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Accounting for IGCSE & O level - Final Statements (Section 6)

1
Why is it important to identify the contribution to profit or loss of each department in a business?
Answer
(B)
To identify and investigate poor performance.
2
Which inventory valuation method uses the price of the earliest batches purchased to value the inventory?
Answer
(B)
LIFO
3
Which items impact the Statement of Financial Position (Balance Sheet)?
Answer
A
B
D
4
What is the last calculation in the income statement?
Answer
(C)
Profit for the year
5
Which of the following is an example of a current asset?
Answer
(C)
Inventory
6
What is the role of the trial balance in preparing the income statement?
Answer
(C)
It lists all the ledger account balances that are used to prepare the income statement.
7
In the income statement, which section comes after calculating gross profit?
Answer
(B)
Operating Expenses
8
Where can you find the data needed to prepare the statement of financial position?
Answer
(B)
Trial balance.
9
How is working capital calculated?
Answer
(C)
Current Assets - Current Liabilities
10
If a company has a net loss for the year, where will that amount be recorded in the financial statements?
Answer
(C)
As a reduction in retained earnings on the balance sheet.
11
Which of the following is NOT a typical non-current asset?
Answer
(C)
Cash held on the business premises
12
Which statement reflects the financial position of a business at a specific point in time?
Answer
(C)
Statement of Financial Position
13
What is the purpose of the closing inventory in calculating the cost of goods sold?
Answer
(C)
To determine the value of unsold goods at the end of the accounting period.
14
Which of the following is an example of an intangible asset?
Answer
(C)
Goodwill
15
What is 'Net Realizable Value (NRV)'?
Answer
(C)
The estimated selling price less the costs to complete or sell.
16
What is 'gross profit' used for?
Answer
(C)
To determine a company's profitability.
17
What is the general sequence of presenting an income statement?
Answer
(B)
Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, Net Income
18
What accounting principle is relevant when inventory is valued at the lower of cost or net realisable value?
Answer
(C)
Prudence
19
Which of the following is a current asset?
Answer
(C)
Inventory
20
What accounting principle directly relates to accurately valuing the closing inventory?
Answer
(A)
Matching principle
21
If a business has assets of $80,000 and liabilities of $30,000, what is the owner's equity?
Answer
(B)
$50,000
22
Which of the following is a characteristic of a 'current asset'?
Answer
(A)
It is expected to be converted to cash within one year or the normal operating cycle.
23
What is the primary objective when adjusting trade receivables?
Answer
(B)
To reflect the actual amount expected to be collected.
24
Which financial statement is most directly impacted by the calculation of gross profit?
Answer
(C)
Income Statement
25
How does depreciation affect the net book value of an asset?
Answer
(C)
It decreases the net book value.
26
If the closing inventory is understated, what impact does this have on the calculated cost of goods sold (COGS)?
Answer
(A)
COGS is overstated.
27
What happens to the owner's capital when the business makes a profit?
Answer
(C)
It increases.
28
Which of the following is a non-current asset?
Answer
(C)
Equipment
29
Which accounts are affected by the recording of carriage inwards?
Answer
(A)
Purchases and Carriage Inwards
30
Which of the following is a method for establishing the quantity of inventory?
Answer
(A)
Carry out a physical count
31
What are the implications if NRV is less than cost?
Answer
A
B
C
32
What is the formula to determine the Cost of Goods Sold (COGS)?
Answer
(B)
Beginning Inventory + Purchases - Ending Inventory
33
Which of the following is a current liability?
Answer
(C)
Salaries payable
34
Which accounts are shown in the capital account?
Answer
(C)
Drawings and Profit/Loss
35
What does a high gross profit margin generally indicate?
Answer
(D)
The business has low cost of goods sold.
36
If a company's assets are $500,000 and its liabilities are $150,000, what is the owner's equity?
Answer
(B)
$350,000
37
What is the role of a departmental income statement?
Answer
(B)
To analyze the performance of each department.
38
What effect does a company's purchase of equipment on credit have on the accounting equation?
Answer
(B)
Assets increase, liabilities increase
39
What are some examples of expenses that Jo's business had?
Answer
A
B
D
40
What will be included in the total expenses for a period?
Answer
A
B
41
What is the primary purpose of making a provision for doubtful debts?
Answer
(B)
To recognise that some receivables may not be collected.
42
If a company is experiencing rising costs, which inventory valuation method is most likely to result in the lowest net income (profit)?
Answer
(B)
LIFO
43
Why is it important to value inventory at the lower of cost or net realisable value?
Answer
(C)
To ensure assets are never overvalued.
44
What is the impact of carriage outwards charges on profit?
Answer
(C)
They reduce profit.
45
How are shared expenses typically allocated between departments?
Answer
B
C
46
When valuing inventory, what is 'Net Realizable Value (NRV)'?
Answer
(C)
Estimated selling price less selling costs.
47
Which accounts will be needed to calculate the net income?
Answer
A
B
D
48
Which of the following is NOT an element used in the calculation of capital employed?
Answer
(D)
Trade payables.
49
In a departmental income statement, what is the primary purpose of having separate columns?
Answer
(C)
To show the profit or loss for each department.
50
What will happen to the capital account at the end of the year?
Answer
(C)
Credit the income statement with the profit