Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 17)
1
Which of the following is NOT a key element to consider when forming a partnership agreement?
Answer
(D)
Personal assets of the partners
2
Which of the following elements are typically included in the ledger accounts for partners?
Answer
A
B
C
D
3
How is a surplus treated in the Income and Expenditure account?
Answer
(B)
It is the same as a profit in a normal trading business.
4
In a manufacturing environment, which of the following would be classified as a direct material?
Answer
(C)
Steel used to manufacture automobiles
5
Where would a partner's salary be recorded in the financial statements?
Answer
(C)
In the Appropriation Account.
6
If a club's income exceeds its expenditure, this is known as a:
Answer
(C)
Surplus
7
What usually requires a partnership to be dissolved?
Answer
A
B
D
8
A business had opening and closing assets and liabilities. The owner introduced capital of $5,000 and made drawings of $10,000. If the business made a profit of $2,000 during the year, what was the change in the equity?
Answer
(B)
A decrease of $3,000
9
The partnership agreement should include which element?
Answer
A
B
C
10
Which of the following is an example of a direct cost in a manufacturing setting?
Answer
(C)
Raw materials used in production
11
What does 'unlimited liability' imply for partners in a general partnership?
Answer
(C)
They are personally responsible for all business debts.
12
What document outlines the terms and conditions of a partnership?
Answer
(B)
The Partnership Agreement.
13
What's the typical order of items in an Appropriation Account?
Answer
(A)
Interest on Capital, Salaries, Profit Share
14
What costs are included when calculating conversion costs?
Answer
(B)
Direct Labor + Factory Overhead
15
What is the purpose of issuing shares to raise capital?
Answer
(C)
To finance the company's operations and growth.
16
Which financial statement would you consult to find a company's assets and liabilities?
Answer
(C)
Balance Sheet
17
Which type of partner faces unlimited liability?
Answer
(C)
General Partner
18
What is the primary objective of a manufacturing account?
Answer
(B)
To ascertain the cost of production.
19
Which of the following is a disadvantage of operating as a sole trader?
Answer
(C)
Limited capital resources.
20
In a manufacturing business, what are 'indirect materials'?
Answer
(B)
Materials that are not a significant part of the finished product.
21
What happens to owner's equity when the owner takes goods for personal use?
Answer
(B)
Decreases.
22
Which is a key component of a manufacturing business?
Answer
(C)
Turning raw materials into finished products
23
Which financial statement reports a company's financial performance over a period of time?
Answer
(C)
Income Statement
24
Which principle of accounting guides the recording of expenses in the period they are incurred?
Answer
(B)
Matching principle
25
Which cost is not included in the manufacturing overhead?
Answer
(C)
Direct labor
26
In the context of a club's financial statements, which item should be recognized on the credit side of the income and expenditure account?
Answer
(A)
Donation to the club.
27
What items would be considered partnership liabilities?
Answer
A
B
28
What is the effect of an adjustment increasing the estimated uncollectible debts on the income statement?
Answer
(C)
Increase in expense
29
What is the primary goal of performing adjustments to financial statements?
Answer
(C)
To ensure that revenues and expenses are recorded in the proper accounting period.
30
If a partner invests a piece of equipment into the partnership, what would be recorded?
Answer
(B)
A debit to Equipment and a credit to the Partner's Capital.
31
Which of the following best describes the term 'drawings' in the context of a sole trader?
Answer
(B)
Money taken out of the business by the owner for personal use.
32
What is the main difference between a 'current account' and a 'capital account' for a partner?
Answer
(B)
Capital accounts record the initial investment, while current accounts record ongoing transactions like salaries and profit shares.
33
How are partners' drawings typically treated in the partnership's accounting records?
Answer
(C)
They decrease the partner's capital account.
34
What is the main advantage of forming a partnership compared to a sole proprietorship?
Answer
(D)
Shared expertise and resources.
35
What is the purpose of a trial balance?
Answer
(C)
To verify the mathematical accuracy of the accounting records.
36
In a partnership, what is the purpose of an appropriation account?
Answer
(B)
To show the distribution of profits.
37
Which of the following elements are typically included in a partnership's income statement?
Answer
A
B
38
Which document is crucial for any entity intending to become a limited company?
Answer
(C)
Memorandum and Articles of Association
39
If a business buys equipment on credit, which accounts are affected?
Answer
(C)
Equipment and Accounts Payable
40
What will happen to the net profit if the closing inventory is reduced?
Answer
(B)
It will decrease.
41
What is the formula used to calculate the 'gross profit'?
Answer
(B)
Sales Revenue - Cost of Sales
42
A business that produces automobiles would likely classify which of the following costs as direct materials?
Answer
(B)
Steel used for the car's frame
43
What is the effect of recording an adjustment for accrued interest expense on the income statement?
Answer
(C)
Increase expense
44
Which formula is used to calculate the cost of goods manufactured (COGM)?
Answer
(A)
Beginning WIP + Direct Materials + Direct Labor + Factory Overhead - Ending WIP
45
What is the effect on the accounting equation if an owner invests cash into the business?
Answer
(C)
Assets increase, equity increases
46
Which of the following is true regarding a 'prepaid expense'?
Answer
(B)
It is an asset representing future expenses.
47
What document reports details of issued share capital, the general reserve, and retained earnings?
Answer
(B)
The Statement of Financial Position
48
How does a partnership's profit or loss get allocated among partners at the end of the accounting period?
Answer
(B)
Based on a predetermined profit-sharing ratio outlined in the partnership agreement.
49
What is the formula to calculate the profit or loss for the year, provided equity at the start and end of the year and drawings is known?
Answer
(B)
Closing equity + Drawings - Opening equity
50
In a manufacturing business, which costs are included when calculating the prime cost?
