Select the choice which best completes the statement, or answers the question, by clicking on the corresponding letter.
Only one of the following statements about the sole trader form of business is correct:
Sole traders do not need to consult accountants
A sole trader is liable to income tax on his/her earnings
A sole trader is not required to pay National Insurance contributions
Sole traders must register the name of their business with the Registrar of Companies
One of the following statements about sole trader businesses is incorrect:
The sole trader form of business is easy to set up
Sole traders are personally responsible for the liabilities of the business
Sole trader businesses are obliged to make their accounts available to the general public
A sole trader is entirely responsible for the management of his/her business
Only one of the following statements about the partnership form of business is correct:
Partnerships must make their accounts available to the general public
Partners are personally liable for the liabilities of the business
Partners must share their profits in equal shares between them
Partnerships are invariably very small businesses
One of the following statements about the partnership form of business is incorrect:
A partnership is a business run by two or more people
Each partner is liable under the law for the actions of his or her partners
A partnership business is not difficult to set up
Partnerships are liable to corporation tax on their profits
Only one of the following statements about the limited company form of business is correct:
The directors of a limited company are obliged by law to hold shares in the company
Shareholders of a limited company share the profits equally between themselves
A limited company cannot itself borrow money; borrowing must be done on its behalf by its shareholders or directors
Members of the general public can find out about the financial affairs of the company
One of the following statements about the limited company form of business is incorrect:
Shareholders are personally liable for all the liabilities incurred by the business
Regular filing of information about the affairs of the company is a legal requirement
The limited company form of business allows ownership of the business to be spread amongst many people
Shareholders can appoint professional managers as directors of the company
One of the following statements about financing is correct:
Bank overdrafts are a form of long-term finance
A partnership wishing to raise finance can issue additional shares
Sole traders wishing to raise finance can sell shares in their business to their friends
Bank overdrafts are repayable on demand
One of the following statements about taxation is correct:
Capital gains tax is levied on business gains made by sole traders, partnerships and limited companies
Company directors are liable to corporation tax on their salaries
All businesses, regardless of size, are required by law to register for VAT
Partners in a partnership are exempt from National Insurance contributions
Bayley and Sharif Limited is a trading company which sells raincoats, umbrellas and wellies. In the VAT quarter ending 30 June 20X6, the business makes sales of £150 000 on which it charges VAT totalling £26 250. In the same three month period it has bought goods and services for £95 000, all of which are subject to VAT at the standard rate of 17.5%. The company’s VAT liability for the quarter is:
£26 250
£16 625
£9 625
£0
One of the following statements about taxation is incorrect:
HMRC is responsible for the administration of the VAT system
Company directors are liable to income tax on the salaries they receive from the company
Partners are subject to a special partnership tax on their share of profits
VAT is a form of indirect taxation
Financial reports for external use show:
information that can be used by, for example, potential shareholders and the general public
a record of amounts paid and payable to HMRC in respect of VAT
information about the environmental impact of a business
the information used by management to run the business
Which of the following statements about audit and auditors is correct?
sole traders, partnerships and limited companies are all required by law to have an annual audit of their financial statements
many companies are nowadays exempt from the requirement to have an annual audit of their financial statements
very large companies are required by law to have their management accounting information audited
auditors are entitled to veto directors’ remuneration packages if they feel that the amounts involved are excessive
Who appoints the directors of a limited company?
the auditors
the shareholders
a representative committee elected from amongst the shareholders
a joint committee of shareholders, existing directors and the company auditors
One of the following statements about management accounting is correct:
Management accounting:
helps management to make sure that shareholders are fully informed on a regular basis of all management decisions
is another term for describing the annual reporting to shareholders for which directors are responsible
requires that managers, especially directors, are accountable to the shareholders for their remuneration packages
assists management in controlling the business and making decisions
Which of the following statements is correct?
The stewardship function requires directors of limited companies to:
act promptly to fulfil all requests for information from shareholders
circulate minutes of directors’ meetings to shareholders on a timely basis
act at all times in the best interests of the company
meet shareholders on a regular basis to discuss major strategic decisions