Financial Accounting
1. The Accounting Standards Board bases its Financial Reporting Standards on what is sometimes called a ‘conceptual framework’. How far do you think that this approach is likely to be successful? (400 words)
2. ‘The statement of financial position is pretty useless for decision-making. It only shows the position at a single point in time and a past point in time, at that.’
A. Comment on this statement. (400 words)
3. ‘The FRC believes that rapid sign-up indicates a real commitment to making the code-based approach work effectively, and the dynamic interaction between code setting and response demonstrates the advantages this has over slower-changing law-based systems.
This interaction has, over the years, reinforced international recognition that standards of
governance in the UK are high. But there are still, of course, plenty of risks to that reputation, and there will always be room for improvement.’
From Developments in Corporate Governance 2011
The Impact and Implementation of the UK Corporate Governance and Stewardship Codes
Financial Reporting Council
Required:
Explain your understanding of corporate governance and illustrate its importance to UK business. (400 words)
4. Claire started a business a year ago when she put in £50,000 of her own money. Shortly after that, the business borrowed £10,000 on a long-term bank loan. By the end of the year, the statement of financial position included the following:
£
Non-current assets (net of depreciation) 53,000
Inventories 2,500
Trade payables 2,700
Cash at bank 5,100
Trade receivables 700
Long-term borrowings (bank loan) 10,000
During the year Claire drew out £15,000 for her own spending.
A. How much profit (or loss) did Claire’s business make during its first year?
B. What is the point of preparing an income statement if the profit figure can be found in the way that you have just done? (300 words)
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