which is complex and specialist (such as found in project development teams) tends to require more supervision (advice, guidance, trouble-shooting, etc.) than work which is relatively simple and straightforward, and therefore tends to reduce the span of control. However it does not normally influence the amount of decentralisation that occurs in an organisation. The other three mentioned, do exert an influence.

Answer: C In universities an academic faculty is usually organised into departments and courses, where teaching staff report both to subject specialists and programme managers, depending upon their particular subject specialism and on which course they teach. The task culture is appropriate where organisations can accommodate the flexibility required to adjust management and team structures to address the tasks that must be fulfilled. This is very common in large consultancy firms. Refer to Answer 52 for information regarding Handys organisational cultures.

5.

Answer: A A matrix structure is associated with networking. For an explanation of a matrix structure refer to Answer 46, which also links you to an overview chart. For an explanation of functional organisation (Distractor B) refer to the chart on the next screen. For an explanation of entrepreneurial (Distractor C) refer to Answer 17 (Syllabus Questions). Line and staff (Distractor D). One widely held concept is that an organisation is made up of line and staff relationships.: Line functions are those which have direct responsibility for accomplishing the objectives of the enterprise, and staff refers to those elements of the organisation that help the line to work most effectively in accomplishing the objectives of an enterprise.

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

Fact Sheet: Organisational structures: Functional organisation


Functional organisation
The grouping of activities in accordance with the functions of the enterprise is a widely accepted practice. It embodies what enterprises typically do.

Board of directors Marketing Engineering Production Production planning Production engineering Purchasing Finance Financial planning Budgets General accounting Management accounting
Statistics and data processing

Market research Marketing planning Advertising and promotion Sales

Engineering administration Preliminary design Electrical engineering Mechanical engineering Packaging

Tooling Production processes

Quality control

ADVANTAGES Is logical reflection of functions Follows principle of occupational specialisation Maintains power and prestige of major functions Simplifies training Tight control at the top

DISADVANTAGES Responsibility for profits at the top only Overspecialises and narrows viewpoints of key personnel Limits development of general managers Reduces coordination between functions Makes growth of company as a system difficult

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

Those who hold this view (there are different interpretations of the terms line and staff) almost invariably classify production and marketing (and sometimes finance) as line functions, and purchasing, accounting, human resource management, plant maintenance, and quality control as staff functions. For a more detailed explanation of line and staff refer to Answer 409 (Syllabus Questions).

6.

Answer: True It is true that the stories of entity creation, such as difficulties the founder had to face and how he/she resolved them often form a part of organisational culture. Stories are a part of the cultural web. Johnson, Scholes and Whittington suggest that an organisations culture develops from a number of influences which they refer to as the Cultural Web. The diagram on the next screen which uses a hypothetical railway company as an example, shows how culture can be influenced by symbols, power structures, organisation structures, control systems, routines and rituals, and stories.

Answer: D An employee is an example of a internal stakeholder. Refer to Answer 77 (Syllabus Questions).

Answer: B Information that is relevant, authoritative, complete and received in time are qualities that are useful for decision making purposes? Information for decision making purposes usually does not require accuracy to 2 decimal places and does not have to be low cost. Information is optimised on a cost-benefit basis, i.e. the benefit arising from the cost should be greater than the cost - however high the cost might be.

Answer: D The duties of the committee secretary include (i) fixing date, time and location, (ii) making notes, (iii) issuing documents and (iv) preparing minutes. A committee secretarys remit does not cover: maintaining the order of the meeting, taking a vote, or ascertaining the consensus view of the meeting. These are duties of the committee chairperson.

10

Answer: B The payment of bribes, for whatever reason, is never ethical, even if they are commonplace in that particular country or culture. (Note: Bribery is a form of pecuniary corruption, in that money or a gift is given that alters the behaviour of the recipient. Bribery constitutes a crime (in most countries) and is defined by Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in discharge of a public or legal duty. The bribe is

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TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS The existing culture of a hypothetical railway company
Such as: logos offices cars and titles type of language/terminology Different sources of power are perceived. For example, in times of financial shortage the views of accountants are more influential

Stories told by members of organisation: - to each other - to outsiders - to new recruits they flag up important events and personalities they typically have to do with heroes, villains, mavericks (deviants), disasters, successes, howlers they are devices for telling people what/who is important in the organisation
SYMBOLS

STORIES events villains (management) the steam age abuse of customers (funny) trade union winning

Corporate logo Uniforms Terminology (special rail speak) Symbols of privilege for senior management

POWER STRUCTURE Fragmented: - central management - trade unions - OFRAIL

PARADIGM The paradigm is the set of ASSUMPTIONS held relatively in common and taken for granted in an organisation. The paradigm encapsulates the other elements in the cultural web

ROUTINES AND RITUALS Passing on blame Get your head down and avoid attention Take the maximum sick leave possible

Routines and rituals:

CONTROL SYSTEMS Emphasis on timekeeping Superficial attention given to customer complaints Emphasis on safety regulations Control of schedules

ORGANISATION STRUCTURE Hierarchical Mechanistic Strong bureaucracy Departments seen as silos within which services are delivered and convention of service preserved

The organisation structure is likely to show important roles and relationships the extent of centralisation or devolution of authority The amount of formality and informality

rituals make up the way we do things around here Examples include: - training programmes Performance measurement and reward - assessment procedures systems emphasise what is important to - promotion system achieve in the organisation. For example, Informal examples include: primary schools may be more concerned - drinks in pub after work with achieving test results and a good local - gossiping in the canteen rating than educating children of lesser ability

For example, highly centralised organisations tend to develop a culture of them and us.

The Cultural Web is developed from ideas of Johnson, Scholes and Whittington
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TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

the gift bestowed to influence the recipient's conduct. It may be any money, good, right in action, property, preferment, privilege, emolument, object of value, advantage, or merely a promise or undertaking to induce or influence the action, vote, or influence of a person in an official or public capacity.)

11

Answer: A It is true that employing lobbyists to put the organisations case directly to ministers or civil servants is a legitimate method of influencing government policy in the interests of business. I Lobbying is the practice of influencing decisions made by the government (in groups or individually). It includes all attempts to influence legislators and officials. The UK House of Commons Public Administration Select Committee argued that while there are shortcomings in the regulation of the lobbying industry in the United Kingdom, "The practice of lobbying in order to influence political decisions is a legitimate and necessary part of the democratic process. Individuals and organisations reasonably want to influence decisions that may affect them, those around them, and their environment. Government in turn needs access to the knowledge and views that lobbying can bring.(Source: Public Administration Select Committee (5 January 2009). "Lobbying: Access and influence in Whitehall)

12

Answer: C Laws to prevent discrimination in the workplace provide greater employment opportunities in large companies. Distractors A, B and D do not increase employment opportunities.

13

Answer: B The following statement describes cost-push inflation. The underlying cost of factors of production (raw materials and labour) increases and this is reflected in an increase in output prices as firms seek to maintain their profit margins. Distractor A: At the time of the annual pay negotiations, a trade union anticipates a raising of inflation during the next year and demands an increase in wages for their members that will compensate them for this expected increase in the cost of living. This statement describe Expectations effect inflation. Demand for goods and services in the economy grows faster than the ability of the economy to supply these goods and services, i.e. too much money is chasing too few goods. This statement describe Demand inflation. The national currency weakens thus increasing the cost of imports in a country where imports are significant to the economy. This statement describe Imported inflation.

Distractor C:

Distractor D:

Refer to the chart associated with Answer 180 (Syllabus Questions).

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TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

14

Answer: D A regressive tax is one which takes a higher proportion of a low salary than a high salary. A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. In simpler terms, a regressive tax imposes a greater burden (relative to resources) on the poor than on the rich - there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income. A value-added tax or other sales tax on food and other essentials such as clothing, transport, and residential rents can be regressive.

15

Answer: B The ageing population trend in many European countries is caused by a decreasing birth rate and a decreasing mortality rate.

16

Answer: C Relocating call centres overseas usually involves outsourcing. A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of an internal business function to an external provider, such as a customer-call centre. (Note: A call centre is a centralised office used for the purpose of receiving and transmitting a large volume of requests by telephone. A call centre is operated by a company to administer incoming product support or information inquiries from consumers.)

17

Answer: B Competitors quality is matched or exceeded at a lower cost best describes a cost leadership strategy in a price sensitive market. Distractor A (Products are priced low but are of inferior quality), Distractor C (Products are of superior quality) and Distractor D (Prices are slightly above those of competitors ) do not directly relate to a cost strategy.

18

Answer: D Inbound logistics represents one of the Primary Activities as described in Michael Porters Value Chain. A, B and C are examples of support activities. The schematic representation of the value chain on the next screen clearly shows its constituent parts. These are: the primary activities which are shown in the lower half of the value chain, alongside which are the secondary (or support) activities of procurement, technology development, human resource management and corporate infrastructure.

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

Michael Porters generic value chain Support activities Firm infrastructure Human resource management Technology development Procurement Margin

Primary activities

Inbound logistics

Operations

Outbound logistics

Marketing and sales

Service

(i)

The primary activities The primary activities, in the lower half of the value chain, show in sequence the activities performed by the organisation in converting raw material inputs to finished products. These are grouped into five main generic categories of activities: Inbound logistics are the activities concerned with receiving, storing and handling raw material inputs. Operations are concerned with the transformation of the raw material inputs into finished goods or services. Outbound logistics are concerned with the storing, distributing and delivering the finished goods to the customers. Marketing and sales are responsible for communication with the customers. Service covers all of the activities which occur after the point of sale.

(ii) The support activities Support activities involved in competing in an industry can be divided into the four generic categories, also shown in the above diagram. As with primary activities, each category of support activities is divisible into a number of distinct value activities that are specific to a given industry. Procurement refers to the function of purchasing inputs used in the firm's value chain, not to the purchased inputs themselves. Purchased inputs include raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings. Procurement tend to be spread throughout a firm. Technology development relates to the other activities. Ever value activity embodies technology, be it know-how, or technology embodied in process equipment. Human resource management consists of activities involved in the recruiting, selecting, training, development and compensation of all types of personnel. Human

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

resource management supports both individual primary and support activities (e.g., recruitment of engineers) and the entire value chain (e.g., labour negotiations). Firm infrastructure consists of a number of activities including general management, planning, finance, accounting, legal, and quality management. Infrastructure, unlike other support activities, usually supports the entire chain and not individual activities. Firm infrastructure is sometimes viewed only as "overhead", but can be a powerful source of competitive advantage.

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Answer C In a very large company working capital management would probably be the responsibility of the: the Treasurer. Working capital is very closely connected to cash management, and effective working capital management is a source of additional liquidity for the organisation.

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Answer: True Non-financial data is required for projecting financial forecasts. For example a sales budget (forecast) would take account of the expected volume of units.

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Answer: B The Board of Directors are responsible for the production of financial statements that give a true and fair view.

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Answer: A The major objective of the International Accounting Standards Board (IASB) is to ensure consistency in corporate reporting.

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Answer: B Tax mitigation involves reducing tax liabilities by exploiting loopholes in the law. Tax avoidance is the legal utilisation of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. This includes exploiting loopholes in the law. By contrast, tax evasion is the general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym for tax avoidance. (Note: A loophole is a weakness or exception that allows a system, such as a law to be circumvented or otherwise avoided. Loopholes are searched for and used strategically in a variety of circumstances, including taxes, elections, politics, the criminal justice system, or in breaches of security. A loophole in a law often contravenes the intent of the law without technically breaking it. For example, in some places, one may avoid paying taxes to the jurisdiction by forming a second residence in another location, or a commercial property can be built in a residential zone if it is made also for residential use.)

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Paper F1: Accountant in Business

TONY SURRIDGE DIAGNOSTIC TEST 2 - ANSWERS

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Answer: B Failure to maintain proper accounting records is both a civil and a criminal offence.

Q
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Answer: D To make sure that an inventory check is effective there should be a systematic approach to counting the items. Distractor A: People independent of stores work should count all the items. (This is an incorrect statement. The auditor should such people while they do the counting.) High volume/fast throughput items should receive most attention. (This is an incorrect statement. High value items also need the auditors attention.) Inventory checking should be performed at one particular time during the year. (This is an incorrect statement. Often inventory is checked on a rotational basis throughout the year.)

Distractor B:

Distractor C:

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