Accountancy

Correct answer: C

I is correct: Interest credited by the bank but unrecorded in the cash book → Cash book needs an addition. The business must record the bank's credit. II is incorrect: Bank charges appearing only on the bank statement → Cash book needs a deduction. The bank has reduced the balance before the business records the expense.

Correct answer: B

Agreement does not prove that every entry is correct.

Correct answer: C

I is incorrect: Cheque issued but not yet presented → Cash-book bank balance is lower than the bank statement, other things equal. The business has recorded payment before the bank debits it. II is incorrect: Trial balance agreeing → Total debit balances equal total credit balances. Agreement does not prove that every entry is correct.

Correct answer: C

I is incorrect: Break-even point → Output or sales where total revenue equals total cost. Profit is zero under the model. II is correct: Cash budget → Forecast of cash receipts, payments and balances. It supports liquidity planning.

Correct answer: D

Examples include factory rent and indirect labour.

Correct answer: B

I is correct: Direct material → Material traceable economically to a cost object. Timber in a furniture item is a typical example. II is correct: Opportunity cost → Benefit forgone by selecting one alternative. It may be relevant even without an accounting entry.

Correct answer: A

I is incorrect: Conversion cost → Direct labour plus production overhead. It represents processing inputs into finished output. II is incorrect: Sunk cost → Past cost unaffected by the current decision. It is normally irrelevant to choosing between future alternatives.

Correct answer: D

It indicates the cushion before a loss occurs.

Correct answer: A

I is incorrect: Standard cost → Predetermined benchmark cost. Actual results can be compared with the standard. II is incorrect: Break-even point → Output or sales where total revenue equals total cost. Profit is zero under the model.

Correct answer: C

Interpretation should consider both causes and context.

Correct answer: A

I is incorrect: Prime cost → Direct material plus direct labour plus direct expenses. It aggregates directly traceable production costs. II is correct: Opportunity cost → Benefit forgone by selecting one alternative. It may be relevant even without an accounting entry.

Correct answer: C

It supports liquidity planning.

Correct answer: B

I is incorrect: Contribution → Sales minus variable costs. Contribution covers fixed costs and then profit. 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: A

I is correct: Prime cost → Direct material plus direct labour plus direct expenses. It aggregates directly traceable production costs. II is incorrect: Sunk cost → Past cost unaffected by the current decision. It is normally irrelevant to choosing between future alternatives.

Correct answer: C

Profit is zero under the model.

Correct answer: B

I is correct: Factory overhead → Indirect production costs. Examples include factory rent and indirect labour. II is incorrect: Relevant cost → Future cost that differs between alternatives. Decision relevance depends on avoidability and difference.

Correct answer: A

Contribution covers fixed costs and then profit.

Correct answer: C

I is incorrect: Standard cost → Predetermined benchmark cost. Actual results can be compared with the standard. II is incorrect: Flexible budget → Budget adjusted for the actual or selected activity level. It separates activity effects from performance differences.

Correct answer: B

It excludes general factory supervision when that cannot be directly traced.

Correct answer: D

I is correct: Break-even point → Output or sales where total revenue equals total cost. Profit is zero under the model. II is correct: Variance analysis → Examination of differences between actual and benchmark results. Interpretation should consider both causes and context.

Correct answer: A

I is incorrect: Direct material → Material traceable economically to a cost object. Timber in a furniture item is a typical example. II is correct: Relevant cost → Future cost that differs between alternatives. Decision relevance depends on avoidability and difference.

Correct answer: B

It separates activity effects from performance differences.

Correct answer: C

I is incorrect: Contribution → Sales minus variable costs. Contribution covers fixed costs and then profit. II is correct: Standard cost → Predetermined benchmark cost. Actual results can be compared with the standard.

Correct answer: A

Timber in a furniture item is a typical example.

Correct answer: D

I is correct: Relevant cost → Future cost that differs between alternatives. Decision relevance depends on avoidability and difference. II is incorrect: Cash budget → Forecast of cash receipts, payments and balances. It supports liquidity planning.