Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 19)
1
What is the effect of unearned revenue on a company's balance sheet?
Answer
(B)
Increases assets and increases liabilities.
2
Which of the following are examples of current liabilities?
Answer
A
B
D
3
What are the disadvantages of forming a partnership?
Answer
B
C
D
4
If a business purchases goods on credit, what is the effect on the accounting equation?
Answer
(A)
Increase assets, increase liabilities.
5
How is the goodwill of a partnership usually treated when a new partner is admitted?
Answer
(C)
It is recorded as an asset and is often written off or amortized over time.
6
If a partner contributes land to the partnership, how is this transaction recorded?
Answer
(B)
Debit Land, credit Capital.
7
In the context of incomplete records, why is it important to identify the values of missing items?
Answer
(B)
To complete and prepare the income statement and the statement of financial position.
8
What is the purpose of calculating the 'rate of inventory turnover'?
Answer
(A)
To measure how quickly a business buys and sells inventory.
9
What is the main purpose of the income statement?
Answer
(B)
To report a company's revenues, expenses, and net income over a period of time.
10
When preparing a Receipts and Payments account, which items would NOT be included?
Answer
(C)
Depreciation expense.
11
Which of the following is considered a product cost?
Answer
(C)
Direct materials
12
What are the main elements in the income and expenditure account for a club or society?
Answer
(B)
Income and Expenditure.
13
What is the role of directors in a company?
Answer
(B)
To manage the company on behalf of the shareholders.
14
Which of the following are included in a partnership's assets?
Answer
A
C
D
15
What would increase the balance of a partner's capital account?
Answer
(C)
Additional capital contributed by the partner.
16
What is the primary function of the 'Statement of Cash Flows'?
Answer
(D)
To track the inflows and outflows of cash over a period.
17
What is the purpose of a provision for doubtful debts?
Answer
(B)
To estimate and record potential losses from uncollectible accounts.
18
What is a key difference between a sole proprietorship and a partnership?
Answer
(A)
A partnership has more owners.
19
What is 'Nominal Value' (or 'Par Value') of a share?
Answer
(C)
The face value of the share, stated in the company's articles of association.
20
Which costs are considered in the calculation of cost of goods sold?
Answer
A
B
C
21
What is the main objective for partnerships to be formed?
Answer
(B)
To make profits.
22
Which of the following would be included in the factory overhead?
Answer
A
B
D
23
Which financial statement presents the assets, liabilities, and equity of a company at a specific point in time?
Answer
(B)
Balance Sheet
24
Which of the following statements is correct regarding the impact of depreciation expense?
Answer
(C)
It decreases net profit.
25
Which statement BEST describes the liability of partners in a general partnership?
Answer
(C)
Unlimited, meaning they are personally liable for the partnership's debts.
26
Which of the following are advantages of a partnership?
Answer
A
B
27
What are the roles of a partnership agreement?
Answer
A
B
C
D
28
What are the key advantages of a partnership?
Answer
A
B
C
29
What is the meaning of "Capital" in a partnership?
Answer
(C)
Equity of the partners in the business.
30
Which statements are usually provided to the partners in a partnership?
Answer
A
B
D
31
In the context of the provided text regarding financial statements, what does 'average inventory' represent?
Answer
(A)
(Opening Inventory + Closing Inventory) / 2
32
In a liquidation, what happens to the partnership's assets?
Answer
A
C
33
What best describes a 'mark-up'?
Answer
(B)
Profit margin based on cost price
34
Which of the following statements is TRUE regarding a 'Receipts and Payments Account'?
Answer
(B)
It includes only cash transactions.
35
In a club, which of the following best describes the treatment of outstanding subscriptions at the year-end?
Answer
(B)
It's income to be added to subscriptions.
36
Why is the matching principle so important?
Answer
(B)
To show the performance of the company for a period.
37
If a club's subscriptions in advance at the beginning of the year were $500 and at the end of the year were $700, how would it affect the subscriptions income?
Answer
(B)
Decrease by $200.
38
What does a debit to 'drawings' represent?
Answer
(B)
A decrease in owner's equity.
39
How does the provision for irrecoverable debts affect the income statement?
Answer
(C)
It decreases profit for the year.
40
Which of the following are characteristics of a limited company?
Answer
A
C
41
What does the accrual basis of accounting recognize?
Answer
(C)
Revenues when earned and expenses when incurred.
42
Which of the following would be classified as a selling expense in a manufacturing business?
Answer
(D)
Advertising expense
43
Which of the following statements is true regarding the use of the total trade payables account?
Answer
(B)
It can be used to calculate the value of credit purchases.
44
Which of the following is included in the calculation of Prime cost?
Answer
(A)
Direct Materials + Direct Labour
45
What impact do accrued expenses have on the statement of financial position?
Answer
(C)
Increase liabilities and decrease equity.
46
Which of the following describes the purpose of the adjusting entry for depreciation?
Answer
(B)
To allocate the cost of an asset over its useful life.
47
What are included in the equity section of the balance sheet of a partnership?
Answer
A
C
48
What are some of the advantages of a partnership?
Answer
A
B
C
49
What is the primary purpose of an appropriation account in a partnership?
Answer
(B)
To allocate profit or loss according to the partnership agreement
