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Accounting for IGCSE & O level - Final Statements (Section 7)

1
What is the primary purpose of a trial balance?
Answer
(C)
To ensure the accounting equation (Assets = Liabilities + Equity) is balanced.
2
Which items are typically classified as assets on the statement of financial position?
Answer
A
B
D
3
What is the definition of Working Capital?
Answer
(C)
Current Assets - Current Liabilities
4
Which of the following are examples of expenses?
Answer
A
B
C
5
What is "working capital" ?
Answer
(C)
Current assets minus current liabilities.
6
What is the impact of a net loss on the owner's equity section of the balance sheet?
Answer
(B)
Decreases the owner's equity
7
What is the accounting equation?
Answer
(C)
Assets = Liabilities + Equity
8
Which of the following represents the amount owed by the business to its creditors?
Answer
(B)
Liabilities
9
What is the impact of understating closing inventory on the current year's net profit?
Answer
(B)
Understates the net profit
10
What is the definition of a current liability?
Answer
(B)
A liability that will be paid within one year.
11
What is the function of a statement of financial position?
Answer
(B)
To show the financial position of a company at a specific point in time.
12
What is the primary goal of using a stock book or register for inventory?
Answer
(B)
To maintain a running balance of inventory
13
How do carriage inwards charges affect the calculation of gross profit?
Answer
(A)
They increase the cost of purchases, thus reducing gross profit.
14
Which statements are true regarding goodwill?
Answer
A
C
15
Which of the following represents a business's ownership stake?
Answer
(C)
Equity
16
In accounting, what does the term 'assets' represent?
Answer
(C)
Resources controlled by the company.
17
What is the main purpose of a departmental income statement?
Answer
(B)
To determine the profitability of each department.
18
What will happen if a business cannot pay for its running expenses?
Answer
(D)
The business will go into liquidation or insolvency.
19
Where are sales returns and allowances typically recorded in the income statement?
Answer
(B)
As a reduction from sales revenue.
20
How is gross profit calculated?
Answer
(B)
Sales - Cost of goods sold
21
What would be the consequence if a business was to close a department?
Answer
A
B
C
22
Which of the following is used in the calculation of gross profit?
Answer
B
C
23
Which of the following is a possible negative consequence of closing a department?
Answer
(C)
Loss of sales.
24
Which of the following is an example of a business expense?
Answer
(C)
Rent
25
What is the impact of a bad debt write-off on a company's financial statements?
Answer
(C)
Decreases net income.
26
Which of the following would decrease the gross profit?
Answer
B
D
27
What are the consequences of writing off a bad debt on a company's financial statements?
Answer
A
C
28
What is the formula to calculate working capital?
Answer
(B)
Current Assets - Current Liabilities
29
What is meant by 'historical cost' when valuing an asset?
Answer
(B)
The original purchase price.
30
How can a business make a good decision about the future of a poorly performing department?
Answer
A
B
31
If the revenue from sales is less than the cost of goods sold, what will the business have?
Answer
(B)
A gross loss.
32
What is the formula to calculate gross profit?
Answer
(C)
Sales - Cost of Sales
33
What are the primary components of a statement of financial position?
Answer
(B)
Assets, liabilities, and equity
34
Which of the following would *most* likely be allocated based on floor space occupied by a department?
Answer
(B)
Rent expense.
35
When calculating capital employed, which of the following would be included?
Answer
(C)
Non-current assets and non-current liabilities
36
Which of the following is true regarding how a business can improve its working capital?
Answer
B
D
37
What does the term 'going concern' mean in the context of financial statements?
Answer
(B)
The business is expected to continue operating for the foreseeable future.
38
Which of the following statements is true regarding the capital account?
Answer
A
C
D
39
Which of the following actions would DECREASE a company's working capital?
Answer
(B)
Paying accounts payable
40
Which statement is used to calculate and report the value of the business assets, liabilities, and capital?
Answer
(C)
Statement of Financial Position
41
Which section of the statement of financial position lists items that are available to convert into cash for the next year?
Answer
(B)
Current assets
42
How does recording a net loss affect the company's retained earnings?
Answer
(B)
Decreases retained earnings
43
What does 'historical cost' of an asset represent?
Answer
(B)
The original purchase price.
44
What is the effect of purchase returns on the amount of purchases?
Answer
(B)
Decreases the amount of purchases
45
What category does 'Accounts Receivable' fall under on a balance sheet?
Answer
(A)
Assets
46
What is a key benefit of using departmental accounts?
Answer
(C)
Improved understanding of departmental profitability.
47
If a business has a net loss, how does that affect the owner's capital account?
Answer
(B)
Decreases the capital
48
If a business has assets of $200,000 and liabilities of $50,000, what is the owner's equity?
Answer
(B)
$150,000
49
What is the impact of cash sales on a company's working capital?
Answer
(C)
Has no effect on working capital.
50
If a business has positive working capital, it means:
Answer
(A)
The business can easily pay its running expenses.