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Accounting for IGCSE & O level - Final Statements (Section 2)

1
What is the main difference between a periodic and perpetual inventory system?
Answer
(B)
A perpetual system tracks inventory continuously, while a periodic system does not.
2
Which items need to be included in the income statement?
Answer
A
B
3
A statement of financial position reports the _______, Liabilities and owner's equity of a business at a given point in time.
Answer
(B)
Assets
4
Which of the following is an example of a non-current liability?
Answer
(C)
Long-term loan
5
What is the key aim for business owners?
Answer
(B)
To make a profit and generate capital gains.
6
Which financial statement shows a company's assets, liabilities, and owner's equity?
Answer
(C)
Balance sheet
7
What does the term "carriage inwards" mean?
Answer
(B)
The cost of transporting goods from the supplier.
8
What is the purpose of the 'Statement of financial position'?
Answer
(B)
To list the company's assets, liabilities, and owner's equity at a specific point in time.
9
What is a business's statement of financial position also called?
Answer
(B)
Balance Sheet
10
Which of the following is a key aspect of inventory valuation?
Answer
(B)
Physical count of inventory
11
What elements are required to determine Profit or Loss for the year?
Answer
A
B
C
12
Which of the following is an example of a non-current asset?
Answer
(C)
Equipment
13
What does "carriage inwards" represent in the accounting context?
Answer
(B)
Cost of transporting goods purchased from suppliers.
14
What are the aims of the business?
Answer
(A)
Increase profit
15
How to calculate gross profit?
Answer
(A)
Sales - Cost of Sales
16
Which of the following does NOT affect the gross profit?
Answer
(C)
Operating expenses
17
Financial statements are prepared to calculate and beyond the profit and value of a business at the end of each accounting year. What else do they do?
Answer
A
B
C
18
What happens to revenue returned during the year?
Answer
(A)
Decreases revenue
19
In the context of inventory valuation, what is the significance of "net realizable value"?
Answer
(B)
It is the estimated selling price less any costs of completion and disposal.
20
If a business sells goods on credit, what happens?
Answer
(B)
The business creates an account receivable.
21
Which of the following methods of inventory valuation is NOT permitted under IFRS?
Answer
(B)
LIFO
22
What is included in Capital Employed?
Answer
(A)
Net Assets
23
Which of the following is NOT a way to increase the amount of money available to a business?
Answer
(D)
Decreased owner's equity
24
What are the effects of rising prices in the use of the LIFO method?
Answer
(B)
Higher cost of goods sold, leading to a lower net income and lower tax liability.
25
What does a business's working capital represent?
Answer
(C)
The difference between current assets and current liabilities
26
Which of the following is considered an expense?
Answer
(D)
Advertising
27
What are assets in a statement of financial position?
Answer
(A)
Items of value owned by the business
28
What is the purpose of preparing a departmental trading account?
Answer
(A)
To calculate gross profit for each department.
29
Which of the following is not a Current liability?
Answer
(C)
Mortgage to pay the business
30
How is net profit calculated?
Answer
(A)
Sales - Cost of Goods Sold - Operating Expenses
31
Which of the following affect the gross profit?
Answer
A
B
32
Which statement summarizes a company's financial performance over a specific period?
Answer
(B)
Income Statement
33
In times of rising purchase prices, which method of valuation results in higher profits – and why?
Answer
(A)
FIFO, because the older, lower-cost inventory is sold first.
34
What items appear on the left-hand side of a horizontal statement of financial position?
Answer
A
D
35
Which of the following statements is/are true regarding inventory valuation methods?
Answer
A
C
D
36
What is the role of the trial balance?
Answer
(C)
To check if the debits and credits in the general ledger are equal.
37
Which of the following is an example of a current liability?
Answer
(C)
Accounts payable
38
What is the core purpose of the 'profit and loss' account?
Answer
(C)
To compute the profit or loss for a specific period.
39
What does owner's equity represent?
Answer
(B)
The owner's investment in the company plus accumulated profits.
40
Assets are financed by:
Answer
(D)
Owner's Equity and From Liabilities
41
What is the primary purpose of preparing a statement of financial position?
Answer
(C)
To provide a snapshot of the business's assets, liabilities, and equity at a specific point in time
42
What does the owner put into the business?
Answer
(C)
Equity
43
Under a perpetual inventory system, what is the best way to find out the inventory on hand?
Answer
(C)
Look at the inventory records
44
Which of the following items would increase owner's equity?
Answer
(B)
Business profits
45
Which of the following is an example of a cost that is usually included in the inventory valuation?
Answer
(C)
Freight-in
46
Which of the following would be found on a departmental trading account?
Answer
A
B
D
47
Which method would you use to determine the value of inventory?
Answer
(D)
All the above
48
In accounting, what is a liability?
Answer
(B)
Something the company owes.
49
What are the two sections of a business assets?
Answer
(B)
Current and Non-Current
50
Which items will affect the owner's equity at the end of the accounting year?
Answer
A
B