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Accounting for IGCSE & O level - Final Statements (Section 11)

1
What is the accounting equation?
Answer
(A)
Assets = Liabilities + Equity
2
What will be used to determine the cost of inventory?
Answer
(D)
The price of each item
3
If a company has assets of $100,000 and owner's equity of $30,000, what are the total liabilities?
Answer
(B)
$70,000
4
If a company has assets of $100,000 and liabilities of $20,000, then the owner's equity would be?
Answer
(B)
$80,000
5
Which of the following statements is true regarding the closing inventory at the end of an accounting year?
Answer
(D)
The closing inventory will become the opening inventory in the next accounting year
6
What components make up a statement of financial position?
Answer
A
B
C
7
What type of inventory recording helps store management review sales of individual lines of merchandise on a daily basis?
Answer
(C)
Point-of-sale inventory recording
8
What does a debit balance for carriage inwards indicate?
Answer
(A)
An increase in the cost of purchases.
9
If a company's sales revenue is $50,000, its cost of goods sold is $20,000, and its operating expenses are $10,000, what is the company's net income?
Answer
(B)
$30,000
10
Which of the following would be found in an expense account?
Answer
A
B
D
11
What is the first part of the income statement known as?
Answer
(B)
Trading Account
12
What is typically used to allocate expenses between departments?
Answer
(B)
Sales revenue, floor space, or number of employees
13
Which of the following is a characteristic of a business with negative working capital?
Answer
(B)
It has more current liabilities than current assets.
14
Which items from the trial balance are needed to calculate the gross profit?
Answer
A
B
C
D
15
What is the calculation for Net Assets in a Statement of Financial Position?
Answer
(A)
Total Assets - Total Liabilities
16
What does the term 'FIFO' stand for in the context of inventory valuation?
Answer
(A)
First In First Out
17
What adjustments must be made to purchases to arrive at 'net purchases'?
Answer
(B)
Subtract purchase returns
18
Which of the following would be considered a current liability?
Answer
(C)
A bank overdraft
19
Which order are the current assets listed in?
Answer
(D)
Stock, trade receivables, bank, cash
20
What type of accounts have a credit balance?
Answer
A
B
C
21
Which of the following is the correct order to prepare an income statement?
Answer
(B)
Sales, cost of goods sold, gross profit, operating expenses, and net income
22
What does a 'provision' represent on the balance sheet?
Answer
(B)
An estimate of a future liability.
23
Which of the following affects the owner's equity?
Answer
A
B
C
24
What does the term 'capital' represent in a statement of financial position?
Answer
(C)
The owner's investment in the business.
25
What is the role of the closing inventory in calculating gross profit?
Answer
(B)
It is used to determine the cost of goods sold which is then used for gross profit calculation.
26
What information is necessary to prepare a departmental income statement?
Answer
A
B
C
27
What is the formula for calculating owner's equity?
Answer
(B)
Assets - Liabilities
28
What is the role of operating expenses in an income statement?
Answer
(C)
To calculate the net income
29
What is the impact of writing off an uncollectible account receivable on the accounting equation?
Answer
(B)
Assets decrease and equity decreases.
30
What is a key indicator of a company's short-term financial health?
Answer
(A)
Working Capital
31
How does a business calculate the cost of goods available for sale?
Answer
(B)
Beginning Inventory + Purchases
32
What is the formula for calculating gross profit?
Answer
(A)
Sales - Cost of Sales
33
What financial statement reflects the profitability of a business over a specific period?
Answer
(C)
Income Statement
34
Which of the following are examples of non-current assets?
Answer
A
B
35
Which expense is most fairly allocated to different departments based on the space they occupy?
Answer
(B)
Rent expense
36
What will happen to the gross profit if the cost of goods sold increases, holding sales constant?
Answer
(B)
Gross profit will decrease
37
What is the purpose of the income statement?
Answer
(C)
To determine the financial performance of a business over a period.
38
What is the relationship between closing inventory and the cost of sales?
Answer
(A)
Closing inventory reduces the cost of sales.
39
What is the purpose of the income statement?
Answer
(B)
To calculate and report a business's profits and losses over a period.
40
What is the definition of net assets?
Answer
(A)
Assets - Liabilities
41
What is the general rule for valuing assets in the Statement of Financial Position?
Answer
(D)
At a value that is fair and reliable.
42
Which of the following is a current liability?
Answer
(D)
Accounts payable
43
Which of the following items would increase a company's working capital?
Answer
A
D
44
What are examples of current assets?
Answer
A
B
C
45
What does the term "non-current assets" mean?
Answer
(C)
Assets such as land, buildings, vehicles and other equipment that will be available for long-term use.
46
What type of account is credited to show profit in the capital account?
Answer
(B)
capital account
47
Which accounting principle is generally applied when inventory is valued at the lower of cost or net realisable value?
Answer
(D)
Prudence principle
48
How is capital employed calculated?
Answer
(C)
Total assets - current liabilities
49
Which items would typically be found on the income statement?
Answer
A
C
50
If a business has a loss, what happens to owner's equity?
Answer
(B)
Decreases