BT9.2

_________ shows the total planned revenues and costs for our business for the coming period.

Answer explanation

A Budget shows the total planned revenues and costs for a business for a specific period, making it the correct choice for this question.

Which of the following tasks would the treasury department be responsible for?

• Recording financial transactions

• Managing foreign currency exposure

• Reporting to shareholders

• Putting together standard cost cards

Answer explanation

The treasury department is responsible for managing foreign currency exposure, which involves handling risks associated with currency fluctuations. The other tasks listed are typically handled by accounting or finance departments.

Nurzhan is considering creating a financial accounting department within her business, but is unsure of what such a department would actually do. Which of the following would usually be prepared by a financial accounting department?

• Tax returns

• Variance reports

• Inventory lists

• Statement of cash flows

Answer explanation

The financial accounting department typically prepares the Statement of Cash Flows, which summarizes cash inflows and outflows. Tax returns and variance reports are usually handled by tax or management accounting, respectively.

When submitting annual financial statements to be available for inspection by third parties, a company should send them to:

• Stock exchange

• Tax authorities

• Shareholders

• Companies house

Answer explanation

A company must submit its annual financial statements to Companies House, as this is the official register for companies in the UK, ensuring transparency and availability for inspection by third parties.

Tax mitigation involves which of the following

• Taking all legal steps to reduce one’s tax liability

• Agreeing to pay a financial penalty to avoid prosecution

• Moving businesses and funds offshore to reduce liability to UK tax

• Reducing tax liabilities without frustrating the law makers’ intentions

Answer explanation

Tax mitigation focuses on reducing tax liabilities in a manner that aligns with lawmakers' intentions, ensuring compliance with the law while optimizing tax obligations.

Consider the following three statements:

(i) The FD is required by the Companies Acts to prepare the financial statements.

(ii) The management accounting section is primarily involved in preparing the financial statements.

(iii) If a firm of accountants may be hired to help with accounts preparation at the end of the year, then they are responsible for them being true and fair.

Which of these statements is/are correct?

• (i) only

• (i) and (ii) only

• (iii) only

• None

Answer explanation

None of the statements are correct. The financial statements are prepared by the finance team, not management accounting. Accountants assist but do not take full responsibility for the truthfulness of the statements.

Reducing the incidence of fraud is primarily an issue of:

• security arrangements

• system procedures

• organisational control

• recruitment procedures

Answer explanation

Reducing fraud primarily involves organisational control, as it encompasses policies, oversight, and culture that deter fraudulent behavior, unlike security arrangements or procedures which are more reactive.

Which of the following statements regarding integrated reports is correct?

• They involve the merging of the other financial statements to produce an overall view of company performance

• They are designed to show the organisation’s profitability more clearly

• They include information on anything that is felt to be of interest to the users of the financial statements

• They include only relevant financial information for the users of the financial statements

Answer explanation

Integrated reports provide a holistic view by including diverse information relevant to users, not just financial data. This makes the correct choice about including anything of interest to users.

Which of the following statements regarding management accounting reports is correct?

• Budgets show the revenues and expenditure for the last accounting period

• Cost schedules are often also referred to as standard cost cards

• Variance reports compare the original budgets to revised budgets

• Management accountants will usually be responsible for creation of the statement of financial position

Answer explanation

The correct statement is that cost schedules are often referred to as standard cost cards, which detail the expected costs for products or services. The other statements are inaccurate regarding management accounting reports.

JLC Co is planning to raise finance to fund the launch of a new product. It is planning to do this via an issue of new shares to the public. Which of the following is an issue that JLC may face if it proceeds with its plans to raise equity finance?

• It will be forced to pay higher dividends in the future — even if the new product launch is a failure

• The share issue may dilute the control that the existing shareholders have over the company

• JLC will require good quality assets to offer as security for the new issue

• The issue of shares is likely to reduce JLC’s corporation tax liability

Answer explanation

The share issue may dilute the control that the existing shareholders have over the company, as issuing new shares increases the total number of shares outstanding, potentially reducing the percentage ownership of existing shareholders.