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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 18)

1
What is the purpose of a receipts and payments account?
Answer
(B)
To record the cash and bank transactions of a club.
2
If a company overstates its ending inventory, what will be the impact on the net income for that period?
Answer
(B)
Net income will be overstated.
3
What would typically be recorded in the capital account of a partner?
Answer
(C)
Initial capital contribution.
4
What is the result of the adjusting entry to record the use of office supplies during an accounting period?
Answer
(B)
Decrease assets and increase expenses.
5
What is the primary function of the statement of affairs?
Answer
(C)
To assess an organization's financial position.
6
What is the purpose of the appropriation section of a partnership's income statement?
Answer
(C)
To detail how the profits are to be distributed to partners.
7
Which costs contribute to the calculation of cost of production?
Answer
A
B
C
8
What is included in the calculation of 'Cost of Goods Sold'?
Answer
(B)
Direct materials, direct labor, and manufacturing overhead
9
Which of the following correctly represents the relationship between accumulated fund, surplus and deficit for a club?
Answer
A
B
10
Which of the following are sources of long term capital?
Answer
A
B
D
11
In a club's financial statements, where would the accumulated fund be presented?
Answer
(C)
Balance Sheet.
12
What would result in an increase to the accumulated fund on the Statement of Financial Position?
Answer
(B)
A surplus for the year
13
What are the components used to calculate gross profit?
Answer
(B)
Sales revenue and cost of goods sold.
14
What type of business is most likely to have 'cost of goods sold' as a line item in its income statement?
Answer
(B)
A trading business
15
Which accounts are usually part of a partner's capital account?
Answer
A
B
16
What happens in a liquidation of a partnership?
Answer
A
B
17
What is an advantage of incorporating a business as a limited company?
Answer
(C)
Ability to raise capital more easily.
18
Which of the following is a characteristic of a manufacturing business?
Answer
(B)
It manufactures goods to sell
19
Which of the following is an example of a current liability?
Answer
(C)
Trade payables
20
What effect does interest on capital have on a partner's capital account?
Answer
(B)
Increases it.
21
Which of the following are examples of indirect labor costs?
Answer
A
C
D
22
Which of the following statements is true regarding a service business?
Answer
(C)
It provides services.
23
How are adjusting entries used in financial accounting?
Answer
(C)
To ensure revenues and expenses are recognized in the correct period.
24
What is the purpose of adjusting entries?
Answer
(B)
To bring account balances up to date at the end of an accounting period.
25
What is the primary purpose of creating a provision for doubtful debts?
Answer
(C)
To comply with the matching principle.
26
What is the result of the following: Debit Purchases, Credit Drawings?
Answer
(A)
Goods taken for personal use by the owner.
27
What is the primary purpose of adjusting for depreciation?
Answer
(B)
To allocate the cost of an asset over its useful life.
28
Which of the following are characteristics of preference shares?
Answer
A
C
D
29
Which of the following is an example of indirect labor?
Answer
(B)
Factory supervisor
30
What will happen to the net profit if the inventory is reduced by goods taken for personal use by the owner?
Answer
(A)
It will decrease.
31
Which aspect of a partnership is most directly influenced by the partnership agreement?
Answer
(C)
How profits and losses are divided among the partners
32
What kind of expenses are selling and administrative expenses?
Answer
(B)
Period costs
33
What can be found in a key element of a partnership agreement?
Answer
A
B
C
D
34
Which item should be included as an asset in the Statement of Financial Position?
Answer
(C)
Prepaid rent
35
What type of account is the "drawings" account?
Answer
(A)
A temporary account closed to capital at year-end.
36
What is the purpose of a statement of cash flows?
Answer
(C)
To summarize the cash inflows and outflows.
37
What is the purpose of the manufacturing account?
Answer
(A)
To calculate the cost of production.
38
Where are the distributions of net profit recorded?
Answer
(C)
Appropriation Account
39
What is the primary effect of recognizing depreciation expense?
Answer
(B)
Decrease net income and decrease assets.
40
If a partner's salary is a fixed amount per year, how is this treated in the financial statements?
Answer
(B)
As an expense in the appropriation account.
41
How does a partner's salary affect the allocation of profits in a partnership?
Answer
(B)
It decreases the partnership's net profit before profit sharing.
42
In a manufacturing company, which expense is NOT included in the cost of goods sold (COGS)?
Answer
(D)
Selling and administrative expenses
43
Which of the following is a characteristic of accrual accounting?
Answer
(C)
Revenues are recognized when earned and expenses are matched to revenue.
44
Which of the following is an example of indirect materials?
Answer
(B)
Thread for sewing shirts
45
What is included in the liabilities section on a partnership's Statement of Financial Position?
Answer
A
B
D
46
What should be determined by the partners' agreement?
Answer
A
B
C
47
What are the two main components of the Statement of Financial Position?
Answer
(C)
Assets and Liabilities
48
Which items are included in a partnership's appropriation account?
Answer
A
C
49
Which account is most similar to the Profit and Loss account for commercial entities?
Answer
(B)
Income and Expenditure account
50
What type of expenses would a manufacturing company list on the income statement?
Answer
(C)
Production costs, selling and administrative expenses