ICAEW critical structure and regulation in accounting Exam Practice guide Questions and Answers 2023/2024

ICAEW critical structure and regulation in accounting Exam Practice guide Questions and Answers 2023/2024 Users of accounting - correct answer any organization/business/individual who needs to keep track of their income, expenses, assets and liabilities. Types of business entity - correct answer • sole trader • partnership • limited liability companies Stakeholders for financial information - correct answer • managers/directors • owners of the company • trade contracts • finance providers •hmrc Year-end capital equation - correct answer bal. At start of year + net profit + capital inj. - drawings Total staff costs equation - correct answer gross salaries + employer's nics Components of gross salary - correct answer • net salary • income tax (paye) • national insurance Conceptual framework - correct answer sets out the concepts that underline the preparation & presentation of financial statements. Objective of financial statements - correct answer to provide information about the reporting entity, that is useful to a wide variety of users in making economic decisions about an entity. Qualitative characteristics of conceptual framework - correct answer • relevance • faithful representation Accounting concepts & conventions - correct answer • materiality • offsetting • money measurement • realization • historical cost convention Regulation in accounting - correct answer it ensures that accounts are sufficiently reliable, useful and prepared without delay. They are relied by many users e.g. Stakeholders Double entry for inventory - correct answer dr inventory Cr closing inventory/cost of sales Double entry for drawings of inventory - correct answer dr drawings Cr purchases Ways cost structure can be stated. - correct answer • gross profit margin on sales • mark-up on cost Classification of subsequent expenditure on non-current assets - correct answer recorded as part of the cost (or capitalisation) if it enhances the benefits of the asset i.e. Increasing revenue capability. E.g an extension to a shop building to provide extra selling space. Purchasing new computers for a new workspace. Depreciation - correct answer the systematic allocation of the depreciable amount of an asset over its useful life. Ways depreciation of an asset could happen - correct answer • use of asset • physical wear & tear • passing of time • obsolesce through technology & market changes • depletion