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Test your finance knowledge

Which of the following statements concerning management accounting is true?

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A

It is used by parties external to the organisation.

B

It is required by law to be produced.

C

It is used to aid planning

D

It only includes non-financial information

Which cost changes directly with production volume?

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Sunk cost

Fixed cost

Variable cost

Opportunity cost

Profits are maximized at the breakeven point.

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True

False

Which of the following statements about fixed budgets is correct? A fixed budget is:

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A budget which ignores inflation

A budget for fixed assets

A budget which is most generally used for planning purposes

A budget for fixed costs

Your company is due to have a short-term cash surplus in the near future. Which of the following would be the best use of the surplus?

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Delay payment to suppliers.

Invest in a short-term deposit account.

Buying back the company's shares.

Reducing inventory levels.

Which of the following represents the accounting equation:

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Assets + Liabilities = Capital

Assets = Capital - Liabilities

Assets - Liabilities = Capital

Liabilities = Capital + Assets

Which of the following will be classified as capital expenditure?

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Purchase of a motor vehicle to be used by the sales director

Rental of a computer

Purchase of goods for resale

Repairs to a broken-down machine

Sales income of $800 was incorrectly treated as expense in the profit or loss statement. What is the impact of this error on profits?

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Profits were understated by $800

Profits were overstated by $800

Profits were understated by $1600

Profits were overstated by $1600