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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 2)

1
Which of the following statements accurately describes the objective of financial statements?
Answer
(B)
To assess a company's profitability and financial position.
2
What is a characteristic of a sole trader?
Answer
(B)
Unlimited liability
3
How should a club/society treat irrecoverable debts (bad debts)?
Answer
(C)
Treat them as an expense.
4
What is the main function of the board of directors in a company?
Answer
(B)
Overseeing the company's strategy and performance
5
What is the primary purpose of the statement of cash flows?
Answer
(C)
To track the movement of cash in and out of a company.
6
What impact does depreciation have on the statement of financial position?
Answer
(B)
Decrease in assets
7
What adjustments are needed to establish the cost of production for the finished goods?
Answer
(A)
Adjustments for opening and closing work in progress
8
What is the impact of the 'Drawings' on the statement of financial position?
Answer
(B)
Decreases owner's equity
9
In sole traders:
Answer
(C)
There is unlimited liability
10
What is the definition of 'assets' in accounting?
Answer
(B)
What a company owns or controls
11
Which of the following is considered an asset?
Answer
(B)
Inventory
12
In a partnership, what is the purpose of the capital account?
Answer
(C)
To record the owner's investment in the business.
13
What is the purpose of preparing a statement of financial position?
Answer
(B)
To show the company's financial position at a specific point in time.
14
To prepare an income statement the business will have to calculate:
Answer
(A)
Total sales and purchases
15
Which of the following would decrease the profit on the income statement?
Answer
(C)
Increase in expenses
16
What does the Income and Expenditure account summarise?
Answer
(C)
Income and expenditure.
17
What is the term for the owners of private and public limited companies?
Answer
(A)
Shareholders
18
What is the purpose of a provision for doubtful debts?
Answer
A
B
19
Which term describes the financial situation when income exceeds expenses?
Answer
(C)
Surplus.
20
Which items will be included in indirect costs?
Answer
A
C
D
21
What is the main difference between a service business and a trading business in terms of financial statements?
Answer
(C)
Trading businesses calculate gross profit.
22
How is a surplus treated in the statement of financial position?
Answer
(B)
Added to the accumulated fund.
23
The Income statement will include:
Answer
(D)
All of the above
24
Which financial statement is used to determine if a company made a profit or loss?
Answer
(B)
Income Statement
25
What is a primary disadvantage of being a sole trader?
Answer
(D)
Unlimited liability
26
What is the definition of 'accounts receivable'?
Answer
(A)
Money owed to the company by its customers.
27
What is the purpose of calculating the inventory turnover rate?
Answer
(B)
To measure how efficiently a company is managing its inventory.
28
Why is it important to make adjustments to financial statements?
Answer
B
C
29
Identify and explain ___ that distinguish a receipts and payments account from an income and expenditure account.
Answer
(A)
a)
30
Which of the following accounts appear on the income statement?
Answer
A
C
31
Which statement summarizes the assets, liabilities, and equity of a company at a specific point in time?
Answer
(C)
Balance Sheet
32
Which of these is the main objective of financial statements?
Answer
(B)
To show the company's performance over the period.
33
What is the main purpose of a balance sheet?
Answer
(B)
To provide a snapshot of a company's assets, liabilities, and equity at a specific point in time
34
What is the formula for net profit?
Answer
(B)
Revenue - Expenses
35
How can partners contribute to a business?
Answer
A
B
C
D
36
If a club's income and expenditure account shows a deficit, what action should be taken?
Answer
(B)
Deduct the deficit from the accumulated fund in the statement of financial position.
37
Which adjustments are required to calculate the adjusted net profit on the income statement?
Answer
A
B
38
What is the primary purpose of the statement of financial position?
Answer
(B)
To give a snapshot of a company's assets, liabilities, and equity.
39
What is the first step in calculating the cost of production?
Answer
(A)
Calculate the cost of raw materials used.
40
What is the formula to calculate profit for the year?
Answer
(A)
Closing equity - Opening equity
41
What type of business organization has unlimited liability?
Answer
(C)
Sole Proprietorship
42
In the context of inventory, what does "turnover" refer to?
Answer
(B)
The rate at which inventory is sold and replaced.
43
What is the purpose of a partnership agreement?
Answer
(B)
To outline the terms and conditions of the partnership
44
Which of the following is an advantage of a limited company?
Answer
(A)
Easier to raise capital
45
What is the general formula for calculating profit sharing?
Answer
(C)
Net profit - partner salaries - interest on capital + interest on drawings
46
A issued shares total:
Answer
(D)
the actual number of shares issued to shareholders while being members of the public
47
Which of the following is classified as a current liability?
Answer
(D)
Accrued expenses.
48
Which of the following is shown on the debit side of a partner's capital account?
Answer
(C)
Drawings
49
What does the partnership's income statement show?
Answer
(B)
The revenue, expenses, and profit or loss for a specific period.
50
What is the effect of an increase in an asset?
Answer
(D)
Increase in other assets.