Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 23)
1
What are the primary components of a statement of financial position?
Answer
(B)
Assets, liabilities, and equity.
2
What does a statement of financial position (balance sheet) show?
Answer
(C)
A company's assets, liabilities, and equity at a specific point in time.
3
What is the characteristic of an accumulated fund?
Answer
(D)
Equity.
4
Which of the following would increase a partner's capital account?
Answer
(C)
Partner's share of net income.
5
What effect does declaring and paying a cash dividend have on the balance sheet?
Answer
(C)
Decreases assets and decreases equity.
6
What does the 'net book value' of an asset represent on the statement of financial position?
Answer
(C)
The asset's original cost less accumulated depreciation.
7
What is the accounting concept that requires the use of accruals and prepayments?
Answer
(B)
Matching Principle
8
What are examples of selling costs?
Answer
A
C
9
What is the accounting treatment for interest paid to a partner on their capital account?
Answer
(B)
It is an expense on the income statement.
10
What is the difference between 'direct costs' and 'indirect costs'?
Answer
(C)
Direct costs can be easily traced to a specific product or service, while indirect costs cannot.
11
What does the balance sheet illustrate?
Answer
(B)
A company's assets, liabilities, and equity.
12
What is the impact on the accounting equation of recognizing the expiration of prepaid insurance?
Answer
(B)
Decrease assets, increase expenses.
13
A club's opening accumulated fund was $25,000 and the closing balance was $28,000, what happened to the surplus or deficit?
Answer
(A)
Surplus of $3,000.
14
What is the nature of the balance in the 'Unearned Revenue' account?
Answer
(B)
A liability
15
What is the primary goal of a manufacturing business?
Answer
(C)
To transform raw materials into finished goods for sale
16
Which method is most often used for calculating depreciation?
Answer
(B)
Straight line method
17
In a club, subscriptions in arrears at the start of the year $2,000. During the year, the club collected $25,000 of subscriptions, and at the end of the year, subscriptions in arrears were $1,000. What is the subscription income shown in the income and expenditure account?
Answer
(B)
$26,000.
18
What is the purpose of the balance sheet of a club?
Answer
(C)
To show the financial position.
19
What items would be presented in the Receipts and Payments account?
Answer
(A)
Cash and bank transactions.
20
Which of the following are characteristic of a Limited Company?
Answer
A
C
D
21
Which of the following would likely be classified as a 'liability' on a club's Statement of Financial Position?
Answer
(C)
Subscriptions received in advance
22
What is the impact of the adjusting entry for a provision for doubtful debts on the income statement?
Answer
(C)
Increases expense
23
What is the primary purpose of preparing a statement of financial position (balance sheet) for a partnership?
Answer
(B)
To show the financial position of the partnership at a specific point in time.
24
Which of the following items should be shown on the credit side of the income and expenditure account?
Answer
(C)
Subscriptions.
25
In the context of a non-profit organization, which account primarily records the income and expenses of a club or society?
Answer
(C)
Income and Expenditure Account
26
Which of the following represents a current asset on the Statement of Financial Position?
Answer
(B)
Bank balance
27
If a company has a prepayment of insurance, which account is debited when the insurance period expires?
Answer
(B)
Insurance Expense
28
Which of the following statements best describes the relationship between a company's financial statements and its shareholders?
Answer
(B)
Financial statements are a legal requirement to report the performance and position of the company to the shareholders.
29
Which of the following is NOT a typical category of costs in a manufacturing account?
Answer
(C)
Selling and administrative expenses
30
What would typically be shown in the liabilities section of the Statement of Financial Position?
Answer
(B)
Accounts Payable
31
What type of business typically uses the 'Cost of Goods Sold' calculation?
Answer
(B)
Trading businesses
32
What is the opposite of a partner's 'drawings'?
Answer
(A)
Capital Contribution.
33
What is the impact on the balance sheet when writing off an uncollectible debt?
Answer
(C)
Decreases assets and decreases liabilities.
34
What is the purpose of an Annual General Meeting (AGM)?
Answer
(C)
To allow the shareholders to discuss the company's performance and make decisions.
35
Which costs are included in the cost of production?
Answer
A
B
D
36
What does the term 'drawings' refer to in a sole trader business?
Answer
(B)
Money taken out of the business by the owner for personal use.
37
What does a debit to the 'drawings' account represent?
Answer
(B)
A decrease in owner's equity.
38
What is the impact on equity if the owner of a business withdraws cash for personal use (drawings)?
Answer
(B)
Decreases the equity
39
What happens to the accounting equation when unearned revenue is earned?
Answer
(C)
Decreases liabilities and increases owner’s equity.
40
If a company receives cash in advance for services, which account is debited at the time of the cash receipt?
Answer
(A)
Cash
41
What is the main purpose of a current account in a partnership?
Answer
(B)
To track all partner transactions except capital contributions.
42
Which financial statement reports the financial performance of a company over a period?
Answer
(C)
Income Statement
43
Which of the following accounts would be debited when a company receives cash from a customer?
Answer
(B)
Cash
44
What is the impact on a company's financial statements if a company issues a bond?
Answer
(D)
Increase in liabilities and no impact on equity.
45
What does the text say is a key difference between a private and public company?
Answer
A
B
C
46
What is included in the calculation of gross profit?
Answer
(B)
Revenue - Cost of Goods Sold
47
Which of the following is a component of factory overhead?
Answer
(C)
Indirect materials
48
What is the formula for calculating gross profit?
Answer
(B)
Revenue - Cost of Goods Sold
49
The formula for calculating the Cost of Goods Sold is:
Answer
(D)
All of the above
50
When a partnership begins, where is the contribution recorded?
