Association of Chartered Certified Accountants (ACCA) Corporate and Business Law (LW) and Performance Management (PM) Syllabus

Corporate and Business Law (LW) and Performance Management (PM) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Corporate and Business Law (LW) and Performance Management (PM) in Association of Chartered Certified Accountants (ACCA), not a summary of it.

1. 1

   The English Legal System and Contract Law

   3 topics

   • Sources and structure of English law
     • Court hierarchy
     • Common law and equity, statute
   • Formation of contract
     • Offer and acceptance
     • Consideration and intention
   • Contract terms and breach
     • Conditions, warranties, innominate terms
     • Remedies and damages
2. 2

   The Law of Torts, Employment and Agency

   3 topics

   • Tort of negligence
     • Duty of care and breach
     • Professional negligence
   • Employment law
     • Contract of employment
     • Dismissal and redundancy
   • Agency relationships
     • Creation and authority of agents
3. 3

   Company Law and Corporate Governance

   3 topics

   • Company formation and constitution
     • Separate legal personality and the veil
     • Articles of association
   • Share capital and financing
     • Shares, debentures and charges
     • Capital maintenance
   • Directors, management and insolvency
     • Directors' duties
     • Liquidation and administration
     • Fraudulent and wrongful trading
4. 4

   Specialist Cost and Management Accounting Techniques

   4 topics

   • Activity-based costing
     • Cost pools and cost drivers
   • Target and life-cycle costing
     • Target cost gap
     • Whole-life costs
   • Throughput accounting
     • Theory of constraints
     • Throughput accounting ratio
   • Environmental accounting
     • Environmental cost categories
5. 5

   Decision Making Techniques

   4 topics

   • Relevant cost analysis
     • Make or buy and outsourcing
     • Shutdown decisions
   • Limiting factors and linear programming
     • Shadow prices and slack
   • Pricing decisions
     • Pricing strategies
     • Demand and price elasticity
   • Decision making under risk and uncertainty
     • Maximin, maximax, minimax regret
     • Expected values and decision trees
6. 6

   Budgeting, Standard Costing and Performance Measurement

   3 topics

   • Budgetary systems and types
     • Incremental, zero-based, activity-based budgeting
     • Behavioural aspects of budgeting
   • Advanced variance analysis
     • Mix and yield variances
     • Planning and operational variances
   • Performance measurement and control
     • Divisional performance, ROI and RI
     • Transfer pricing
     • Performance in not-for-profit organisations

Corporate and Business Law (LW) and Performance Management (PM) flashcards for Association of Chartered Certified Accountants (ACCA)

23 of 51 cards from the Corporate and Business Law (LW) and Performance Management (PM) deck — real questions with worked answers.

1. What are the two main sources of English law, and how do they differ?

   Case law (common law/judicial precedent), made by judges through decisions in court, and statute law (legislation), made by Parliament. Statute law overrides conflicting case law because Parliament is sovereign.

2. Under the doctrine of judicial precedent (stare decisis), what part of a judgment is binding on lower courts?

   The ratio decidendi (the legal reasoning essential to the decision) is binding. Obiter dicta (things said 'by the way') are only persuasive, not binding.

3. List the essential elements required for a valid simple contract.

   Offer, acceptance, consideration, intention to create legal relations, and capacity. (Certainty of terms is also required.)

4. In contract law, what is the difference between an offer and an invitation to treat?

   An offer is a definite promise to be bound on specific terms, capable of acceptance. An invitation to treat is merely an invitation to make an offer (e.g. goods on display, advertisements, auctions). Carlill v Carbolic Smoke Ball Co confirmed an advertisement can be an offer if specific enough.

5. State the postal rule of acceptance and a key exception.

   Acceptance by post is complete (binding) when the letter is properly posted, not when received (Adams v Lindsell). Exception: it does not apply to instantaneous communications (telephone, email, telex) where acceptance takes effect on receipt.

6. Define 'consideration' and state the rule about past consideration.

   Consideration is the price for which the promise of the other is bought — something of value given by each party. Consideration must be sufficient but need not be adequate, and past consideration (given before the promise) is not valid consideration.

7. Distinguish between a condition and a warranty as contract terms, including the remedy for breach of each.

   A condition is a fundamental term going to the root of the contract; breach allows the injured party to repudiate (terminate) and claim damages. A warranty is a minor term; breach only allows a claim for damages, not termination.

8. State the rule on remoteness of damage in contract from Hadley v Baxendale.

   Damages are recoverable for losses that arise naturally from the breach (in the ordinary course of things), or that were within the reasonable contemplation of both parties at the time of contracting as the probable result of breach (e.g. from special knowledge communicated).

9. What three elements must a claimant prove to succeed in the tort of negligence?

   (1) The defendant owed a duty of care; (2) the defendant breached that duty (fell below the standard of the reasonable person); and (3) the breach caused reasonably foreseeable loss or damage (causation and remoteness).

10. What is the 'neighbour principle' and which case established it?

    Established in Donoghue v Stevenson (1932): you must take reasonable care to avoid acts or omissions you can reasonably foresee would be likely to injure your 'neighbour' — persons so closely and directly affected that you ought to have them in contemplation.

11. In employment law, list four factors used to distinguish an employee (contract of service) from an independent contractor (contract for services).

    Control (degree of direction over how work is done), integration into the business, the economic reality/mutuality of obligation, provision of own equipment, financial risk, and ability to delegate/substitute. Employees score high on control and integration.

12. Distinguish between wrongful dismissal and unfair dismissal.

    Wrongful dismissal is a common law/contractual claim for dismissal in breach of contract (e.g. without proper notice). Unfair dismissal is a statutory claim where the employer lacks a fair reason or fails to follow a fair procedure; it generally requires a qualifying period of continuous employment.

13. In agency law, what are the three main types of authority an agent may have?

    Express actual authority (specifically given), implied actual authority (arising from the position/conduct), and apparent (ostensible) authority (where the principal's representation leads a third party to believe the agent is authorised).

14. Compare the key features of a private limited company and a public limited company (plc).

    A plc can offer shares to the public and must have minimum allotted share capital (£50,000, 25% paid up) and a trading certificate before trading; a private company cannot offer shares to the public and has no minimum capital. Plcs need at least 2 directors and a qualified company secretary; private companies need only 1 director and no secretary.

15. What is the principle of separate legal personality and which case established it?

    A company is a legal person distinct from its members and directors. Established in Salomon v Salomon & Co Ltd (1897) — the company's debts are its own, and members' liability is limited to amounts unpaid on their shares (the 'corporate veil').

16. What are the two key constitutional documents of a company and what does each contain?

    The memorandum of association (a simple statement that subscribers wish to form a company and become members) and the articles of association (the internal rulebook governing how the company is run — directors' powers, meetings, share rights). Model articles apply by default.

17. Distinguish between ordinary shares and preference shares.

    Ordinary shares carry voting rights, variable dividends paid after preference shares, and the residual surplus on winding up. Preference shares carry a fixed dividend paid before ordinary shares and usually no voting rights; dividends are presumed cumulative unless stated otherwise.

18. Distinguish between a fixed charge and a floating charge as forms of company security.

    A fixed charge attaches to a specific identifiable asset (e.g. land) which cannot be disposed of without the lender's consent. A floating charge 'floats' over a class of changing assets (e.g. stock) until it crystallises (e.g. on default or liquidation), after which it attaches to the assets then held.

19. State three general duties of directors codified in the Companies Act 2006.

    Any three of: duty to act within powers; duty to promote the success of the company; duty to exercise independent judgement; duty to exercise reasonable care, skill and diligence; duty to avoid conflicts of interest; duty not to accept benefits from third parties; duty to declare interest in proposed transactions.

20. Distinguish between wrongful trading and fraudulent trading under the Insolvency Act 1986.

    Wrongful trading: a director continues trading when they knew or ought to have known there was no reasonable prospect of avoiding insolvent liquidation; civil liability, no need to prove intent. Fraudulent trading: carrying on business with intent to defraud creditors; requires dishonest intent and can be civil or criminal.

21. Define Activity-Based Costing (ABC) and explain how it differs from traditional absorption costing.

    ABC assigns overheads to products based on the activities that drive cost, using cost drivers and cost pools, rather than a single volume-based rate (e.g. labour hours). It gives more accurate product costs where overheads are high and diverse, avoiding the cross-subsidisation found in traditional absorption costing.

22. State the formula for an activity-based cost driver rate and how cost is charged to a product.

    $$\text{Cost driver rate} = \frac{\text{Total cost of activity (cost pool)}}{\text{Total number of cost driver units}}$$ Cost charged to product = cost driver rate $\times$ number of driver units consumed by the product.

23. What is target costing and how is the target cost calculated?

    Target costing works backwards from a competitive market price to a cost the firm must achieve. $$\text{Target cost} = \text{Target selling price} - \text{Required (target) profit margin}$$ Any excess of estimated cost over target cost is the 'cost gap', which must be closed (e.g. via value engineering).

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