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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 15)

1
What is the key difference between direct materials and indirect materials?
Answer
(B)
Direct materials are a significant component of a finished product, while indirect materials are not.
2
What is a liability in the accounting equation?
Answer
(B)
Something the company owes.
3
What is a debenture?
Answer
(C)
A fixed-income instrument.
4
What is the effect of closing inventory being lower than expected on a company's financial statements?
Answer
(C)
Increase cost of goods sold, decrease net profit.
5
In the context of financial statements, what does the 'cost of sales' represent?
Answer
(B)
The total cost of producing or acquiring the goods sold.
6
In a partnership, what determines the distribution of profits and losses among partners?
Answer
(C)
The partnership agreement.
7
How is 'gross profit' calculated?
Answer
(B)
Revenue - Cost of Goods Sold
8
What impact does a surplus have on the accumulated fund?
Answer
(B)
Increases the accumulated fund.
9
What accounting principle states that expenses should be matched with revenues?
Answer
(B)
Matching principle
10
In a partnership, what is the purpose of the appropriation account?
Answer
(B)
To allocate profits or losses among partners.
11
How are the direct costs in a manufacturing business generally traced?
Answer
(B)
Directly traced to a specific product or job
12
What does a 'drawing' represent in a partnership?
Answer
(C)
Funds or assets taken out of the business by a partner for personal use.
13
Which financial statement is prepared at the end of an accounting year?
Answer
(D)
Income statement
14
Which of the following would be classified as a current asset?
Answer
(B)
Accounts Receivable.
15
Which of the following is the principal goal of a club?
Answer
(C)
To provide services to its members.
16
Which of the following is a fundamental difference between the income and expenditure account and the receipts and payments account?
Answer
(B)
The receipts and payments account is based on the cash basis and the income and expenditure account on the accruals basis.
17
Which of the following best describes the term 'liabilities'?
Answer
(B)
Obligations of a company to others.
18
Which expenses are typically found on the income statement?
Answer
A
B
19
What is the key difference between direct and indirect labor?
Answer
(B)
Direct labor costs are easy to trace to a product, while indirect labor costs are not.
20
Which of the following is essential for a partnership agreement?
Answer
(A)
The amount each partner contributed to the business.
21
What happens when a business has prepaid expenses at the end of the accounting period?
Answer
(B)
Expense is deferred to the next period.
22
What is the order of accounting in partnerships?
Answer
(C)
Income statement, appropriation account, statement of financial position
23
Which account is increased when a customer pays for goods or services on account?
Answer
(C)
Cash
24
What are examples of conversion costs?
Answer
A
B
25
What costs make up the cost of goods sold (COGS)?
Answer
(A)
Beginning Inventory + Purchases - Ending Inventory
26
A club had the following information for subscriptions: Subscriptions received during the year $15,000, subscriptions in arrears at the start of the year $2,000, subscriptions in arrears at the end of the year $3,000. What is the total subscription income in the income and expenditure account?
Answer
(A)
$14,000.
27
In the context of accounting, what do the terms "debentures" and "bonds" refer to?
Answer
(B)
Debt instruments
28
Which financial statement shows the financial position of a business at a specific point in time?
Answer
(C)
Statement of Financial Position
29
Which item is NOT included in a manufacturing account?
Answer
(C)
Selling and Admin Expenses
30
Which of the following is a current liability?
Answer
(D)
Accounts Payable.
31
In a partnership, interest on capital is usually calculated based on:
Answer
(C)
Capital balances.
32
Which cost is generally *not* included in the manufacturing overhead?
Answer
(C)
Direct materials
33
Which of the following would be included in the assets of a club in its balance sheet?
Answer
A
C
34
What would be the impact on the Income and Expenditure account for a club, if subscriptions in arrears were written off during the year?
Answer
(D)
Have no effect
35
Which of the following items are components of factory overhead?
Answer
A
B
36
Which financial statement is prepared at the end of a period?
Answer
(B)
Income statement
37
What is the impact of a sole trader taking cash from the business for personal use?
Answer
(C)
Decreases assets and decreases owner's equity.
38
If a club purchased some goods for resale and had some left over at the end of the accounting year, what adjustment is needed?
Answer
(C)
Include the cost of the goods remaining as stock
39
Which of the following is included in the cost of goods sold (COGS)?
Answer
A
B
40
What is an advantage of forming a partnership compared to a sole proprietorship?
Answer
(B)
Easier access to capital.
41
Which accounts are affected when adjusting for an accrued expense?
Answer
(B)
A liability and an expense account.
42
What does the term 'conversion costs' refer to?
Answer
(C)
Direct labor plus factory overhead
43
What is the calculation for cost of goods sold (COGS)?
Answer
(A)
Beginning Inventory + Purchases - Ending Inventory
44
Which of the following costs are usually considered a part of the factory overhead?
Answer
(C)
The cost of insurance on the factory building
45
What information is needed to calculate average inventory?
Answer
A
B
46
If the average inventory is $11,000 and the rate of inventory turnover is 8.5 times, what is the cost of sales?
Answer
(A)
$93,500
47
What is often determined in the partnership agreement?
Answer
A
B
C
D
48
What are typically listed in a partnership's Statement of Changes in Equity?
Answer
A
B
C
49
During the first year, what did the partnership business record?
Answer
(B)
ledger accounts
50
What are some potential disadvantages of a partnership?
Answer
A
D