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Accounting for IGCSE & O level - Final Statements (Section 12)

1
Which inventory valuation method will give the lowest valuation when prices are rising?
Answer
(A)
LIFO
2
Which items are normally included in current assets?
Answer
A
B
D
3
What is the primary purpose of presenting an income statement in a vertical format?
Answer
(B)
To easily calculate profit or loss
4
What is 'working capital' used to assess?
Answer
(B)
A company's ability to meet its short-term obligations.
5
Which of the following is an example of a fixed asset?
Answer
(C)
Land
6
Which financial statement reports a company's financial performance over a period of time?
Answer
(C)
Income Statement
7
What is the basic accounting equation?
Answer
(C)
Assets = Liabilities + Equity
8
What does a departmental trading account primarily show?
Answer
(C)
The gross profit of each department.
9
Which of the following is used to calculate gross profit?
Answer
A
B
10
What are the key components used to calculate the cost of goods sold (COGS)?
Answer
(A)
Opening Inventory + Purchases - Closing Inventory
11
Which of the following is an example of a current liability?
Answer
(D)
Accounts payable
12
Which of the following is a current asset?
Answer
(C)
Inventory
13
What is the significance of a 'provision for doubtful debts'?
Answer
(C)
It estimates the portion of receivables that may not be collected.
14
Which principle is most relevant when valuing inventory at the lower of cost or net realisable value?
Answer
(C)
Prudence
15
What is the formula for calculating Net Assets?
Answer
(A)
Assets - Liabilities
16
What will increase a business's profit?
Answer
(C)
Increased sales revenue.
17
What financial statement would be directly impacted by an error in the calculation of COGS?
Answer
(C)
Income Statement
18
Which of the following is an example of a current asset?
Answer
(C)
Inventory
19
In which situation would it be easier to determine the price for inventory held?
Answer
(C)
When there is a small number of easily distinguishable items
20
Which of the following statements accurately describe the vertical format of an income statement?
Answer
(D)
It lists revenues, then subtracts costs and expenses sequentially to arrive at net profit.
21
What do liabilities represent in a statement of financial position?
Answer
(B)
What a business owes to others.
22
What does an opening inventory at the start of the accounting year do?
Answer
(A)
Will contribute in the cost of sales.
23
What does the balance sheet represent at a specific point in time?
Answer
(B)
The company's financial position (assets, liabilities, and equity).
24
Which inventory valuation method assumes that the items left in inventory are the earliest ones to be purchased?
Answer
(A)
FIFO
25
What type of asset is goodwill?
Answer
(C)
Intangible
26
What could a business do if they have insufficient working capital?
Answer
A
B
C
27
Which item should be included in current assets?
Answer
(C)
Inventory
28
What is the accounting equation?
Answer
(A)
Assets = Liabilities + Capital
29
What would reduce the net purchases value?
Answer
(A)
Purchase returns
30
What is the effect on working capital when a company pays off a short-term loan?
Answer
A
C
31
Which type of asset is expected to be used for more than one accounting period?
Answer
(B)
Non-current assets
32
What calculation is involved in the Trading Account?
Answer
(B)
Calculating gross profit
33
In the income statement, which item usually appears immediately after sales revenue?
Answer
(A)
Cost of goods sold
34
Which of the following does not appear on the statement of financial position?
Answer
(C)
Sales
35
In a statement of financial position, what does 'Liabilities' represent?
Answer
(B)
What a company owes.
36
Which account is affected by the recording of carriage outwards?
Answer
(D)
Carriage Outwards
37
Which of the following are considered liabilities on a statement of financial position?
Answer
A
B
38
What effect will profit for the year have on the capital account?
Answer
(A)
It will increase it.
39
Which of the following is an example of a current liability?
Answer
(B)
Accounts payable
40
Which accounting principle is MOST closely associated with the valuation of inventory at the lower of cost or net realisable value?
Answer
(C)
Prudence
41
Which inventory valuation method typically gives the highest valuation when prices are rising?
Answer
(A)
FIFO
42
If a company has a positive working capital, what does that imply?
Answer
(B)
It has more current assets than current liabilities.
43
What financial statement provides information about a company's financial position at a specific point in time?
Answer
(D)
Balance Sheet
44
What is the purpose of the 'Allowance for Doubtful Accounts'?
Answer
(B)
To estimate the amount of uncollectible accounts receivable.
45
What is the formula for calculating net assets?
Answer
(B)
Assets - Liabilities
46
In a business, what does the term "capital employed" represent?
Answer
(D)
The amount of capital invested in a business.
47
What are the advantages of using departmental accounts?
Answer
A
B
D
48
In inventory management, what does 'LIFO' stand for?
Answer
(A)
Last In First Out
49
Which of the following would be found under the assets section of a Statement of Financial Position?
Answer
A
C
50
Which factors would affect the decision to close a poor performing department?
Answer
A
B
C
D