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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 24)

1
Which of the following is usually considered an indirect material?
Answer
(C)
Glue used to assemble furniture
2
In the context of limited companies, which group of individuals usually manage a public company?
Answer
(D)
Directors elected by shareholders
3
Which of the following are components of Owner's Equity?
Answer
A
B
4
What is the usual order when an income statement is prepared?
Answer
(A)
Revenue, COGS, Gross Profit, Operating Expenses, Profit
5
How does a partner's share of the partnership's profits affect their capital account?
Answer
(B)
It increases the capital account.
6
Referencing the provided information, what is the formula for calculating purchases?
Answer
(A)
Purchases = Cost of Sales + Closing Inventory - Opening Inventory
7
Which of the following items would typically appear in the equity section of a statement of financial position?
Answer
(C)
Ordinary share capital
8
What is a reason for a partnership's dissolution?
Answer
(A)
The agreement between the partners.
9
Which of the following is an example of an accrued expense?
Answer
(B)
Salaries earned by employees but not yet paid
10
What information do the Receipts and Payments account show?
Answer
(B)
Only cash and bank transactions.
11
Which of the following is an example of a contra-asset account?
Answer
(B)
Accumulated Depreciation
12
Which of the following costs are included in factory overhead?
Answer
A
B
D
13
What is the effect of owner's drawings on a sole trader's financial position?
Answer
(C)
Decreases assets and decreases equity.
14
Which of the following is an example of an income statement item?
Answer
(C)
Cost of Goods Sold
15
What is the purpose of the Receipts and Payments Account?
Answer
(C)
To record all cash inflows and outflows.
16
What is the effect of adjusting for goods taken for personal use by the owner?
Answer
(B)
Decreases purchases and increases drawings.
17
A business provides services to a customer on account. How should this transaction be recorded?
Answer
(B)
Debit Accounts Receivable and Credit Service Revenue
18
How does the write-off of an uncollectible account affect the net realizable value of accounts receivable?
Answer
(C)
Has no effect on the net realizable value.
19
What is the key characteristic that distinguishes a general partnership from a limited partnership?
Answer
(B)
Unlimited liability for all partners in a general partnership.
20
What are the key sections of an Income Statement?
Answer
(B)
Revenue, Expenses, and Profit/Loss
21
In a trading business, what is the main difference in the income statement compared to a service business?
Answer
(C)
The addition of Cost of Goods Sold.
22
What is the purpose of a trial balance?
Answer
(A)
To prove the equality of debits and credits.
23
When a partner contributes an asset like a building to the partnership, how is it initially recorded?
Answer
(C)
Debit to Building, credit to Partner's Capital.
24
What is the effect on the statement of financial position when a partner lends the partnership money?
Answer
(B)
Partnership liabilities increase, and cash increases.
25
How is the cost of goods sold calculated?
Answer
(A)
Beginning Inventory + Purchases - Ending Inventory.
26
Which of the following is a key characteristic of a sole trader?
Answer
(C)
Unlimited liability
27
What is the impact on the income statement of recording the depreciation expense for the current period?
Answer
(B)
Decreases net income
28
Which of the following would be part of the calculation for cost of goods manufactured?
Answer
A
B
C
29
What is a key element of accrual accounting?
Answer
(C)
Matching revenues and expenses in the same period.
30
What is the cost of goods sold (COGS) used for?
Answer
(A)
To calculate a company's profitability
31
What is the effect of declaring and paying dividends on a company's financial statements?
Answer
A
B
32
What is the primary difference between a general and a limited partner?
Answer
(B)
A general partner is more involved in the day-to-day operations than a limited partner.
33
In a partnership, what is the primary function of the balance sheet?
Answer
(B)
To show the company's assets, liabilities, and equity at a specific point in time.
34
Which of the following is an example of an adjusting entry?
Answer
(C)
Depreciating an asset.
35
Which financial statement will be used to calculate the net profit of a business?
Answer
(B)
Income Statement
36
What is the primary function of the 'statement of financial position' in a partnership?
Answer
(C)
To present a snapshot of the partnership's assets, liabilities, and equity at a specific point in time.
37
Which of the following statements is TRUE about the liability of partners in a general partnership?
Answer
(B)
Partners have unlimited liability, are personally liable for the business's debts.
38
In preparing the income and expenditure account for a club, which of the following information is *needed* to accurately calculate the amount of subscriptions to be included in the account?
Answer
A
C
D
39
In a partnership, what is the primary purpose of an income statement?
Answer
(C)
To report revenues, expenses, and net income/loss.
40
What accounting principle is used to recognize an annual charge for depreciation expense?
Answer
(C)
Matching principle
41
What financial statement includes Cost of Goods Sold (COGS)?
Answer
(B)
Income Statement
42
In a manufacturing context, what does the term 'factory overhead' encompass?
Answer
(D)
Indirect costs associated with the manufacturing process.
43
In a partnership, how are partners' salaries treated in the financial statements?
Answer
(A)
As a reduction of the partnership's net income, before profit allocation.
44
Which items are included in the cost of goods sold (COGS)?
Answer
A
B
C
45
Which account reflects the money that partners withdraw for personal use?
Answer
(B)
Drawing Account
46
What is the impact of prepaid expenses at the end of the period?
Answer
(D)
Increase in assets and decrease in expenses.
47
Which of the following is most impacted by the profit-sharing ratio?
Answer
(B)
Each partner's share of the net profit or loss
48
In a partnership, the allocation of profits and losses is typically guided by which document?
Answer
(C)
The Partnership Agreement.
49
Which of the following represents examples of direct materials?
Answer
A
C
50
What are examples of indirect labor costs?
Answer
A
C