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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 6)

1
What would be the impact of the purchase of inventory on account?
Answer
(B)
Increase assets and increase liabilities.
2
A statement of financial position shows:
Answer
(B)
The assets, liabilities and accumulated fund.
3
Which of the following would be considered a contra-asset account?
Answer
(B)
Accumulated Depreciation
4
What are the common features of a private company?
Answer
B
C
D
5
Which of the following statements is true regarding the relationship between a partnership and its partners' personal assets?
Answer
(B)
Partners' personal assets are only at risk if the partnership has unlimited liability.
6
What item is shown in the assets section of the statement of financial position?
Answer
(B)
Inventory
7
What is a key benefit of a sole trader business structure?
Answer
(B)
Easy to set up and manage
8
What do we subtract from Revenue to calculate Gross Profit?
Answer
(B)
Cost of Goods Sold
9
What is the purpose of the statement of cash flows?
Answer
(C)
To show the movement of cash in and out of a company
10
What type of business will calculate Gross Profit as part of their financial statements?
Answer
(B)
Trading business
11
In the case of a partner's loan to the business, which of the following accounting treatments is correct?
Answer
(C)
Interest paid on the loan is a business expense.
12
Which of the following is true regarding an income statement?
Answer
A
C
13
Which accounts are affected when adjusting for the provision for doubtful debts?
Answer
(A)
Accounts Receivable and Allowance for Doubtful Accounts
14
Which of the following are advantages of a partnership?
Answer
A
C
D
15
What is the formula for calculating the rate of inventory turnover?
Answer
(A)
Cost of goods sold / Average inventory
16
Which financial statement shows the financial position of a partnership at a specific point in time?
Answer
(C)
Statement of Financial Position
17
What does the partnership's appropriation account show?
Answer
(C)
How the profit is divided amongst the partners.
18
What effect does an overstatement of the closing inventory have on the cost of goods sold and net profit?
Answer
(B)
COGS is understated, net profit is overstated
19
Which of the following items are used in calculating the profit for a company?
Answer
A
B
20
What is the main purpose of the appropriation account?
Answer
(B)
To show how profits are distributed among the partners.
21
What is the role of the auditor in a limited company?
Answer
(B)
To ensure the company's financial statements are accurate and reliable.
22
What are the effects of a provision for doubtful debts?
Answer
A
D
23
What is the accounting treatment for goodwill when a new partner is admitted?
Answer
(B)
Goodwill is written off against the partners' capital accounts.
24
What does the balance sheet show?
Answer
A
B
C
25
Which of the following is the correct definition of a surplus?
Answer
(A)
Income less expenses.
26
What is the primary goal of a company's management?
Answer
(A)
To maximize shareholder wealth
27
Which of the following is a type of liability?
Answer
(C)
Trade creditors
28
What financial statement reports the cash inflows and outflows of a company?
Answer
(C)
Statement of Cash Flows
29
What is the role of a balance sheet?
Answer
(C)
To present a company's assets, liabilities, and equity at a specific point in time.
30
Describe and explain how the members of a club or society differ from the members of a commercial business.
Answer
(A)
a)
31
When writing off bad debts, which account is credited?
Answer
(A)
Accounts Receivable
32
If the closing inventory is understated, how does it affect the cost of goods sold (COGS) and net profit?
Answer
(D)
COGS is overstated, net profit is understated
33
What is the relationship between gross profit and net profit?
Answer
(A)
Gross profit is always higher than net profit.
34
What type of account is 'accounts payable'?
Answer
(B)
Liability
35
What is a key characteristic of a sole trader in terms of their liability?
Answer
(B)
Unlimited liability
36
Which of the following items would be included in an income and expenditure account?
Answer
(D)
All of the above
37
When is the depreciation for equipment increased?
Answer
(A)
Yearly
38
Which of the following is a key step in preparing an income and expenditure account?
Answer
(B)
Adjusting for accruals and prepayments.
39
What is an advantage of a private limited company?
Answer
B
D
40
Which items are used to calculate purchases?
Answer
A
B
C
41
Clubs and societies will normally appoint a treasurer who should keep an up-to-date cash book and periodically (at least once a year) prepare:
Answer
(A)
receipts and payments accounts reflecting the cash movements and balances
42
In a trading business, what does 'Cost of Goods Sold' (COGS) represent?
Answer
(B)
The cost of acquiring and selling goods
43
What is the effect of depreciation expense on the income statement?
Answer
(B)
Decreases net income
44
Which financial statement reports a company's financial performance over a specific period?
Answer
(C)
Income Statement
45
Which accounts are directly involved when making a provision for doubtful debts?
Answer
A
C
46
What is the main purpose of adjusting entries?
Answer
(B)
To update accounts for unrecorded items.
47
What accounting principle is the basis for providing depreciation?
Answer
(B)
Matching principle
48
What is an example of a current liability?
Answer
(C)
Accounts Payable
49
What will happen on the statement of financial position if the closing inventory is overvalued?
Answer
(C)
Assets are overvalued
50
What is the treatment of depreciation in the income and expenditure account?
Answer
(A)
Added to the expenses.