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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 3)

1
What does the 'going concern' assumption mean in accounting?
Answer
(A)
The company is expected to continue operating in the foreseeable future.
2
Which of the following is a direct cost associated with production?
Answer
(B)
Wages of factory workers
3
What does 'Capital' represent on a statement of financial position?
Answer
(B)
The partners' ownership interest in the business.
4
The statement of financial position is prepared in the same way as for:
Answer
(C)
Both sole traders and partnerships
5
If a partnership has a loss for the year, how does this affect the partners' capital accounts?
Answer
(B)
Capital accounts decrease
6
Which of the following is NOT a current liability?
Answer
(D)
Long-term loan
7
Which of the following is an example of a current asset?
Answer
(C)
Accounts receivable
8
Which of the following does a society need to do to comply with the matching principle?
Answer
A
B
C
9
What does it mean that the owner has unlimited liability?
Answer
(A)
The owner is responsible for the business’s debts.
10
What information is needed to calculate the gross profit?
Answer
(B)
Sales revenue and cost of sales
11
What does the 'Cost of Goods Sold' (COGS) represent?
Answer
(C)
The direct costs of producing goods sold.
12
Once the total amount demanded on the shares has been received they are designated as:
Answer
(A)
Issued and fully paid
13
Which of the following would be considered a current asset?
Answer
(C)
Accounts Receivable
14
What does the term 'limited liability' mean in the context of a limited company?
Answer
(C)
The personal assets of the shareholders are protected from the company's debts.
15
Which of the following adjustments are commonly made to financial statements?
Answer
A
B
C
16
Which of the following items is typically listed on the Income Statement?
Answer
(C)
Sales revenue
17
Which of the following is an example of a direct cost?
Answer
(B)
Raw materials
18
Where will you be able to find information to calculate sales and purchases?
Answer
A
B
C
19
Which of the following is an advantage of a partnership?
Answer
(C)
Relatively easy to set up
20
Which financial statement is also known as the Statement of Financial Position?
Answer
(C)
Balance Sheet
21
Which financial statement shows a company's revenues and expenses over a specific period?
Answer
(C)
Income Statement
22
What does 'accrued income' mean?
Answer
(B)
Income earned but not yet received.
23
The statement of financial position shows the financial position of the club/society:
Answer
(B)
At a specific point in time.
24
Which item is NOT included in the Receipts and Payments Account?
Answer
(C)
Depreciation.
25
Which statement provides a snapshot of a company's assets, liabilities, and equity at a specific point in time?
Answer
(C)
Balance Sheet
26
What type of businesses prepare financial statements?
Answer
A
B
C
D
27
What is the effect of taking drawings on a partner's capital account?
Answer
(B)
It decreases the capital account.
28
What does 'equity' represent?
Answer
(B)
The owner's stake in a company
29
The loan agreements will specify:
Answer
A
B
D
30
Which of the following transactions would cause an increase in liabilities?
Answer
(D)
Purchasing inventory on credit
31
What kind of information is often shown in a partnership agreement?
Answer
A
B
D
32
What is the formula for calculating total cost?
Answer
(A)
Prime cost + factory overhead cost
33
Which of the following is an example of an asset?
Answer
(C)
Inventory
34
What are the stages of manufacturing?
Answer
(A)
Raw Materials -> Work in Progress -> Finished Goods
35
What is the impact of accrued expenses on the statement of financial position?
Answer
(D)
Increases liabilities.
36
What type of account is the 'provision for doubtful debts'?
Answer
(C)
A contra-asset account
37
What is the formula for calculating purchases?
Answer
(B)
Purchases = Cost of sales + Opening inventory - Closing inventory
38
What financial statement reports the financial position of a company at a specific point in time?
Answer
(C)
Balance Sheet
39
When calculating profit, which item(s) should be considered?
Answer
(C)
Both sales revenue and expenses
40
What is the main purpose of an income and expenditure account?
Answer
(B)
To determine the financial performance of the club/society.
41
What is the effect on the statement of financial position when a company makes drawings?
Answer
(C)
Decreases owner's equity
42
Which of the following will be impacted when adjusting for drawings?
Answer
B
C
43
Which accounting principle is related to matching expenses to revenues?
Answer
(B)
Matching Principle
44
What is the normal impact of an increase in expenses on a company's profit?
Answer
(B)
Profit will decrease.
45
When preference shares are not classified as equity:
Answer
(C)
Both statements are correct
46
In accounting, what is an 'expense'?
Answer
(C)
The cost of running a business.
47
Which item decreases when the owner withdraws goods from the business for personal use?
Answer
(C)
Owner's equity
48
Which accounting document summarizes the financial performance of a partnership?
Answer
(B)
Income statement
49
What is the purpose of adjusting for accumulated depreciation?
Answer
(B)
To recognize the cost of using an asset over its useful life.
50
Which type of liabilities do general partners have?
Answer
(B)
Unlimited liability