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AF100: Introduction to

Accounting and Financial


Management for the NonSpecialist

Introduction

and

Assignments Semester 1,
2014

School of Accounting and Finance


Faculty of Business and Economics
The University of the South Pacific

Produced by the University of the South Pacific, Suva, Fiji, 2014.

First produced July 1999


This revision February 2014

Introduction & Assignments team for semester 1, 2014


Course
Nirmala Singh
coordinator
Instructional
Jane Kanas
designer
Educational
Kerishma Seth
technologist
Electronic
Letila Fong
publisher

This material has been prepared by the University of the South Pacific
for use by students enrolled in the course for which it was developed.
It may contain copyright material copied under the provisions of the Fiji
Copyright Act 1999 or under license from rightsholders or their agents.
Copyright in material prepared by USP is owned by USP.
This material cannot be sold or copied for further distribution without the
Universitys permission. Where provided in electronic format, it can only be
printed by or for the use of the student enrolled in the course.

AF100 (IA) 12014

Content

Calendar for semester 1, 2014......................................................................i

Your course coordinator...............................................................................

Course introduction......................................................................................

Your learning materials................................................................................

Your learning support...................................................................................

How to login to Moodle ...............................................................................

Study schedule..............................................................................................

Assessment overview...................................................................................

Grading Systems ..........................................................................................

Submission of assignments ..........................................................................1

Plagiarism.....................................................................................................1

Assignment 1................................................................................................1

Assignment 2................................................................................................1

Past test paper...............................................................................................1

Past examination paper.................................................................................2

Calendar for semester 1, 201

Beginning of semester 1
Laucala, Emalus and Alafua
campus students -Final day
for withdrawal with
remission of tuition fees for
semester 1 courses is 28
February 2014

Other USP Campuses


students: Final day for
official withdrawal with
remission of tuition fees for
semester 1 courses* 28
March 2014

Week 1

1721 February
2428 February

Week 2
Week 3

37 March

Week 4

1014 March

Week 5

1721 March

Week 6

2428 March

Week 7

31 March4

Week 8
Week 9
Week 10
Week 11
Week 12
Week 13
Week 14
Week 15
Week 16
Week 17

April 513 April


1418 April
21 25 April
28 April2
May 59 May
1216 May
1923 May
26 30 May
31 May8
June 913
June 1620
June

Mid-semester break

Final day for official


withdrawal without
remission of tuition fees for
semester 1 courses is 25
April 2014

Study break
Examinations
Examinations

* If you are considering withdrawal from your course, contact your


lecturer, local USP Campus or Centre first to see if they can help.

Your course coordinato

Dear student,
Welcome to AF100: Introduction to Accounting and Financial Management For the
Non-Specialist.
The name and the email address of the course coordinator for this unit will be
announced at the beginning of the semester.
Please note that all important notices and information will be put on the AF100
DFL Moodle and sent to your centres as well. Check AF101 Moodle regularly and
your centre for any information. If you encounter any problems with this course
you can contact your local tutors first. If you do not have a tutor, contact the
course coordinator via AF101 DFL Moodle or through email.
Other contact details of the coordinator are as follows:
AF 100 Course Coordinator School of Accounting and Finance, Faculty of
Business and Economics, University of the south Pacific, Private Mail bag,
Suva, Fiji.
Telephone: + 679 323-2517 or + 679 323-3571 (School Office)
Fax: +679 330-1487
All the best in your studies!

Course introductio

Welcome to AF100: Introduction to Accounting and Financial Management for the


Non-Specialist by Distance and Flexible Learning (DFL) mode. This course is
designed to provide basic knowledge to non-accounting students, to disseminate
accounting knowledge, and to enhance your ability to understand, interpret financial
reports prepared by accountants. It challenges you with relevant concepts in
accounting from the point of view of a beginner. It explores the fundamentals of
accounting from the users perspective.
The knowledge and skills acquired in this course provide basic tools for
undertaking financial statements analysis and some of the business activities in the
workforce. The course covers two broad fields of accounting: financial and
management accounting. As such management tools for planning, control and
decision making are taken into consideration. The nature of business finance is also
covered in this unit.

Learning Outcomes:

Apply knowledge, principles and skills embodied in the curriculum


of accounting to:
1 construct simple income statement and balance sheet
2 analyse and interpret financial performance and position of an entity

Make short-term and long term decisions by discriminating between


relevant and .irrelevant accounting information.

Critically appraise financial, social and environmental accounting


practices employed by entities.

Apply ethical reasoning to the actions and decision making of


accountants and businesses.

Develop teamwork skills through working in groups.

Your learning material

You should have already received the following materials a week before semester
starts:
1. The Introduction and Assignments book, which you are reading now
2. Study Guide
3. A course Moodle page
Contact your USP Campus or Centre immediately if you are missing any of the
materials mentioned in 1 and 2 above.
The prescribed textbook for the course is:
Birt, J., Chamers, K., Byrne, S., Brooks, A., & Oliver, J. (2012). Accounting:
th
business reporting for decision making, 4 edition, John Wiley & Sons Australia,
Ltd.

Your learning suppor

Local tutorials
To assist you with your studies, regular face-to-face sessions may be held with a
tutor. You should check with your Campus or Centre at the start of semester to see if
face-to-face tutorials will be held for your course.

Study groups
Most people find it easier to study in a group or with a friend, at least for part of the
time. Working with others helps to motivate us. It provides a shared goal and
reduces feelings of isolation or boredom. Your local Campus or Centre will be able
to put you in touch with students doing this course and may help you get organised.

Library services
Making good use of the library and its resources is vital for you to be a successful
student. Learn about library support and services and the importance of information
literacy at your Campus or Centre library.

Student Learning Support (SLS)


SLS supports you through e-mentoring which is giving you learning tips and
advice through email.
You can email us at the following addresses:
Faculty of Arts, Law and Education: falesls@usp.ac.fj Faculty of Science,
Technology and Environment: fstetutorsupport@usp.ac.fj Faculty of Business
and Economics: fbe_sls@usp.ac.fj

Your REACT session


Apart from local tutorials, USP uses a system known as REACT which allows you to
hear and see your course coordinator or tutor as well as your fellow students who are
located in the various campuses in the USP region. You may get presentations and
notes in addition to your scheduled session. These are commonly known as satellite
tutorials. You are encouraged to attend the scheduled sessions in the weeks shown in
your study schedule.
Here are some suggestions for getting the most out of these REACT sessions:

1
Note that before your REACT tutorial session begins your tutorial
group will be advised as to who all the participants are (regional and oncampus). Try to note down names of your colleagues and which Campuses or
Centres they are listening from.
2
Speak slowly and pronounce your words clearly so that your colleagues
can understand what you are saying.
3
Be courteous and try to maintain a polite tone of voice.
4
When you want to address your tutorial group, press the "speak button",
and aim to maintain a 6-inch distance between your mouth and the microphone
whilst speaking. Please note that you may be using two different types of
microphones as shown below.

1.

If you have ques stions or comments to communicate during yo our


tutorial session you can ddo so by speaking to a microphone or throughh
the chat tool in REACT.
2. Try not to "steal the show". Remember that each of you will hhave
important pointss to add to discussions.
Contact your local USP P Campus or Centre for further information onn using the
REACT facilities.

Online learning
Moodle is USPs learnin ng management system and will be used to su upport
learning in some of yourr courses.

How to login t

to Moodle

If your course has a Mooodle component, the instructions below will hhelp you
access the system.
You will need a computeer connected to the Internet. The computer m must have a
Web browser such as Intternet Explorer or Firefox. Such a computer s should be
available at your USP C Campus (if you dont already have one at hom me or
work). You will also be given a a username and password by your local USP C
Campus.
Step 1: Accessing Moo
odle
1.
Open your brow wser: Internet Explorer, Firefox, or other. Type in
the follo owing at the address bar: http://elearn.usp.ac.f fj/
2.
Press Enter.

Alternatively, yo ou can go to the USP website: http://www.usp p.ac.fj/ and


use the Quick Li inks drop down menu to the left of the page a and select
Online Learning g (Moodle).
Step 2: Username and
password

You will come to o a Login screen.


Type your studen nt number in the Username
box.

Type your studen nt email (webmail)


password in the PPassword box.

Click Login.

Step 3: Accessing you ur


course
You should now see a list of your courses. Click the Course C Code and
Title of the coursse that you are enrolled in to enter. For examp ple:

Lost or forgotten n
password
Contact your local ITS s student Helpdesk or email: moodlehelp@usp..ac.fj

Study schedul

Planning your work


To help you keep up with the course, we suggest you allocate at least 2 hours a
day to study. Plan your time using this study schedule.
Week
Chapter
Assignments
no. &
Unit
s
and tutorials
date
Week 1 17 1.
1
21
Introduction
February to Accounting
2. Business
2
Satellite Tutorial
Week 2 24
Sustainability
Tuesday 25
28
February 2014 7.00
February
8.00pm
Week 3 37 3. Business
3
March
Structures
4. Business
Week 4 10 Transactions
14 March
Week 5 17 5. Balance
21 March Sheet
6. Income
Statement
Week 6 24
28 March

Satellite Tutorial
Tuesday 11 March
2014 7.00 8.00pm

5 and 3
(pages 89
-94)
6 and 3 Assignment 1 due
(pages 89- Friday 28 March
108)
2014 Satellite
Tutorial Tuesday
25 March 2014 7.00
8.00pm

Week 7 31 7. Statement
7
Mid-Semester Test
March4 of cash Flows
April
513 April MID-SEMESTER BREAK
8. Analysis
Week 8 14 and
18 April
Interpretation

Week 9 21 9. Budgeting
25 April

10. CostWeek 10 28
Volume Profit
April2
Analysis
May

10

11. Costing
Week 11 5
and Pricing in
9 May
an Entity
12. Capital
Week 12
Investment
1216 May

11

Week 13
13. Financing
1923 May the Business
Review and
Week 14
Revision
2630 May

12

Satellite Tutorial
Tuesday 15 April
2014 7.00 8.00pm

Satellite Tutorial
Monday 28 April
2014 7.00 8.00pm
Assignment 2 due
Monday 5 May
2014
Satellite Tutorial
Monday 12 May
2014 7.00 8.00pm

13
Satellite Tutorial
Monday 26 May
2014 7.00 8.00pm

Week 15 31 STUDY BREAK


May8
June
Weeks 16 & EXAMINATIONS Check with your USP
17 920
Campus or Centre for the exact time and
June
date of your examination.
* Fiji dates and times
7

(GMT + 12hours)

Assessment overvie

This course is assessed in 2 ways:


Continuous 50%
assessment
Final
50%
examination
Total value 100%

Continuous assessment
Continuous assessment makes up 50% of the final score and includes 2
assignments. It is weighted in the following way:
Assignment 1 10%
Assignment 2 15%
Mid-semester Test 25%
Total value 50%

Assignments
During the course you will be required to submit two written assignments. This helps
you and your coordinator to see how you are progressing with the course. It will
allow you to demonstrate that you are actively studying and learning. The feedback
you get from your assignment is important, so make sure you submit your
assignments by the due date. It should help to guide your studies and set you in the
right direction if you are experiencing difficulties.

Mid-semester Test
You will be required to sit a mid-semester test in week 7 of the semester. This will
account for 25% of your total course mark and will be 2 hours in duration. It will
cover all work up to and including week 6. Please confirm the date and time with
your Campus or Student Academic Services. A sample past MST test paper is
available at the end of this book.
Final examination
The final examination will consist of a 3 hour paper at the end of your course. This
will account for 50% of your final course mark. Please confirm the date and time
with your Campus or Student Academic Services. A sample past final examination
paper is available at the end of this book.

Grading System

a) The following grading system will be used by all faculties in awarding final
grades for academic performance in a course:

Pass Grades
Grade Percentage
Description
s
(%)
A+
85+
Pass with Distinction
A

78 84

Pass with Distinction

B+

71 77

Pass with Credit

64 70

Pass with Credit

C+

57 63

Pass

50 56

Pass

Other Pass Grades


R
Restricted Pass
Aeg

Aegrotat Pass

Comp Compassionate
Pas

Pass or Competent

Satisfactory

Note: Pas and S are used in circumstances where graded passes are inappropriate
such as in postgraduate thesis and Professional Diploma in Legal Practice.
Fail Grades
Grade Percentage (%)
Description
D 40 -49
Work below the standard required for a pass
E 40 (Less than)
Very weak performance or failure to complete to the
satisfaction of the examiner such practical, field or other work as may be prescribed

NC Not completed NV Null and Void: This is awarded for


plagiarism or dishonest practice U Unsatisfactory Fail
Not Competent
Note: Fail and U correspond with Pass and S above respectively.
Provisional Results:
Incomplete IP In progress

Students shall be awarded an Aegrotat or Compassionate Pass if they satisfy the


conditions prescribed in Clauses 5.3 or 5.4 of these Regulations respectively.

c)
Students may be awarded a Restricted Pass if they satisfy the
conditions prescribed in Regulation 7.
d)
Students who have been granted an extension of time past the last day of
lectures to complete work required for the final assessment of their course shall be
awarded the provisional grade of I (Incomplete) for an undergraduate or postgraduate
course assessed by coursework, or IP (In progress) for a Supervised Research Project
or thesis for a Masters degree or a thesis for a PhD degree. At the end of the period
of extension the School or Department Assessment Meeting shall determine a final
grade.
e)
Students who have not submitted their masters or PhD thesis or Supervised
Research Project by the end of the maximum period of candidature prescribed in the
regulations shall be awarded the grade of NC (Not completed).
[Extracted from 2013 Handbook & Calendar, pp 449-450]

Submission of assignment

You should submit all your assignments by the dates given in your study schedule or
on your course Moodle page. Please upload them in the correct assignment drop box.
Hard copy
You should submit all assignments by the dates given on your study schedule.
Please submit them in the correct order and address the envelope to the Course
Coordinator. For each assignment, you should fill out a yellow assignment cover
form which you collect from Student Academic Services (SAS). If you do not have
assignment covers, contact your USP Campus.

For Suva based students, all assignments are to be posted or dropped off at the
allocated boxes in your Faculty at Laucala Campus. Foundation and
Preliminary students are to post or drop off their assignments at the College of
Foundation Studies Building.
The only assignment(s) that are to be posted or dropped off at Student
Academic Services at Laucala Campus are for the Agriculture courses.
For all other students, please confirm with your Course Coordinator about
your assignment submission.

It is very important that you keep to the study schedule and complete the
assignments so that you get regular feedback on your progress through this
course.

Correct labelling of assignments


Please be very careful to correctly label your assignments. On each assignment
cover or e-copy file that you send in or upload for marking, you should write or
type:

1.
2.
3.
4.

the full name you used to enrol in this course;


your student identification number;
the correct course code and title; and
the assignment number.

Correct labelling will help ensure that the marker receives your assignment on time,
and that you get the credit for the work that you do. If your marker receives one of
your assignments late because you did not label it correctly, you may lose marks.

Late assignments

If you expect to be late in submitting an assignment, write to your course


coordinator. You should explain why you are late and suggest a revised schedule
that will allow you to complete the remaining assignments on time.
Your course coordinator may mark a late assignment if there is a good reason for its
delay. In deciding whether to mark late assignments, your course coordinator will
give greater consideration to students in remote areas with little or no access to their
USP Campus, Centre or tutorial help.
USP reserves the right to decide whether or not to mark late assignments. It is in
your interest to send in your assignments on time. The assignment schedule gives
your course coordinator time to provide you with regular feedback on your progress,
before it is too late for you to use this information constructively in your studies.
Your course coordinator will not mark any assignment received after the final
examination.

Plagiaris

Plagiarism is the copying of another persons creative work and using it as ones
own without explicitly giving credit to the original creator. Work copied without
acknowledgement from a book, from another students work, from the internet or
from any other source is plagiarism. Plagiarism includes the following:

a)
Copying of the published or unpublished words of another writer without
acknowledging the source using acceptable reference citation methods. Thus, to;
cut and paste from internet sources or lift sentences, ideas and sections from a
textual source qualifies as plagiarism.
b)
Lifting or cutting and pasting extracts without quotation marks
or appropriate acknowledgement of sources.
c)
Paraphrasing of content and ideas without proper acknowledgement of
the source.
d)
The use of images, diagrams, photographs and material from blogs
and social networks, without acknowledgement.
e)
Copying part or all, of another students assignment. In this instance,
student assignment refers to a piece of academic work submitted for
assessment purposes for any course, in past or current years at any
educational institutional including USP or any other university.
i) Collusion
Collusion means working with someone else to deceive or mislead to gain an
unfair academic advantage. It includes; a) Submission of a paper that has been
written by an author other than the author credited for that piece of writing. This
includes the use of paid services of a student, or any other person that has been
solicited for that purpose. b) Facilitating or enabling another student to plagiarise
in any way.
ii) Cheating
Cheating involves acting in any way that directly contradicts the explicit rules
and guiding principles of that form of assessment. It applies in any form of
examination including short tests, quizzes and final examinations.
Cheating includes (inter alia): a) Doing anything to gain an unfair or illicit academic
advantage in an examination; b) Possessing, referring to or having access to any
material, or to access the internet crib notes or device containing information
directly or indirectly related to the subject matter under examination other than what
is explicitly approved for examination purposes; c) Using a cell phone to
communicate with any other student or person inside or outside the examination
venue; d) Copying from another student in a test or examination; enabling another
student to cheat in a test or examination;

Soliciting a person to sit a test or final examination in place of the student


enrolled; sitting a test or final examination in the place of another student;

f)
Manipulation of scores in tests or examination or in any other form
of assessment; and
g)
Enabling another student in any or a combination of any of the above.
[Extracted from 2013 Handbook & Calendar, pp 457-458]

Assignment

Due Date: Friday 28 March (week 6)


Value: 10%
This assignment covers units 1-5.
Please Note:

1.
This is an individual assignment. If you work in groups to discuss the
assignment, make sure you submit your own original work. Similar answers to
assignment will be seen as copying. If copying is detected in your assignment
you will be automatically be awarded a mark of zero.
2.
There are three questions to be answered in this assignment.
3.
Late assignments will incur a 10 percent deduction per day late.
4.
Assignment must be typed

Question 1 (10 marks)


Explain the following terms in not more than five lines for each. You can use
examples to illustrate your answer. Each part is worth 2 marks.

1
2
3
4
5

Management Accounting
Conceptual Framework
Assets
Corporate Social Responsibility
Single-Entry Error

Question 2 (15 marks)


Tara has just been offered a retirement package from her work as a sales
representative with Everlasting Makeup Company. Her long-term goal has been to
start up a day spa resort on the west coast of Viti Levu with her sister Janet, who is a
marketing consultant. They think the potential for the business venture is enormous,
but expect that additional capital will be required over the next five years for their
dreams to be realized.
Required:
The two sisters have decided to set up a partnership. Do you think that this is
the right decision, or do you think the company structure would be a better
option? Why?

Compare and contrast the income tax issues associated with the
partnership and company forms of business structure.

Do you think their bank would be happier to lend them finance to


expand, due to the fact that they are in partnership? Why?
(5 marks each)
Question 3 (15 marks)
From the following information for sole trader M Sharma, software designer, draw
up a balance sheet at the end of the financial year (30 June 2013) in vertical form.
You are also required to determine the amount of owners capital: accounts payable
$8000; land $100 000; cash on hand $10 000; premises $230 000; bank mortgage
$14 000; profit $4000; accounts receivable $7650; accounts payable $1000;
computer equipment $10 000.

Assignment

Due Date: Monday 5 May (week 11)


Value: 15%
This assignment covers units 7-10.
Please Note:
1.
This is an individual assignment. If you work in groups to discuss the
assignment, make sure you submit your own original work. Similar answers to
assignment will be seen as copying. If copying is detected in your assignment
you will be automatically be awarded a mark of zero.
2.
There are three questions to be answered in this assignment.
3.
Late assignments will incur a 10 percent deduction per day late.
4.
Assignment must be typed

Question 1 (20 marks)


A summary of Vanua Ltds financial information for the years ended 31 March
2011, 2010 and 2009 is detailed below.
Revenue ($m)

2011
18
071
(13
082)

2010
16
871
(12
119)

2009
14
934
(10
595)

Operating expenses
($m)
Earnings before interest
4 770 4 8354 259
and tax (EBIT) ($m)
Profit after tax ($m)
3 825 3 9073 449
24 23 20
Equity($m)
350 516 500
39 37 33
Assets($m)
282
952 255
Required:
14 14 12
Perform the following ratio analysis and present your answer in
a table as shown. Show all workings on the table.

Comment on the profitability of Vanua Ltd in about half a page.


(Hint: Comment on each of the ratios above to conclude about
the profitability).

2011
Ratio
Return on
Equity
Return on
Assets
Profit
Margin
Operating
expenses

2010

2009

(12 marks)

(8 marks)

Question 2 (15 marks)


Sunsui Enterprises operates a single-product entity. Data relating to the
product for 2013 were as follows.
Annual volume
30 000 units
Selling price per unit $40 Variable manufacturing cost per unit $18
Annual fixed manufacturing costs $60 000 Variable marketing and
distribution $12 costs per unit Annual fixed non-manufacturing costs
$100 000

Required:
1.
Calculate the break-even units for 2013.
2.
Calculate the margin of safety in both units and dollars.
3.
Calculate the profit achieved in 2013.
4.
Changes in marketing strategy are planned for 2014. This would
increase variable marketing and distribution costs by $4 per unit, and reduce
fixed non-manufacturing costs by $10 000 per year. Calculate the units that
would need to be sold in 2014 to achieve the same profit as in 2013.
5.
Would you recommend the change? Explain.

Question 3 (15 marks)


Dorothys makes special candles. The entity has recently implemented a new
marketing strategy. Unit sales for each quarter of 2013 were as follows:
Quarter ending
31 March
30 June
30 September
31 December

$26 000
22 000
18 000
24 000

Due to the change in sales strategy, the marketing department at


Dorothys expect sales to grow by 10% in the first two quarters of
2014, and by 20% in the second two quarters in 2014. The unit sale
price will be the same as in 2013, at $20 per unit.
Required:
Prepare a sales budget for 2014.

Past test pape

You are given the following past test paper to help you to prepare for your test.
However, remember that the test paper that you will take this semester may not
follow exactly the same structure, format or content as this one.
Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and
Vanuatu.

SCHOOL OF ACCOUNTING
AND FINANCE
AF 100: INTRODUCTION TO
ACCOUNTING AND FINANCIAL
MANAGEMENT FOR THE NONSPECIALIST
MID-SEMESTER TEST
SEMESTER 2, 2011

PRINT MODE
Time Allowed 2 hours plus 10 minutes reading time
100 marks (20% of final grade)
INSTRUCTIONS
1.
e University of
Pacific

4.
5.
6.
7.
8.

This test has three sections:


Th
1.
Section A: 15 multiple choice questions (30
the South
marks)
2.
Section B: Discussion questions (40 marks)
Answer
3.
Section
all questions.
C: Problems
There(30
aremarks)
choices in Q16.
Write your answers in the answer booklet provided.
For questions in section C, begin answering each question
on a fresh page.
You can use calculators.
This test is worth 20% of your overall mark.

SECTION A 15 Multiple Choice Questions (30 marks)

Circle the letter of the correct choice on the multiple choice answer sheet provided.
1.

Qualitative characteristic of reliability refers to:


A. information that is of value to users in decision making.
B. information that can be classified.
C. information that is without bias and error.
D. information that is understandable

2.
is:

The information about a business that would be of most interest to a bank


A. profit.
B. ability to repay loan.
C. annual dividends.
D. taxable income.

3.

The external user of accounting information is:


A. Purchasing manager.
B. Director of Research and Development.
C. Accounts clerk.
D. Employee.

4.
Select the option that does not represent criteria for differentiating
between financial and management reporting.
A. The level of detail in the reports
B. Regulations binding the reporting
C. Timeliness of the reports
D. Whether the reports are useful for decision-making
5.

Limitations of accounting information include:


A. its subjective nature
B. the use of historical data to predict future events
C. the time delay from when events take place and their reporting
D. All of the above

6.

Which of these is an asset?


A. Income tax payable
B. Revaluation reserve
C. Rent received in advance
D. Prepaid expense

7.

Which of these is

not

part of shareholders' equity in the balance sheet?

A. Share capital
B. Retained earnings
C. Revaluation reserve
D. Equipment
8. Which of these is not a current liability?
A. Bank loan repayable in five years
B. Accounts payable
C. Tax payable
D. Accrued expenses
9. The distinction between current and non-current liabilities is based on:
A. Whether the liability is secured or unsecured
B. The size of the liability
C. Whom the liability is owned to
D. When the liability is due for payment
10. If current assets are $100 000, non-current assets are $400 000 and equity is
$200 000, liabilities must be:
A. $700 000
B. $300 000
C. $200 000
D. $100 000
11. The balance sheet
A. presents the income and expenses of an entity for a specific period of time.
B. reports the changes in assets, liabilities and equity over a period of time.
C. reports the assets, liabilities and equity at a specific point in time.
D. summarises the change in equity over a specific period of time.
12. Which of these is not a business transaction?
A. Business owner uses personal funds to buy a laptop for home use.
B. Money is collected from a customer owing from goods sold last week
C. A sale is made on credit
D. Additional capital is contributed by the owner
13. For a retailing entity, cost of goods sold is calculated as
A. sales less purchases.
B. sales less all expenses.
C. stock at the beginning plus purchases less stock at the ending.
D. stock at the ending plus purchases less stock at the beginning.

14.

Equity finance for a sole trader comes from:

A. the issue of shares to public.


B. loans from financial institutions.
C. the owner and profit retained in the business.
D. government loans.
15. The act of an employee exposing an entitys unethical practices is termed as:
A. whistleblowing.
B. insider trading.
C. bribery.
D. integrity.

SECTION B: DISCUSSION QUESTIONS (40 MARKS)


Question 16 (20 marks)
Explain any four terms listed below to a friend who has no accounting background.
Use numerical examples wherever possible.
Limited liability
Entity concept
Concept of duality
Prepaid expense
Income
(Any four @ 5marks each)

Question 17 (20 marks)


Maria has just been offered a retirement package from her work as a flight attendant
with Air Pacific. Her long-term goal has been to run a day spa business on the coral
coast of Fiji with her sister Karla, who is a marketing consultant. A suitable building
has become available at the Coral Coast. With their husbands (Mana, who is a builder,
and Harman, who is a plumber), they decided to sell their homes in Suva and
purchase this rundown building. They think the potential for the business venture is
enormous, but expect that additional capital will be required over the next five years
for their dreams to be realized.
Required:
a. The families have decided to set up a partnership. Do you think this is the right
decision, or do you think the company structure would be a better option? Give five
reasons to support your answer.
(15 marks)
b. Advise the families by comparing and contrasting the income tax issues
associated with the partnership and company forms of business structure. (5
marks)

SECTION C PROBLEMS (30 MARKS) Question 18:


Preparation of Financial Reports. (30 marks)

Given the following balances in various accounts, prepare an income statement for
Prasad Pty Ltd for the year ended 30 June 2010.
Accounts
$62 Equity
$100
Receivable
000 30/06/2009
000
Rent Expense
48 Insurance
30
000 expense
000
Cash at bank
25 Advertising
60
000 expense
000
Wages expense
120 Equipment
240
000
000
Accounts payable 48 Cost of sales
280
000
000
Utilities expense 3 600
Loan (long -term) 176 Interest expense 9 000
000
Depreciation
24 Retained
42
expense
000 earnings
000
30/06/2009
Sales
642
Paid
20 income statement of
1. Revenue
Prepare
a Dividend
simple (unclassified)
600for the year ended
00030 June 2010. (15 marks)
Prasad Pty Ltd

2.
Prepare a classified balance sheet on 30 June 2010 in T
form.

(15 marks)
The End

Past examination pape

You are given the following past examination paper to help you to prepare for your
final examination. However, remember that the examination paper that you will
take this semester may not follow exactly the same structure, format or
content as this one.
Serving the Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu, and
Vanuatu.

SCHOOL OF ACCOUNTING
AND FINANCE
AF 100 : INTRODUCTION TO
ACCOUNTING AND FINANCIAL
MANAGEMENT FOR THE NONSPECIALIST FINAL EXAMINATION
SEMESTER 2, 2011
PRINT MODE

Time Allowed 3 hours plus 10 minutes reading


100 marks (50% of final grade)
INSTRUCTIONS
1.

This exam has three sections:


1
Section A: 30 marks
2
Section B: 40 marks
The
3
Section C: 30 marks University of the South Pacific
2.
Answer all questions in sections A, B and C. There are
no choices.
3.
Write your answers in the answer booklet
4.
For questions in section C, begin answering each question
provided.
on a fresh page.
5.
You can use
6.
This exam paper has a cover page + 6 pages of
calculators.
questions.
7. This exam is worth 50% of your overall mark. The minimum
exam mark is 20/50.

Section A 15 multiple choice questions (30 marks)

Circle the letter of the correct choice on the multiple choice answer sheet
provided.
1.

A ratio is of limited usefulness unless it is compared with what?

A.
B.
C.
D.

Benchmarks
Industry averages
Arbitrary (rule of thumb) standards
All of the above

2.

Relevant costs and revenues are those costs that usually

A.
B.
C.
D.

are considered as opportunity cost


are considered as overhead costs only
differ among alternative uses
appear in the next accounting period

3.

Before a make or buy decision is made it is important to identify

A.
B.
C.
D.

avoidable costs
unavoidable costs
cost benefits of the decision
all of the above

4.

The payback period relates to the period in which:

A.
B.
C.
D.

The loan is paid fully


The interest is fully paid
The initial amount invested in a project is fully recovered
None of the above

5.

The ARR is calculated by dividing which of these?

A. Gross profit by ordinary share returns


B. Net profit by preference share returns
C. Average net profit by average investment
D. Net profit by average investment
6.

What is the disadvantage of the ARR method?

A.
It is difficult to understand.
B.
It ignores the importance of cash as the ultimate resource, without
which businesses cannot survive.
C.
It is relatively unknown.
D.
None of the above.

Some costs, by nature, are both fixed and variable (e.g. a mobile phone on fixed
plan plus call costs). How are these costs referred to?

A.
B.
C.
D.

Fixed
Variable
Mixed
None of the above

8.

The decision rule with Internal Rate of Return (IRR) is to accept projects

A.
B.
C.
D.

for which the IRR exceeds the entitys Required Rate of Return (RRR).
that have a positive time value for money.
that ignore inflation.
for which the Pay back Period is greater than the IRR.

9.
If senior managers set targets and budgets for their unit managers, this
is referred to as what?
A.
B.
C.
D.

Participative style of budgeting


Authoritative style of budgeting
Combined participative and authoritative style of budgeting
A variance style of budgeting

10. How can net working capital be defined?


A.
B.
C.
D.

Funds invested in the entity


Current assets less current liabilities
Debts to be repaid within the next 12 months
Current assets less inventory

11. Profitability ratios inform users


A.
B.
C.
D.

about the returns and risks associated with investment decisions.


on how management are managing their assets
about an entitys ability to meet its short-term obligations
about an entitys ability to meet its long-term financing decisions.

12. An interest coverage ratio of less than one suggests


A.
that an entitys net finance expense exceeds its sales revenue.
B.
That an entitys net finance expense is less than its EBIT
C.
that an entity will have no trouble meeting its interest expense for
the period.
D.
none of the above.
13. What does an entitys credit policy determine?
A.
B.
C.
D.

The value of its purchases


The value of non-current assets
The value of its credit sales
The cost of finance

14.

By comparing the planned level of activity with the break-even point,


managers are in a better position to

A. evaluate the risk involved in the activity


B. change the fixed cost structure of the entity
C. make a profit for this particular activity
D. evaluate how employees have preformed
15. What does trend analysis usually involve?
A. Comparing trends in the market that will affect an entity
B. Predicting future directions of various financial items
C. Analyzing trends in price movements within the current year
D. Comparing expense items to total revenue within an accounting period

Section B Discussion questions (40 marks)


Question 16 (12 marks)
Distinguish clearly between the following pairs of terms by using examples.
a) Fixed costs and variable costs
b) Return on assets and Return on equity
c) Strategic planning and Budgeting
(4 marks)
Question 17 (10 marks)
Budgeting is seen as a crucial activity in all successful organizations.
Describe five ways in which budgets can assist managers in decision making.
Question 18 (6 marks)
A manufacturer found out that it was cheaper to make a part instead of buying it.
Discuss three qualitative factors which the manufacturer must consider before
deciding to make the part.
Question 19 (12 marks)
A company can raise long term finance through issue of shares or issue of
debentures or retention of profit. For each source of finance, give one advantage
and one disadvantage.

Section C Calculation and Interpretation (30 marks)


Question 20 (10 marks)

The following information relates to a new product produced by Sunshine


Limited:
Selling
$16
price per
unit
Variable
$10
cost per unit
You
required
Fixedare
costs
$12 000 to calculate:
Units sold 4 000
a) the break-even point in units and dollars (5 marks) b) the
operating profit if the selling price increases by $2 per unit and
the fixed cost increases by $5 000. (5 marks)

(Note: Formula for calculating break-even point is Total Fixed Costs/


Contribution margin per unit)
Question 21 (10 marks)
The following ratios have been calculated for Prasad Ltd, an entity specializing in
selling groceries.

2007
2008
Current ratio4:1
3:1
Quick ratio 1.5:1
1:1
Inventory
30 days
40 days
turnover
period
Debtors
60 days
75 days
Turnover
period
Debt ratio 60%
80%
Interest
Comment
on the entitys liquidity, asset efficiency and capital
5 times
3 times
coverage
structure.
(3 marks for each plus I mark for correct
category)
Question 22 (10 marks)
Gordon Ltd is considering a possible investment in one of two projects. Both
projects are to do with the purchasing of new machinery. The firms cost of
capital is 14%. Details relating to the projects are given below.

Internal Rate of
17% 13%
Return (IRR)
Net Present
$20,0 $130,0
Value (NPV)
00
00
Payback Period 4
Required:
3 years
(PP)
years
a) Based on the quantitative data provided, which project should Gordon Ltd
invest
in if it uses:
i) Payback Period method? Why? ii) Internal
Rate of Return method? Why? iii) Net
Present Value method? Why?
(6 marks)
b) Which project do you think Gordon Ltd should invest in if there is no resource
constraint? Why?
(2 marks)
c) State two qualitative factors which Gordon Ltd should consider before
investing in a project.
(2 marks)

The end