Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 10)
1
In a receipts and payments account, cash movements are summarized as:
2
What does a partner's loan represent?
Answer(A)
A loan made by the partner to the business.
3
What should be done at the end of the year for the drawings account?
Answer(A)
It is balanced off and transferred to the current account
4
Which of the following would be included in the Receipts and Payments Account?
Answer(C)
Cash received from donations.
5
What is the role of a partnership agreement?
Answer(C)
To outline the rights and responsibilities of each partner.
6
Which of the following adjustments would increase the net profit?
7
What cost consists of the sum of the direct costs, the opening work in progress inventory, less the closing work in progress inventory?
8
What would be the immediate accounting effect of a partner investing cash into the business?
Answer(B)
Debit Cash, Credit Partner's Capital
9
Trading businesses provide which of the following?
Answer(B)
Goods to re-sell to customers
10
What is the formula for calculating the gross profit margin?
11
Auditing of financial statements in sole traders and partnerships:
12
In relation to a company, which of the following is correct?
13
What is the effect of recording an accrual of expenses?
Answer(B)
Increase liabilities and increase expenses
14
What is the primary difference in share transfer between private and public companies?
Answer(A)
Public companies allow easy transfer of shares.
15
What is the correct order of the following stages for preparing an appropriation account?
Answer(B)
Deduct interest on capital, deduct partners' salaries, transfer net profit to current accounts
16
What is the relationship between the mark-up percentage and the gross profit margin?
Answer(B)
They are used for calculating the selling price, but are different in percentage.
17
What is the accounting method to record the initial capital contribution of a partner?
Answer(B)
Credit the capital account
18
What would be considered an administrative expense?
Answer(B)
Depreciation of office equipment
19
What is the impact of the adjustment for accrued expenses on the balance sheet?
Answer(C)
Increases liabilities and decreases equity.
20
In a partnership, if a partner dies or retires, what will happen?
Answer(B)
The partnership can be terminated.
21
How are partner's salaries usually treated on the income statement?
Answer(B)
As an expense, reducing net income.
22
Which of the following items would typically appear on the credit side of a receipts and payments account?
23
What is the main function of a partnership agreement?
Answer(C)
To govern the relationship between partners.
24
Which financial statement shows a company's assets, liabilities, and equity at a specific point in time?
25
What is the purpose of a manufacturing overhead rate?
Answer(B)
To distribute overhead costs among all the products made.
26
What effect will a surplus have on a club's accumulated fund?
Answer(C)
It increases the accumulated fund.
27
What is the impact on the financial statements when the owner of a sole trader business takes cash out of the business for personal use?
Answer(C)
Decreases owner's equity and decreases assets.
28
What does the term "drawings" represent in accounting?
Answer(C)
Money the owner takes from the business for personal use.
29
What are the typical components of the income statement?
30
When a partner contributes capital, which account is typically credited?
31
In a partnership, which financial statement is prepared *after* the income statement?
32
Which of the following best describes unearned revenue?
Answer(C)
Cash received for goods or services that have not yet been provided.
33
What are the steps to follow for an accurate preparation of financial statements?
34
In a partnership, how do partners often share the roles?
Answer(B)
A specific partner has certain duties.
35
How is the distribution of net profit or loss among partners determined?
Answer(C)
As specified in the partnership agreement.
36
What is the impact of a prepaid expense on the financial position?
Answer(B)
Increase in assets and a decrease in liabilities.
37
In the context of incomplete records, what information is generally *not* readily available?
Answer(C)
Detailed records of income and expenses.
38
What type of account is used to track the financial position of a club or society at a specific point in time?
Answer(C)
Statement of Financial Position
39
What is the primary goal of the statement of cash flows?
Answer(C)
To track cash inflows and outflows.
40
What is the relationship between prime cost and conversion cost?
Answer(A)
Prime cost includes direct materials and direct labor; conversion cost includes direct labor and factory overhead.
41
In a manufacturing setting, which of the following is typically classified as factory overhead?
Answer(C)
Factory rent and utilities
42
What is the primary purpose of the income statement?
Answer(B)
To report the financial performance of a company over a period of time.
43
What is included in calculating conversion costs?
Answer(B)
Direct labor and factory overhead
44
What is a disadvantage of forming a partnership?
Answer(D)
Difficulties in decision-making.
45
Which accounts are commonly listed in the appropriation account?
Answer(C)
Interest on capital, partners' salaries, and the allocation of profit/loss.
46
What does the term 'surplus' mean in the context of a non-profit's Income and Expenditure Account?
Answer(B)
Income is higher than expenses.
47
What is the impact of adjusting for prepaid expenses?
Answer(B)
Decreases assets and increases expenses.
48
Which of the following is a component of the cost of goods sold (COGS)?
49
What is the purpose of making a provision for irrecoverable debts?
Answer(B)
To match revenue with the related expense.
50
How do you calculate gross profit?
Answer(A)
Revenue - Cost of Goods Sold
