Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 13)
1
Which of the following is the primary focus of the manufacturing account?
Answer
(B)
To calculate the cost of production.
2
In accounting, what does the term "provision" often refer to?
Answer
(A)
An estimate of a future expense or liability.
3
What is the formula for calculating the Gross Profit if sales is $240,000 and the mark-up is 50%?
Answer
(A)
$80,000
4
What is the difference between a trading and a service business?
Answer
(A)
A trading business buys goods to sell, while a service business provides services.
5
What are components of the manufacturing overhead?
Answer
A
B
D
6
What are the primary components of prime cost?
Answer
(B)
Direct Materials and Direct Labor
7
A trading business differs from a service business primarily in how it handles:
Answer
(B)
Cost of goods sold
8
Which financial statement reports the profitability of a company over a specific period?
Answer
(C)
Income Statement
9
Which financial statement is used to calculate the gross profit?
Answer
(B)
Income Statement
10
Which item would appear on the debit side of a trial balance?
Answer
(B)
Cash
11
Which of the following are included in the partnership agreement?
Answer
A
B
C
12
Which of the following is a potential disadvantage of operating as a partnership compared to a corporation?
Answer
(D)
Unlimited liability.
13
What is the formula for calculating net profit or loss?
Answer
(C)
Revenue - Expenses
14
Which items are usually included in a partnership's Statement of Changes in Equity?
Answer
A
B
C
15
What do you add to calculate the amount of subscriptions to record in the income and expenditure account?
Answer
A
C
16
What type of item is depreciation?
Answer
(C)
An expense
17
Which costs are included in the cost of production?
Answer
A
B
C
18
What is the term used for the excess of income over expenditure?
Answer
(C)
Surplus
19
Which statement shows the financial position of a business?
Answer
(C)
The statement of financial position.
20
When a company receives cash in advance for services to be performed, how is it recorded?
Answer
(C)
Debit Cash, Credit Unearned Revenue.
21
How does adjusting for accrued income affect the accounting equation?
Answer
(C)
Increases assets and increases equity.
22
What is the primary purpose of an income statement?
Answer
(B)
To calculate the profit or loss for a specific period
23
What will happen if the sales revenue is $300,000 and the cost of sales is $210,000?
Answer
(C)
The gross profit will be $90,000
24
What would be considered the cost of goods sold?
Answer
(C)
The total cost of producing the finished goods that were sold during the period
25
Which of the following are examples of prime costs?
Answer
A
B
26
Which account is increased when an owner invests cash into the business?
Answer
(B)
Cash
27
Which of the following are elements of a partnership's capital?
Answer
A
B
28
What is the impact on the balance sheet from a company declaring a dividend?
Answer
A
C
29
A club’s subscriptions in arrears at the start of the year were $1,000. During the year, the club received subscriptions of $20,000. At the end of the year, subscriptions in arrears were $1,500. What is the subscription income shown in the income and expenditure account?
Answer
(C)
$21,500.
30
What type of business would typically have Cost of Goods Sold as a key item on its income statement?
Answer
(B)
Trading business
31
What is the primary purpose of the Income and Expenditure Account for a non-profit organization?
Answer
(C)
To determine whether the society has a surplus or a deficit.
32
In a sole trader business, what determines the owner's capital?
Answer
(C)
The owner's initial investment plus profits less drawings
33
What impact does a write-off of uncollectible accounts have on the allowance for doubtful debts?
Answer
(B)
Decreases the allowance.
34
Which of the following are considered assets?
Answer
A
C
35
What does WIP stand for, in manufacturing?
Answer
(A)
Work In Progress
36
Which of the following is a component of the cost of goods manufactured (COGM)?
Answer
(C)
Direct materials used
37
What costs are components of the cost of production?
Answer
A
B
D
38
What is the purpose of calculating the cost of production?
Answer
(C)
To prepare the income statement
39
In a partnership, what is the primary factor influencing the decision-making process?
Answer
(B)
The partnership agreement
40
What is the effect on the financial statements when adjusting for a prepaid expense?
Answer
(B)
Decreases assets and increases expenses.
41
Which of the following would be used in calculating the total credit purchases?
Answer
(B)
Opening and closing balance for trade payables and cash paid to suppliers
42
What does a partnership agreement usually cover?
Answer
A
B
C
43
Which is the most important purpose of the partnership agreement?
Answer
(D)
To have an understanding on possible future disagreements.
44
What is the main function of the statement of cash flows?
Answer
(B)
To report the sources and uses of cash during a period.
45
Which of the following best describes the 'matching principle' in accounting?
Answer
(C)
Expenses are matched with the revenues they help generate.
46
What would be the impact of paying for supplies with cash on the accounting equation?
Answer
(D)
Decrease assets, no effect.
47
Which of the following items would be included in an income statement?
Answer
(C)
Revenue
48
What is the impact of a partner's drawings on their capital account?
Answer
(C)
It decreases the capital account.
49
When a partner contributes additional capital to the partnership, which of the following is most likely to occur?
