CIMA BA2 · Chapter 8
Integrated accounting and management reporting MCQs with Answers
9 multiple-choice questions on Integrated accounting and management reporting for CIMA BA2 Fundamentals of Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
What is an INTEGRATED accounting system?
- A) Separate cost and financial ledgers that are reconciled at the end of each period
- B) A system in which only financial accounting records are kept
- C) A single set of ledger accounts that meets the needs of both financial accounting and cost accounting
- D) A system that records only variances from standard
Show answer & explanation
Answer: C) A single set of ledger accounts that meets the needs of both financial accounting and cost accounting
Integrated accounts combine cost and financial accounting in one set of ledgers, so no reconciliation between two profit figures is needed. Interlocking accounts keep separate cost and financial ledgers, linked by control accounts, and require a reconciliation.
Question 2
In an integrated accounting system, which entry records DIRECT labour costs charged to production?
- A) Debit Wages control account, Credit Work in progress control account
- B) Debit Production overhead control account, Credit Wages control account
- C) Debit Work in progress control account, Credit Wages control account
- D) Debit Finished goods control account, Credit Bank
Show answer & explanation
Answer: C) Debit Work in progress control account, Credit Wages control account
Gross wages are first collected in the wages control account. The direct element is then transferred out (credit wages control) and charged to production (debit work in progress). The indirect element is debited to the production overhead control account.
Question 3
In an integrated accounting system, what entry records the issue of INDIRECT materials (such as cleaning materials) to the factory?
- A) Debit Work in progress control account, Credit Materials control account
- B) Debit Materials control account, Credit Production overhead control account
- C) Debit Cost of sales, Credit Payables
- D) Debit Production overhead control account, Credit Materials control account
Show answer & explanation
Answer: D) Debit Production overhead control account, Credit Materials control account
Indirect materials cannot be traced to specific products, so they are treated as production overhead: debit production overhead control and credit materials control (inventory). The overhead is later absorbed into work in progress using the predetermined rate.
Question 4
At the end of a period, production overheads have been UNDER-absorbed. In an integrated accounting system, what entry transfers the under-absorption?
- A) Debit Production overhead control account, Credit Income statement
- B) Debit Work in progress control account, Credit Production overhead control account
- C) Debit Income statement (profit or loss), Credit Production overhead control account
- D) Debit Production overhead control account, Credit Work in progress control account
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Answer: C) Debit Income statement (profit or loss), Credit Production overhead control account
Under-absorption leaves a debit balance on the production overhead control account (actual overheads exceed absorbed overheads). It is cleared by crediting the control account and debiting the income statement, which reduces profit.
Question 5
A company holds material inventory at STANDARD cost. It buys 6,000 kg of material on credit at $5.20 per kg; the standard price is $5.00 per kg. Which entries record the purchase?
- A) Debit Materials control $31,200; Credit Payables $31,200
- B) Debit Materials control $30,000; Credit Material price variance $1,200; Credit Payables $28,800
- C) Debit Materials control $31,200; Credit Material price variance $1,200; Credit Payables $30,000
- D) Debit Materials control $30,000; Debit Material price variance $1,200; Credit Payables $31,200
Show answer & explanation
Answer: D) Debit Materials control $30,000; Debit Material price variance $1,200; Credit Payables $31,200
Payables must be credited with the actual amount owed: 6,000 x $5.20 = $31,200. Inventory is held at standard, so materials control is debited with 6,000 x $5.00 = $30,000. The difference of $1,200 is an adverse price variance, recorded as a debit in the material price variance account.
Question 6
Gross wages for a period were $92,000, of which $68,000 was for direct labour and $24,000 for indirect labour (supervisors and maintenance staff). In an integrated system, what amount is DEBITED to the production overhead control account in respect of wages?
- A) $68,000
- B) $24,000
- C) $92,000
- D) $44,000
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Answer: B) $24,000
Only indirect labour is treated as production overhead, so production overhead control is debited with $24,000. The direct labour of $68,000 is debited to work in progress, and the full $92,000 is credited out of the wages control account.
Question 7
Under the principle of responsibility accounting, on which costs should a manager's performance be judged?
- A) All costs of the organisation, including head office costs
- B) Only costs that are fixed in the short term
- C) Only costs that have been apportioned to the manager's department
- D) Costs that the manager is able to control or significantly influence
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Answer: D) Costs that the manager is able to control or significantly influence
Responsibility accounting holds managers accountable for the items they can control. Including apportioned or uncontrollable costs in their performance reports can be unfair and demotivating, so such costs should be shown separately if at all.
Question 8
The finished goods control account shows an opening balance of $24,000 and transfers in from work in progress of $310,000. The closing balance of finished goods is $31,000. What amount is transferred to cost of sales?
- A) $365,000
- B) $303,000
- C) $317,000
- D) $310,000
Show answer & explanation
Answer: B) $303,000
Cost of sales = opening finished goods + transfers in from WIP - closing finished goods = $24,000 + $310,000 - $31,000 = $303,000.
Question 9
For cost control purposes, a department's actual costs for a period should be compared with which of the following?
- A) The original fixed budget, regardless of the activity achieved
- B) The actual costs of the same period in the previous year
- C) A budget flexed to the actual level of activity achieved
- D) The costs of the most efficient department in the organisation
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Answer: C) A budget flexed to the actual level of activity achieved
If activity differs from the original plan, comparing actual costs with a fixed budget mixes the effect of volume with the effect of efficiency and spending. Flexing the budget to actual activity shows what costs should have been at that output, giving meaningful variances for control.