Acca paper F1 fia diploma in Accounting and Business Accountant in Business (AB/fab) exam kit

166 S is considering creating a financial accounting department within her business, but is 
unsure of what such a department would actually do. Which of the following would 
usually be prepared by a financial accounting department? 
A Cost 
schedules 
B 
Statement of cash flows 
C 
Variance analysis
D Tax 
calculations 
(2 marks)
167 
S decided to record the purchases made on the 2nd of April 200X in tax year ending 31st of 
March 200X. The authorities will likely classify this as tax ____________. 
Which of the following words correctly fill this gap? 
A Evasion 
B Minimisation 
C Avoidance 
D Suppression 
 (2 
marks) 
168 Tax mitigation involves which of the following? 
A 
Taking all legal steps to reduce one’s tax liability 
B 
Agreeing to pay a financial penalty to avoid prosecution 
C 
Moving businesses and funds offshore to reduce liability to UK tax 
D 
Reducing tax liabilities without frustrating the law makers’ intentions 
(2 marks)
169 An important advantage of using loans to finance investment is: 
A 
loan interest payments can usually be suspended if profits are low 
B 
the timing of loan payments is often at the company’s discretion 
C 
loan interest is tax deductible 
D 
banks will often not require security for loan advances 
(2 marks) 
170 VDF Co is planning to raise finance to fund the launch of a new product. It is planning to 
do this via an issue of new shares to the public. Which of the following is an issue that 
VDF may face if it proceeds with its plans to raise equity finance? 
A 
It will be forced to pay higher dividends in the future – even if the new product 
launch is a failure 
B 
The share issue may dilute the control that the existing shareholders have over the 
company 
C 
VDF will require good quality assets to offer as security for the new issue 
D 
The issue of shares is likely to reduce VDF’s corporation tax liability 
(2 marks) 
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