Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 22)
1
Which financial statement reports a company's financial position at a specific point in time?
2
How is the net profit determined for an income statement?
Answer(B)
Deducting operating expenses from gross profit.
3
What is the role of direct labor in the manufacturing process?
Answer(C)
To directly convert raw materials into finished goods
4
Where should a depreciation expense be recorded for a club?
Answer(C)
Income and Expenditure Account.
5
What type of costs is Factory rent?
6
How does interest on capital affect a partner's share of profits?
Answer(C)
It has no effect on their profit share.
7
Which of the following will be included in the income statement of a manufacturing company?
8
In the context of a balance sheet, what does "accumulated depreciation" represent?
Answer(B)
The estimated decline in value of an asset over its useful life.
9
What does the matching principle of accounting state?
Answer(C)
Expenses should be recorded in the same period as the revenues they help generate.
10
Which financial statement reports a company's assets, liabilities and equity at a specific point in time?
Answer(C)
Statement of Financial Position
11
If a partner withdraws cash from the partnership, which account is directly affected?
12
Which account is debited when recognizing depreciation expense?
13
What is the effect on the accounting equation when a company pays salaries to its employees?
Answer(C)
Decreases assets and decreases equity.
14
What effect does an adjustment for unearned revenue have on the balance sheet?
Answer(D)
Decrease liabilities and increase equity.
15
What type of business is formed by combining businesses?
16
What is the impact of writing off an uncollectible account on a company's net income?
Answer(C)
Has no impact on net income.
17
In a limited company, the liability of the shareholders is limited to:
Answer(C)
The amount they have invested in the company.
18
Which of the following are typically shown on the credit side of an Income and Expenditure Account for a club?
19
What is the primary difference in the treatment of salaries paid to partners versus salaries paid to employees?
Answer(B)
Partner salaries are included in the appropriation account, while employee salaries are in the income statement.
20
What is the impact of recognizing accrued expenses on the financial statements?
21
Which of the following is an example of an expense?
Answer(C)
Salaries paid to employees
22
Which of the following items increases the subscriptions received in advance?
Answer(C)
Subscriptions marked in advance at the end of the year
23
What is the impact of an adjustment for goods taken for personal use by the owner?
Answer(B)
Decreases purchases and increases drawings.
24
Which of the following may be included in the appropriation account?
25
What is the result of an adjustment to write off an uncollectible debt?
Answer(A)
Increase in provision for doubtful debts and decrease in accounts receivable.
26
Which of the following are examples of current assets?
27
Which of the following is typically included in the Accumulated Fund of a club?
28
What type of account is 'Drawings' and what is its primary purpose?
Answer(B)
A temporary account used to record partner withdrawals, affecting the capital account.
29
What is typically in a partnership agreement?
30
Which of the following is generally deducted from revenue to arrive at gross profit?
31
In a partnership, what is the primary characteristic that distinguishes it from a sole proprietorship in terms of liability?
Answer(B)
Unlimited liability of the partners.
32
What is 'Cost of Goods Sold' (COGS)?
Answer(C)
The direct costs attributable to the production of the goods sold by a company.
33
What is the effect of owner's drawings on the statement of financial position?
Answer(B)
Decreases assets and equity.
34
If a partner withdraws cash from the business for personal use, what account is affected?
35
What is a 'limited partner' in a partnership?
Answer(C)
A partner whose liability is limited to their investment.
36
Which of the following would be classified as an administrative expense in a manufacturing company?
Answer(C)
Depreciation of office equipment
37
Which item will affect the partner's drawings account?
38
What is the purpose of a partnership agreement?
Answer(B)
To establish the rules and obligations of the partnership.
39
How are costs in a manufacturing company generally classified?
Answer(C)
Both direct and indirect, and fixed and variable
40
In a club, what will a deficit do to the accumulated fund?
41
When making adjustments, which of the following is true of accrued income?
42
Which of the following is a characteristic of a manufacturing business?
Answer(D)
It transforms raw materials into finished products.
43
When is revenue recognized under the accrual accounting system?
Answer(C)
When goods are delivered or services are performed.
44
Which of the following represents the equity of a partnership?
45
What distinguishes a 'general partner' from a 'limited partner' in a partnership?
Answer(B)
General partners manage the daily operations, and limited partners do not.
46
What is the treatment of a club's building in the financial statements?
Answer(B)
Record at net book value on the balance sheet.
47
Which of the following is a primary advantage of a partnership?
48
Which of the following best describes the purpose of a company's articles of association?
Answer(B)
To provide the rules for how the company will be run.
49
What would be the correct adjusting entry to record accrued interest expense?
Answer(A)
Debit Interest Expense, Credit Interest Payable
50
What is typically found in the capital account of a partner?
