Accountancy

Correct answer: B

It is normally irrelevant to choosing between future alternatives.

Correct answer: D

I is correct: Direct material → Material traceable economically to a cost object. Timber in a furniture item is a typical example. II is correct: Flexible budget → Budget adjusted for the actual or selected activity level. It separates activity effects from performance differences.

Correct answer: C

It aggregates directly traceable production costs.

Correct answer: B

I is correct: Margin of safety → Actual or budgeted sales above break-even sales. It indicates the cushion before a loss occurs. II is correct: Standard cost → Predetermined benchmark cost. Actual results can be compared with the standard.

Correct answer: D

It represents processing inputs into finished output.

Correct answer: B

I is correct: Prime cost → Direct material plus direct labour plus direct expenses. It aggregates directly traceable production costs. II is incorrect: Factory overhead → Indirect production costs. Examples include factory rent and indirect labour.

Correct answer: D

Actual results can be compared with the standard.

Correct answer: C

I is correct: Prime cost → Direct material plus direct labour plus direct expenses. It aggregates directly traceable production costs. II is incorrect: Flexible budget → Budget adjusted for the actual or selected activity level. It separates activity effects from performance differences.

Correct answer: B

Decision relevance depends on avoidability and difference.

Correct answer: A

I is incorrect: Conversion cost → Direct labour plus production overhead. It represents processing inputs into finished output. II is incorrect: Direct labour → Labour traceable economically to a cost object. It excludes general factory supervision when that cannot be directly traced.

Correct answer: B

It may be relevant even without an accounting entry.

Correct answer: B

I is correct: Prime cost → Direct material plus direct labour plus direct expenses. It aggregates directly traceable production costs. II is correct: Direct labour → Labour traceable economically to a cost object. It excludes general factory supervision when that cannot be directly traced.

Correct answer: A

I is incorrect: Allowance for doubtful debts → Contra-receivable estimate. It reduces receivables to an estimated recoverable amount. II is incorrect: Purchased patent used by the business → Intangible asset. It is an identifiable non-physical right.

Correct answer: D

Equity equals assets minus liabilities.

Correct answer: C

I is incorrect: Retained earnings → Accumulated profits retained in the business. They are not the same as a separate cash fund. II is incorrect: Amount owed to suppliers for purchases → Trade payable. It is a liability to suppliers.

Correct answer: A

It is part of normal trading operations.

Correct answer: D

I is correct: Gross profit → Sales revenue minus cost of goods sold. Operating and financing expenses are deducted later. II is incorrect: Factory building used over many years → Non-current tangible asset. It supports production rather than being held for ordinary sale.

Correct answer: B

The business has a short-term future service benefit.

Correct answer: D

I is correct: Retained earnings → Accumulated profits retained in the business. They are not the same as a separate cash fund. II is correct: Accumulated depreciation → Contra-asset. It reduces the carrying amount of the related depreciable asset.

Correct answer: A

The repayment falls outside the short-term classification assumed here.

Correct answer: D

I is correct: Operating profit → Profit from operations before financing and tax effects under the stated presentation. It focuses on operating performance. II is correct: Statement of cash flows → Report of cash movements by activity. It distinguishes cash flows from accrual profit.

Correct answer: A

It is a liability to suppliers.

Correct answer: C

I is correct: Outstanding electricity expense → Accrued liability. The expense has been incurred but remains unpaid. II is incorrect: Trade receivable expected to be collected within the operating cycle → Current asset. It is expected to convert into cash in the ordinary cycle.

Correct answer: B

I is correct: Owner's residual interest after liabilities → Equity. Equity equals assets minus liabilities. II is correct: Accumulated depreciation → Contra-asset. It reduces the carrying amount of the related depreciable asset.

Correct answer: D

It is an identifiable non-physical right.