Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 16)
1
What is the effect of recording depreciation expense on the balance sheet?
2
In the provided information about the income statement, what is the role of the 'cost of goods sold' (or cost of sales)?
Answer(B)
To show the direct costs involved in producing goods.
3
How does the admission of a new partner typically affect the partnership's existing capital accounts?
Answer(B)
They remain unchanged as the admission doesn't directly impact them.
4
What is a key reason for forming a partnership?
5
Which of the following is an advantage of a partnership compared to a sole proprietorship?
6
What is the primary purpose of the statement of financial position (balance sheet)?
Answer(B)
To show a company's financial position at a specific point in time.
7
Which type of cost is allocated to products using a predetermined overhead rate?
8
Which statement shows assets and liabilities?
Answer(B)
The statement of financial position
9
Which of the following statements is correct regarding prepaid expenses?
Answer(C)
Prepaid expenses are assets that become expenses over time.
10
The main disadvantage of a partnership is:
Answer(B)
The difficult decision-making process.
11
When a business receives cash in advance for providing services, what happens?
12
What is the purpose of an income and expenditure account?
Answer(C)
To determine the profit or loss for a period.
13
What is the nature of the 'accumulated fund' or 'capital' in a non-profit organization?
14
Which of the following best describes the matching principle?
Answer(B)
Revenues should be matched with expenses in the same accounting period.
15
In the income statement, which comes before the profit for the year?
16
What is the purpose of an 'appropriation account' in a partnership's financial statements?
Answer(B)
To distribute the profit/loss among the partners.
17
What cost is allocated to products using a predetermined overhead rate?
18
What are some of the disadvantages of a partnership?
19
When should revenue be recognized under the revenue recognition principle?
Answer(B)
When goods or services are delivered or performed.
20
Which financial statement presents the results of operations for a specific period?
21
What is the role of the partnership agreement?
Answer(B)
To dictate how profits and losses are divided.
22
What type of account is used to record the collection of money from members of a club or society?
23
Where are administrative expenses reported?
24
What items are included as liabilities on the Statement of Financial Position of a non-profit organization?
25
What does the term 'assets' mean in accounting?
Answer(C)
The resources owned by a business that have future economic value.
26
What will be included in the profit-sharing ratio?
27
What would be presented on the debit side of an income and expenditure account?
28
What is the impact of depreciation on the statement of financial position?
Answer(C)
Decreases the value of the assets.
29
What account is debited when unearned revenue is earned?
30
What type of partner is typically involved in the day-to-day operations of a partnership?
31
Which of the following is an example of an income for a club?
32
What is a common component of the equity section of the balance sheet for a partnership?
Answer(B)
Partner's Capital Accounts.
33
What is the main difference between the members of a club or society and a commercial business?
Answer(A)
Clubs and societies do not aim to make a profit.
34
What is usually included in a Statement of Financial Position?
35
Answer(B)
An expense that has been incurred but not yet paid.
36
Which accounting method is used for irrecoverable debts?
Answer(C)
Establishing a provision for irrecoverable and doubtful debts
37
What is the effect of an adjustment on the provision for doubtful debts if the estimated amount of uncollectible debts is increased?
Answer(C)
Increase the expense and increase the liability.
38
How would a partner's withdrawal of cash from the partnership be recorded in the accounting records?
Answer(B)
Debit to Drawings, credit to Cash.
39
Which of the following should be recognized as an asset in the balance sheet?
Answer(B)
Outstanding subscriptions.
40
What would be the effect of including an item of capital expenditure in the income and expenditure account?
Answer(B)
The deficit would be overstated.
41
Which of the following best describes a 'current asset'?
Answer(A)
An asset that is expected to be used up or converted to cash within one year.
42
In a partnership, what is the purpose of the appropriation section of the income statement?
Answer(B)
To allocate profits/losses according to the agreement.
43
Which accounting principle is essential for creating accruals and provisions for doubtful debts?
44
What is the impact of a partner's salary on the profit and loss of the partnership?
Answer(B)
It reduces the partnership's net income before allocation to the partners.
45
What does the term "drawings" refer to in a partnership?
Answer(C)
The partners' withdrawals of cash or assets from the business.
46
What components are typically included in the manufacturing overhead?
47
Which accounting concept is most relevant when recognizing an estimated loss from a potential bad debt?
48
Which financial statement provides information about the solvency of a partnership?
49
What effect does recording depreciation expense have on net income?
50
What are some of the considerations made by a partnership before formation?
