Accounting for IGCSE & O level - Final Statements (Section 13)
1
What does the 'matching principle' primarily focus on?
Answer(B)
Matching expenses with revenue
2
What can cause the book value of an asset to differ from its market value?
3
What happens to the value of inventory when the prices are rising?
4
What is the primary goal of valuing assets at a fair value?
Answer(B)
To reflect the current market conditions.
5
Which of the following is a non-current liability?
6
Which inventory valuation method calculates an average price across all purchases made?
7
Under US GAAP, which of the following inventory valuation methods is *not* allowed?
8
What is the impact of the 'lower of cost or net realisable value' rule on the statement of financial position?
Answer(A)
It could reduce the reported value of inventory.
9
What does a 'bank overdraft' represent on a statement of financial position?
Answer(B)
The business owing money to the bank
10
What does 'cost of sales' mainly cover?
Answer(B)
Costs directly involved in the sale of goods.
11
In a departmental income statement, what is used to determine the gross profit?
Answer(B)
Sales revenue less cost of goods sold.
12
Which valuation method is used when there are many indistinguishable items?
13
What is the general advantage of presenting a statement of financial position in a vertical format?
Answer(B)
It's easier to understand and see how the assets, liabilities, and capital are related.
14
What does the departmental income statement assist managers in doing?
Answer(C)
Identifying departments that are performing poorly.
15
What is the role of a statement of financial position?
Answer(B)
To show the financial health of a business at a given point in time.
16
What are the components of the accounting equation?
Answer(B)
Assets, Liabilities, Equity
17
Which section of the balance sheet lists the resources owned by a company?
18
What financial document provides a snapshot of a company's financial position at a specific point in time?
Answer(C)
Statement of financial position
19
To calculate the value of closing inventory, what two things do we need to know?
20
Which of the following is an example of a non-current asset?
21
What does the matching principle state?
Answer(A)
Match expenses to revenue
22
Which of the following accounts will appear in the income statement?
23
How do drawings affect owner's equity?
24
What is the impact of depreciation on the statement of financial position?
Answer(B)
Decreases the value of an asset.
25
What is the first section of an income statement called?
26
What best describes goodwill?
Answer(B)
The excess of the purchase price over the fair value of net assets acquired.
27
Which of the following best describes 'liabilities' in a statement of financial position?
Answer(B)
What the business owes to others.
28
Which item is considered when determining Net Realisable Value of inventory?
Answer(C)
Estimated selling price less costs to sell.
29
Which factors should be considered when determining the value of inventory on the Statement of Financial Position?
30
In what section of the Statement of Financial Position is the total value of assets shown?
31
What is the difference between an asset and a liability?
Answer(B)
Assets represent what a company owns, while liabilities represent what a company owes.
32
What is the impact of unsold goods at the end of the accounting year?
Answer(A)
Will not contribute to the cost of sales.
33
What does the Statement of Financial Position show?
Answer(B)
A company's financial position at a specific time.
34
What are the liabilities?
Answer(C)
Amounts owing to outside people or organizations.
35
What does the term 'net realisable value' refer to concerning inventory?
Answer(B)
The amount the inventory could be sold for less any additional costs to make the sale.
36
What is the formula for the accounting equation?
Answer(A)
Assets = Liabilities + Owner's Equity
37
When should a physical count of inventory items typically be carried out?
38
What are the elements of the accounting equation?
Answer(B)
Assets, liabilities, and equity.
39
What is the primary objective of financial accounting?
Answer(C)
To provide useful financial information to external users.
40
What is the impact of depreciation on an asset's carrying value?
Answer(B)
It decreases the carrying value.
41
How does the inclusion of purchase returns affect the cost of goods sold (COGS)?
42
Which principle is primarily applied when valuing inventory at the lower of cost or net realisable value?
43
Which of the following events will increase the net assets of a business?
44
How can a business increase profit?
45
What is the treatment of goodwill in a statement of financial position?
Answer(B)
It is only included if it's the result of an acquisition.
46
During the year, the owner took $1,000 for personal use. What is the effect of these personal drawings?
Answer(B)
Decrease the owner's equity
47
What are the two main sections of a statement of financial position?
48
What does the statement of financial position report?
Answer(C)
Assets, liabilities, and equity at a point in time.
49
Which of the following are included in the calculation of cost of goods sold?
50
What is the classification of 'Carriage Outwards' on the income statement?
