Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

Question

The Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, is concerned about the lack of a “standardised risk management system” and “good corporate governance” at Bazar. Following Continuous Professional Development (CPD) training organised recently by the Institute of Chartered Accountants, Ghana (ICAG), on this subject and attended by you as a member of the Finance Team, duly paid for from Bazar’s training budget:

Required:
You have been asked by management to brief your finance team members on the following:

i) The International Standardisation for Organisation (ISO 31000) framework for risk management using the three (3) main elements. (5 marks)
ii) TWO (2) out of the Six OECD principles of Corporate Governance. (5 marks)

Answer

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Tags: Corporate Governance, ISO 31000, OECD principles, Risk Management
Level: Level 3

Topic: Controlling Risk
Series: AUG 2022

SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

Question

Remuneration packages should attract individuals to a company and persuade them to work for the company. Ghana’s Code of Best Practices makes three statements about remuneration policy. The Code adds that the remuneration level for individual directors should reflect their experiences and the level of responsibilities they undertake.

Required:
i) Explain the three statements about remuneration as stated in the Ghana’s Code of Best Practices policy to support Bazar management engagement with the General Welfare Committee (GWC). (6 marks)

ii) Explain to the management of Bazar why executive remuneration is a governance issue. (4 marks)

Answer

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Tags: Director Compensation, Executive Remuneration, Governance, Remuneration Policy
Level: Level 3

Topic: Ethics and social responsibility
Series: AUG 2022

SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

Question

The management style of Bazar is in transition from a somehow authoritarian style described by some managers as almost autocratic and militaristic to a more ‘open’ style that encourages managers and supervisors to seek ideas from staff and to operate in an informal manner.

Required:
Using Lewin’s Model for Managing Change, (unfreeze, change, re-freeze) suggest an approach to introducing planned transformational change in the management style of Bazar.

Answer

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Tags: Change Management, Lewin's Model, Re-freezing, Transformation, Unfreezing
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

Question

Using the additional information presented by AB Consult & Associate to the Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, on 4 August, prepare the following:

i) Little Bee new forecasted Statement of financial performance after the changes that will be discussed at the board meeting on the 5 August 2022. (4 marks)
ii) Calculate the operating gearing, measured as the ratio of the percentage increase in profit before interest and tax divided by the percentage increase in sales. (2 marks)
iii) Calculate the financial gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in profit before interest and tax. (2 marks)
iv) Calculate the Combined gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in sales. (2 marks)
v) Explain the significance of operating gearing and financial gearing to the management of Bazar. (10 marks)

Answer

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Tags: Business Valuation, Combined Gearing, Financial Forecast, Financial Gearing, Operating Gearing
Level: Level 3

Topic: Financial management
Series: AUG 2022

SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

Question

Within an entity, there is a primary value chain and there are support activities (also called secondary value chain). Porter identified five primary value chain activities which can be applied to a retailing company such as Bazar.

Required:
Using the concept of the value chain, explain using a diagram the FIVE (5) primary value chain as explained by Porter to the management of Bazar highlighting their relevance. (10 marks)

Answer

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Tags: Business operations, Porter, Retail Industry, Strategic Success, Value Chain
Level: Level 3

Topic: Competitive Advantage
Series: AUG 2022

SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

Question

“Whistleblowing” means reporting suspicions of illegal or improper behaviour to a person in authority.

Required:
In relation to the comments above, explain to the Director of Human Resources and Organisational Culture, Mrs. Raju Asha, the consequences of comments recorded by an employee. Additionally, advise the employee on what he/she should consider before deciding on “blowing the whistle” and the potential difficulties that the staff might encounter.

Answer

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Tags: Corporate Governance, Ethics, Reporting, Unethical Behavior, Whistleblowing
Level: Level 3

Topic: Conflicts of Interest and Ethical Conflict Resolution
Series: AUG 2022

SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

Question

In discussing the report presented by AB Consult & Associate, the Director of Finance and Operations made a strong point for acquisition and mergers as a growth strategy instead of internal development. She gave her full support to the decision to acquire the 20 stores.

Required:
Write a report detailing the advantages of an acquisition and mergers method of growth instead of an internal development. Conclude your report by explaining why the financial position and financial performance of Bazar will support or not support the decision to acquire the 20 stores.

Answer

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Tags: Acquisitions, Financial strategy, Growth Strategy, Internal Development, Mergers
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

Question

Mintzberg identified six different organizational configurations. Explain to Bazar management FOUR (4) of these organizational configurations suitable to support the change management process highlighting the differences.

Answer

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Tags: Change Management, Mintzberg, Organizational Configurations
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

Question

The organisational structure of Bazar is ‘family centric management’ while not interested
in changing the structure any time soon. It is important to recognise that the most suitable
organisation structure depends partly on circumstances and partly on management
preference. An organisation structure can therefore be changed.
Required:
Using the Mintzberg’s five building blocks for organizational configurations, explain and illustrate with a diagram to the management of Bazar, why management needs to review its current organization structure in order to coordinate its business activities and work processes effectively.

Answer

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Tags: Business Processes, Mintzberg, Organizational Coordination, Organizational Structure, Strategic Apex
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: AUG 2022

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

Question

ISA 706 (Revised): Emphasis of Matter Paragraphs and Other Matter(s) paragraphs in the Independent Auditor’s Report requires that an auditor’s report may include an “emphasis of matter” paragraph and/or an “other matter” paragraph.

Required:
Distinguish between Emphasis of Matter and Other Matter paragraphs, showing clearly requirements of Audit Report and communication with those charged with governance.

Answer

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Tags: Audit report, Communication with Governance, Emphasis of Matter, ISA 706, Other Matter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

FM – AUG 2022 – L2 – Q2 – Mergers and acquisitions

Evaluates the reasons for failure in mergers and acquisitions, and the financial calculations related to an acquisition.

Question

a) Mergers and acquisitions are business strategies used to achieve various synergies. However, it is observed that there are instances where the desired results are not achieved after the mergers and acquisitions have taken place.

Required:
Explain THREE (3) reasons why mergers and acquisitions fail to achieve the desired results. (6 marks)

b) Mako Ghana Ltd is a company in Ghana operating in the Manufacturing industry and currently valued at GH¢200 million. Jini Ltd is also operating in the same industry but on a smaller scale and is currently valued at GH¢80 million. Due to growing challenging operating environment currently, the shareholders of both companies agreed to a 100% equity acquisition of Jini Ltd by Mako Ghana Ltd.

A detailed research and analysis by the Finance team of Mako Ghana Ltd shows the following:

There will be incremental operation cost of GH¢40 million per annum in perpetuity due to the increased number of branches.
The combined company’s market share will improve by 15% per annum on the average leading to incremental revenue of GH¢160 million per annum in perpetuity.

Based on the analysis above, both parties agreed to seal the deal under the following payment terms:

Option One:
Mako Ghana Ltd to pay GH¢170 million in cash for the 100% equity of Jini Ltd.

Option Two:
Mako Ghana Ltd to offer 25% of the combined company’s equity to shareholders of Jini Ltd as the payment for the 100% equity.

The cost of capital of Mako Ghana Ltd is 15% per annum.

Required:
i) Calculate the gains from the acquisition for Mako Ghana Ltd. (4 marks)
ii) Calculate the cost of the acquisition to Mako if cash is paid under Option one. (4 marks)
iii) Calculate the cost of the acquisition to Mako Ghana Ltd if the 25% of the combined equity is used for the payment under option two. (6 marks)

Answer

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Tags: Acquisitions, Cost Analysis, Gain Calculation, Mergers, Valuation
Level: Level 2

Topic: Mergers and acquisitions
Series: AUG 2022

FM – AUG 2022 – L2 – Q1 – Cost of capital

Evaluates the objectives of public sector institutions and the calculation of cost of capital components.

Question

a) Public Sector Institutions exist generally not to make business profit. In view of this, there are other objectives that such sectors aspire to achieve in the performance of their functions.

Required:
i) Explain THREE (3) core objectives of Public Sector Institutions. (8 marks)
ii) Distinguish between financial objectives and non-financial objectives of a firm. (2 marks)

b) Baaday Company Ltd is a Ghanaian registered company engaged in the importation and exportation of general goods. The company issued GH¢600 million bonds at a coupon of 25% per annum. The bonds are irredeemable. Baaday Company Ltd pays a tax rate of 25% and the issue cost is 2% on the value of the bonds issued, which is tax-deductible. Additionally, the company has sold GH¢900 million worth of shares, and the issue cost for the shares is 5% of the value of the shares issued, which is also tax-deductible. The Company shareholders require a return of 30% per annum.

Required:
i) Calculate the cost (in percentage terms) of servicing the bonds. (3 marks)
ii) Calculate the amount raised from the sale or issue of the shares. (2 marks)
iii) Compute the amount the company should earn annually to be able to meet the return expectation of the suppliers of funds. (2 marks)
iv) Compute the Weighted Average Cost of Capital (WACC) for Baaday Company Ltd. (3 marks)

Answer

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Topic: Cost of capital
Series: AUG 2022

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

Question

a) Garu and Gushegu are two businesses that compete in the same market and have been trading for a number of years. The following information relates to their results for the year ended 31 December 2021:

Account	Garu (GHȼ’000)	Gushegu (GHȼ’000)
Sales	4,455	5,264
Cost of Sales	2,549	2,632
Net Profit	1,075	1,137
Inventory at 1 January	820	518
Inventory at 31 December	1,040	498
Capital Employed	2,428	1,953
Receivables	1,200	1,324
Bank	75	980
Payables	750	720

There are no other current assets or current liabilities.

Required:
Calculate the following ratios for each of the two businesses: i) Return on Capital Employed (ROCE)
ii) Gross Profit Margin
iii) Current Ratio
iv) Liquid (Acid Test) Ratio
v) Inventory Turnover
(10 marks)

b) Using the ratios calculated, discuss which of the two businesses appears to be performing better.
(10 marks)

Answer

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Tags: Acid Test Ratio, Current Ratio, Gross Profit Margin, Inventory Turnover, Ratio Analysis, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – Aug 2022 – L1 – Q4 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Preparation of a Statement of Cash Flows using IAS 7, including cash flows from operating, investing, and financing activities, with an analysis of the benefits of preparing cash flow statements.

Question

a) The following information relates to the activities of Chemu Ltd:

Statement of Financial Position as at 31 December

Account	2021 (GHȼ’000)	2020 (GHȼ’000)
Assets
Non-current assets	1,295	810
Current assets
Inventory	1,500	500
Receivables	2,680	890
Bank	–	740
Total assets	5,475	2,940
Equity and liabilities
Equity
Share capital	600	400
Retained earnings	1,625	600
Total equity	2,225	1,000
Non-current liabilities
10% Debentures	160	360
Current liabilities
Bank overdraft	1,810	–
Payables	1,000	680
Taxation	280	900
Total liabilities	3,250	1,940
Total equity and liabilities	5,475	2,940

Additional information:

i) The Statement of Profit or Loss for the year ended 31 December 2021 shows the following:

Account	Amount (GHȼ’000)
Operating profit	1,531
Interest payable	(26)
Profit before taxation	1,505
Taxation	(480)
Profit for the period	1,025

ii) Payables consist of trade payables and accrued interest. The accrued interest as at 31 December 2021 was GHȼ45,000 and as at 2020 was GHȼ80,000.

iii) Profit before taxation had been arrived at after charging GHȼ395,000 for depreciation on non-current assets.

iv) During the year, non-current assets with a carrying amount of GHȼ200,000 were sold for GHȼ190,000.

Required:
Prepare a Statement of Cash Flows for Chemu Ltd for the year ended 31 December 2021, in accordance with IAS 7: Statement of Cash Flows.
(16 marks)

b) Identify FOUR (4) benefits Chemu Ltd may derive from preparing a Statement of Cash Flows.
(4 marks)

Answer

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Tags: Cash Flow Statement, Financing Activities, Investing Activities, Operating Activities
Level: Level 1

Topic: IAS 7: Statement of cash flows, Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – Aug 2022 – L1 – Q3 – Correction of errors

Preparation of journal entries to correct errors, adjustment of the trial balance, and explanation of error types that do not affect the trial balance.

Question

The following list of balances was extracted from the books of Awatey at 30 April 2021:

Account	Amount (GHȼ)
Sales	134,200 (Cr)
Purchases	62,300 (Dr)
Inventory at 1 May 2020	4,700 (Dr)
Discounts received	390 (Cr)
Discounts allowed	240 (Dr)
Salaries and wages	12,700 (Dr)
Rent and rates	8,100 (Dr)
Motor vehicle expenses	7,500 (Dr)
Machinery repairs	14,200 (Dr)
General expenses	2,600 (Dr)
Machinery at cost	45,000 (Dr)
Machinery accumulated depreciation	8,000 (Cr)
Motor vehicles at cost	30,000 (Dr)
Motor vehicles accumulated depreciation	6,000 (Cr)
Bank	4,400 (Dr)
Trade receivables	4,600 (Dr)
Trade payables	2,200 (Cr)
Drawings	7,400 (Dr)
Capital at 1 May 2020	52,950 (Cr)

After the extraction of the above balances, the following errors and omissions were discovered: i) A sale on credit to Ali Baba of GHȼ800 had been entered in the Sales Journal as GHȼ80 and had also been posted to the Sales Ledger at the same amount. ii) A new Motor Vehicle costing GHȼ15,000 bought during the year had been debited to the Purchases Account. iii) Purchase of goods on credit from Agyemang Duah, amounting to GHȼ600, had been omitted from the books. iv) A cheque for GHȼ435 paid for Motor Vehicle expenses was recorded in the Cash Book and the Motor Vehicle Expenses Account as GHȼ475. v) Sales of goods on credit to Nii Ayi, amounting to GHȼ1,000, had been omitted from the books. vi) A cheque for GHȼ689 paid for general expenses was recorded in the Cash Book and the General Expenses Account as GHȼ698. vii) The purchase of machinery for GHȼ8,500 had been debited to the Machinery Repairs Account.

Required:
a) Prepare journal entries with appropriate narratives to correct each of the errors and omissions.
(8 marks)

b) Prepare the Trial Balance of Awatey as at 30 April 2021 after adjusting for the errors and omissions.
(8 marks)

c) Explain TWO (2) types of errors which would not affect the balancing of a trial balance.
(4 marks)

Answer

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Tags: Error Correction, Error Types, Journal Entries, Trial Balance
Level: Level 1

Topic: Correction of errors
Series: AUG 2022

FA – Aug 2022 – L1 – Q2 – Non-current assets and depreciation | Preparation of Partnership accounts

Preparation of ledger accounts for office equipment and disposal, calculation of profit due to a partner, and preparation of an appropriation account and current accounts for partners.

Question

a) The following Statement of Financial Position extract has been taken from the accounts of Yamfo Ltd as at 31 December 2020:

Non-current Assets	Cost (GHȼ)	Accumulated Depreciation (GHȼ)	Net Book Value (GHȼ)
Office Equipment	172,800	92,100	80,700

During the year ended 31 December 2021, the following transactions took place in relation to Office Equipment.

Disposals:

Equipment	Disposal Date	Purchase Date	Original Cost (GHȼ)	Disposal Proceeds (GHȼ)
Equipment 1	31 March 2021	1 January 2018	22,000	4,000
Equipment 2	30 June 2021	1 January 2017	30,000	5,100

Additions:

Equipment	Date of Addition	Cost (GHȼ)
Equipment 3	1 October 2021	35,000

Depreciation for Office Equipment is charged using the straight-line method based on a five-year life and an estimated residual value of 10% of the original cost. Depreciation is applied from the date the Office Equipment was bought until it was sold. All transactions were by cheque.

Required:
i) Prepare the Office Equipment ledger account for the year ended 31 December 2021.
(2 marks)

ii) Prepare the Disposal of Office Equipment ledger account for the year ended 31 December 2021.
(4 marks)

b) The following balances are in the books of a partnership as at 31 December 2021:

Account	Amount (GHȼ)
Capital accounts Badu, as at 1 January 2021	500,000
Tawiah, introduced 1 July 2021	300,000

Drawings	Amount (GHȼ)
Badu	220,000
Tawiah	100,000

Additional information:

Until 30 June 2021, Badu had run the business as a sole trader. Tawiah joined him on 1 July 2021, introducing capital of GHȼ300,000.
Under the partnership agreement, the balance of profit is to be shared between Badu and Tawiah in the ratio 3:2. No interest is to be charged on drawings. Both partners are to receive interest on their capital account balances at 5% per annum. Tawiah is to receive a salary of GHȼ40,000 per annum, but no salary is to be paid to Badu.
The profit for the year ended 31 December 2021 was GHȼ330,000. It was agreed that this profit had accrued one-third in the six months ended 30 June 2021 and two-thirds in the six months ended 31 December 2021, except for an irrecoverable debt of GHȼ30,000 charged in arriving at the profit, which was to be regarded as occurring in the six months ended 30 June 2021.

Required:
i) Calculate the amount of profit due to Badu for the six months to 30 June 2021.
(2 marks)

ii) Prepare the Appropriation Account for Badu and Tawiah for the six months ended 31 December 2021.
(6 marks)

iii) Prepare the Current Accounts for Badu and Tawiah for the year ended 31 December 2021.
(6 marks)

Answer

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Tags: Depreciation, Disposal of assets, Partnership Capital Accounts, Profit Sharing
Level: Level 1

Topic: Non-current assets and depreciation, Preparation of Partnership accounts
Series: AUG 2022

FA – Aug 2022 – L1 – Q1 – Accruals and prepayments | The IASB’s Conceptual Framework

Explanation of the IASB’s enhancing qualitative characteristics of financial information and preparation of ledger accounts for commission received, stationery, and rates, including adjustments for accruals and prepayments.

Question

a) IASB Conceptual Framework underpins what IFRS say and why they identify a particular accounting treatment. Another important aspect of the conceptual framework is an attempt to define “high quality” information or in other words, what makes financial information useful.

Required:
Explain in accordance with the IASB’s Conceptual Framework the enhancing qualitative characteristics of useful financial accounting information.
(10 marks)

b) On 1 January 2021, Koo Nimo, a trader, had the following entries in his ledger:

Account	Amount (GHȼ)
Commission received (owing)	900
Stationery (owing)	400
Rates (prepaid)	600

The following information relates to the financial year ended 31 December 2021. All transactions were by cheque.

i) Commission received was as follows:

Date	Amount (GHȼ)
14 January	850
16 November	3,200

On 31 December 2021 GHȼ800 was still owing in commission to Koo Nimo for the 2021 financial year.

ii) Stationery was paid as follows:

Date	Amount (GHȼ)
19 January	800
13 November	4,200

On 1 January 2021 there was no stock of stationery, while at 31 December 2021 stock of stationery was GHȼ200. There were no outstanding invoices for stationery at 31 December 2021.

iii) Rates were paid as follows:

Date	Amount (GHȼ)
9 April	2,600
24 November	2,800

A refund for rates of GHȼ800 was received on 15 December 2021. At 31 December 2021 rates were overpaid by GHȼ250.

Required:
Prepare the commission received, stationery and rates ledger accounts, including in each case the transfer to the Statement of Profit and Loss, for the year ended 31 December 2021, and the balance carried down to the next financial year.
(6 marks)

c) Explain TWO (2) reasons why a business entity will make adjustments for accruals and prepayments in the final accounts.
(4 marks)

Answer

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Tags: Accruals, Conceptual Framework, Enhancing Qualitative Characteristics, Ledger Accounts, Prepayments
Level: Level 1

Topic: Accruals and prepayments, The IASB’s Conceptual Framework
Series: AUG 2022

IMAC – AUG 2022 – L1 – Q5 – Costs and Cost Behaviour

Establishment of total cost function using high-low method, profit calculation for a specific production level, and identification of advantages and disadvantages of high-low method.

Question

a) Takyi Carpentry makes twin-desk for local schools in the Daboase District. To facilitate control, the owner of the shop has asked you to assist him in analysing cost into fixed and variable elements.

Below is his six-year financial information:

Year	No. of Twin-Desk	Revenue (GH¢)	Profit (GH¢)
2016	1,800	19,600	6,000
2017	1,700	22,000	6,200
2018	1,750	20,300	5,800
2019	2,100	26,200	8,000
2020	1,950	22,400	7,500
2021	2,050	21,800	6,800

Required: i) Establish total cost function using high-low method. (5 marks)

ii) Calculate profit for making 3,500 units of the twin-desk if the selling price is fixed at GH¢20. (3 marks)

iii) Identify TWO (2) advantages and TWO (2) disadvantages of using high-low method. (4 marks)

iv) Identify THREE (3) importance for classifying cost as fixed and variable. (3 marks)

b) For managers within a company, exercising control through standards and standard costing is a creative program aimed at determining whether the organisations’ resources are being used optimally. Standard costs are typically determined during the budgetary control process because it uses predetermined standard costs for direct material, direct labour and factory overheads.

Required: Explain THREE (3) benefits to a company that uses standard costing. (5 marks)

Answer

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Tags: Cost Classification, Cost Function, Fixed Cost, High-Low Method, Profit Calculation, Variable Cost
Level: Level 1

Topic: Cost and Cost Behaviour
Series: AUG 2022

IMAC – AUG 2022 – L1 – Q4 – Inventory Management

Calculation of cost of goods issued and closing inventory using the weighted average method, and identification of causes for material and labour cost variances.

Question

Question: a) The following extracts are from the books of Bediako Enterprise in the month of February:

Date	Description	Units	Per unit cost (GH¢)
01	Receipts	400	42
04	Receipts	700	45
07	Issue	450
10	Receipts	600	48
14	Issue	700
20	Receipts	1,200	50

Required: Using the Weighted Average Method;

i) Calculate the cost of goods issued to Cost of Sales. (3 marks)

ii) Compute the value of closing inventory. (12 marks)

b) Identify TWO (2) possible causes for each of the following variances:

i) Material cost variance.

ii) Labour cost variance. (5 marks)

Answer

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Tags: Closing Inventory, Cost of Goods Issued, Labour Cost Variance, Material Cost Variance, Weighted Average Method
Level: Level 1

Topic: Inventory Management
Series: AUG 2022

IMAC – Aug 2022 – L1 – Q3 – Scope of Management Accounting

Discuss the objectives and qualities of management accounting, differentiate operational control from cost control, and explain specific order costing characteristics.

Question

a) Management Accounting is that branch of accounting known for management decision-making. It is a more intimate merger of the two older professions of management and accounting, wherein the information needs of the manager determine the accounting means for their satisfaction.

In Management Accounting, managers use accounting information in decision-making and to assist in the management and performance of their control functions. Management accounting information should comply with certain qualities and characteristics to be useful in planning, control, and decision-making.

Required:
i) Identify THREE (3) objectives of Management Accounting. (6 marks)
ii) Explain FIVE (5) qualities of management accounting information. (5 marks)

b) All deployed cost-accounting controls and processes should bring to focus opportunities for improvement and engender decision-makers’ trust in results. Operational control and cost control management approaches are needed to add insight into where and how cost improvements can be implemented.

Required:
Distinguish between operational control and cost control. (4 marks)

c) Specific order costing methods are appropriate for business organizations that are involved in the construction, manufacturing, or assembling of products to individual customers’ specifications.

Required:
State THREE (3) characteristics of Specific Order Costing. (5 marks)

Answer

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Tags: Cost Control, Information Qualities, Management Accounting, Objectives, Operational Control, Specific Order Costing
Level: Level 1

Topic: Scope of Management Accounting
Series: AUG 2022

Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

FM – AUG 2022 – L2 – Q2 – Mergers and acquisitions

Evaluates the reasons for failure in mergers and acquisitions, and the financial calculations related to an acquisition.

FM – AUG 2022 – L2 – Q1 – Cost of capital

Evaluates the objectives of public sector institutions and the calculation of cost of capital components.

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

FA – Aug 2022 – L1 – Q4 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Preparation of a Statement of Cash Flows using IAS 7, including cash flows from operating, investing, and financing activities, with an analysis of the benefits of preparing cash flow statements.

FA – Aug 2022 – L1 – Q3 – Correction of errors

Preparation of journal entries to correct errors, adjustment of the trial balance, and explanation of error types that do not affect the trial balance.

FA – Aug 2022 – L1 – Q2 – Non-current assets and depreciation | Preparation of Partnership accounts

Preparation of ledger accounts for office equipment and disposal, calculation of profit due to a partner, and preparation of an appropriation account and current accounts for partners.

FA – Aug 2022 – L1 – Q1 – Accruals and prepayments | The IASB’s Conceptual Framework

Explanation of the IASB’s enhancing qualitative characteristics of financial information and preparation of ledger accounts for commission received, stationery, and rates, including adjustments for accruals and prepayments.

IMAC – AUG 2022 – L1 – Q5 – Costs and Cost Behaviour

Establishment of total cost function using high-low method, profit calculation for a specific production level, and identification of advantages and disadvantages of high-low method.

IMAC – AUG 2022 – L1 – Q4 – Inventory Management

Calculation of cost of goods issued and closing inventory using the weighted average method, and identification of causes for material and labour cost variances.

IMAC – Aug 2022 – L1 – Q3 – Scope of Management Accounting

Discuss the objectives and qualities of management accounting, differentiate operational control from cost control, and explain specific order costing characteristics.

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