Accounting for IGCSE & O level - Final Statements (Section 5)
1
What is the effect of closing inventory on the income statement?
Answer
(A)
Decreases cost of goods sold
2
If a company has a lot of inventory, which could be one of the consequences?
Answer
(C)
May become obsolete
3
What is the net realizable value?
Answer
(B)
Estimated selling price less any additional costs
4
Which one reduces the owner's equity?
Answer
(B)
Drawings
5
What are the most important financial statements?
Answer
(D)
All of the above
6
What items will appear on a departmental income statement?
Answer
A
B
C
7
What is the term for goods remaining at the end of the accounting period?
Answer
(C)
Closing inventory
8
Which formula can be used to calculate profits or losses?
Answer
(A)
Gross Profit - Total Expenses
9
What is the effect of purchase returns in the calculation of cost of goods sold?
Answer
B
C
10
Which of the following is a measure of how quickly and easily current assets can be converted into cash?
Answer
(B)
Liquidity
11
The statement of financial position is also known as?
Answer
(A)
Balance sheet
12
Profit for the year will have which effect on the net assets and capital of the business?
Answer
(B)
Increase both.
13
What is the book value equal to?
Answer
(B)
Original price - accumulated depreciation
14
What is an example of non-current liability?
Answer
(C)
Commercial Bank Loan
15
What is the difference between the assets and the liabilities?
Answer
(A)
Owner's Equity
16
Which of the following is an example of an intangible asset?
Answer
(C)
Goodwill
17
The rule for valuing inventories is that they should be valued at the lower of their cost or net realisable value. This rule is a practical application of which accounting principle?
Answer
(C)
Prudence
18
What do we understand by 'Current Assets'?
Answer
(C)
Those assets that will be used up relatively quickly within the next accounting year.
19
Which of the following are examples of non-current assets?
Answer
A
C
20
Which of the following is a method to value inventory?
Answer
(D)
All of the above
21
Where should be a single horizontal income statement be based?
Answer
(B)
Business A and B
22
Which of the following is NOT a method of allocating expenses to different departments?
Answer
(D)
Proportion to the bank loan
23
What do financial statements aim to present?
Answer
(C)
A fair representation of a company's financial performance and position.
24
What impact do carriage inwards charges have on the cost of purchases?
Answer
(B)
Increase the cost of purchases.
25
Where are sales revenues recorded?
Answer
(B)
In the Income Statement
26
Which of the following is a characteristic of current assets?
Answer
(B)
They are expected to be converted to cash within one year or the operating cycle, whichever is longer.
27
What is the second part of an income statement also known as?
Answer
(B)
Profit and Loss Account
28
Which of these items would increase the net profit for the year?
Answer
(C)
Decrease in expenses.
29
What does the term "net sales" mean?
Answer
(A)
Gross sales minus sales returns and allowances.
30
What does "net sales" mean?
Answer
(B)
Sales revenue less sales returns.
31
Which of the following is included in the cost of goods available for sale?
Answer
(B)
Opening inventory
32
How do drawings affect capital?
Answer
(B)
Decrease capital
33
Which of the following is typically NOT considered an asset?
Answer
(D)
Accounts payable
34
Which of the following would increase the owner's equity?
Answer
(C)
Profit
35
Which is an example of an expense?
Answer
(B)
Salary
36
When is it wise to sell non-current assets?
Answer
(D)
All of the above
37
Which of the following would decrease owner's equity?
Answer
(C)
Withdrawals by the owner.
38
Which of the following will the business need to include in the income statement?
Answer
A
B
C
39
What is the main purpose of a profit and loss account?
Answer
(B)
To calculate profit for the year.
40
Which of the following is an example of a running cost or expense?
Answer
(C)
Advertising and Marketing Costs
41
What impact does profit have on the capital account?
Answer
(B)
Increases capital
42
Which accounting principle is being applied by valuing inventories at the lower of their cost or net realisable value?
Answer
(C)
Conservatism
43
What can the analysis of a departmental income statement identify?
Answer
A
B
C
44
Which account(s) will be used to determine the gross profit?
Answer
A
B
45
How can the business increase its profit?
Answer
(B)
By increasing their selling prices.
46
Which of the following is an example of a current asset?
Answer
(C)
Accounts Receivable
47
What is the relationship between assets, liabilities, and owner's equity?
Answer
(A)
Assets = Liabilities + Owner's Equity
48
What impact would a business buying stock have on its working capital?
Answer
(C)
No impact
49
What is a bank overdraft classified as in the statement of financial position?
Answer
(C)
Current liability
50
What does the text state is the result of the three different inventory valuation methods?
