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Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 7)

1
Which financial statement is used to evaluate a company's profitability?
Answer
(B)
Income Statement
2
What is the definition of 'liabilities'?
Answer
(B)
What a company owes to others
3
Which of the following is NOT a common source of income for a club or society?
Answer
(D)
Loans from a bank.
4
In the context of a partnership, which item affects a partner's 'Current Account'?
Answer
A
B
C
5
Which of the following best describes the term 'current assets'?
Answer
(B)
Assets that are easily converted to cash within one year.
6
Which of the following would be considered a current asset?
Answer
(C)
Inventory
7
What is the formula for calculating net income?
Answer
(B)
Revenue - Expenses
8
The term "debenture", "mortgage", "loan stock" or "bond" are used to describe various types of:
Answer
(B)
Liabilities
9
If a club’s accumulated fund increases, it means:
Answer
(A)
The club had a surplus in the year.
10
What account is used to record the cost of goods taken out for personal use by the owner?
Answer
(B)
Drawings
11
What is the primary benefit of limited liability for a business owner?
Answer
(B)
Personal assets are protected from business debts
12
What is the purpose of an income statement?
Answer
(C)
To show a company's revenues, expenses, and profit.
13
What is 'revenue' in accounting?
Answer
(C)
The income a business generates from its activities.
14
Which statement would be used to show the financial performance of the club or society?
Answer
(C)
Income and expenditure account
15
What is the definition of a deficit?
Answer
(B)
Expenses exceeding income.
16
Which of the following is NOT a component of the income statement?
Answer
(C)
Assets
17
What does 'prepaid expenses' mean?
Answer
(B)
Expenses paid in advance.
18
Which of the following accounts would be debited when a subscription is received in advance?
Answer
(C)
Cash Account
19
What do adjusting entries typically affect?
Answer
(C)
At least one income statement account and one balance sheet account
20
Preparing an income statement the business will have to calculate the total sales and purchases for the year.
Answer
(A)
a)
21
Which of the following is a characteristic of a trading business?
Answer
(B)
Buys and sells goods
22
Which of the following is an example of a non-cash transaction?
Answer
(C)
Depreciation of an asset.
23
What is the fundamental accounting equation?
Answer
(A)
Assets = Liabilities + Equity
24
Which of the following is an example of a liability?
Answer
(C)
Outstanding subscriptions.
25
Which of these items would appear in a receipts and payments account?
Answer
(C)
Rent paid
26
Which of the following costs are included in manufacturing overhead?
Answer
A
B
D
27
Which of the following is considered an asset?
Answer
(B)
Prepaid Expenses
28
How is equity and profit or loss for the year calculated?
Answer
(B)
Closing equity - opening equity = profit or loss
29
What is the purpose of the income statement?
Answer
(C)
To show the profitability of a company over a period.
30
What is the main goal of a manufacturing business?
Answer
(C)
To produce goods for sale
31
Which of the following is NOT a principal financial statement for a not-for-profit organization?
Answer
(D)
Statement of Cash Flows
32
Where is the closing bank balance recorded?
Answer
(B)
Receipts and payments account
33
The net surplus is added to the accumulated fund in which statement?
Answer
(C)
Statement of Financial Position.
34
How are the organization's assets, liabilities, and equity presented?
Answer
(C)
Statement of Financial Position.
35
What is the function of adjusting entries?
Answer
(B)
To update account balances for items not previously recorded.
36
What are the basic components of the accounting equation?
Answer
(C)
Assets, Liabilities, and Equity
37
What type of balance does a club/society usually maintain?
Answer
(D)
It depends on the financial activities.
38
What is the purpose of a provision for doubtful debts?
Answer
(B)
To estimate the amount of receivables that are likely to be uncollectible.
39
What do businesses use to collect financial information about the volume of goods produced during the accounting year?
Answer
(C)
Manufacturing account
40
What is the purpose of the receipts and payments account?
Answer
(B)
To summarize cash inflows and outflows.
41
In which statement is the accumulated fund found?
Answer
(C)
Statement of Financial Position
42
What is a retained earnings?
Answer
(A)
The profits a company has kept and not distributed to owners.
43
What is a key risk associated with general partnerships?
Answer
(C)
Unlimited liability for partners
44
What is the impact of the owner taking goods out of the business for personal use?
Answer
(C)
Decrease in owner's equity
45
Which of the following can be found on the income statement?
Answer
(B)
Gross profit
46
What does the term 'accounts payable' represent?
Answer
(A)
Money owed to suppliers
47
Which of the following would be found on an income statement?
Answer
(C)
Revenue
48
Which of the following is an example of an indirect cost?
Answer
(C)
Factory rent
49
Which of the following is NOT a direct cost of production?
Answer
(C)
Factory rent
50
Which accounts are adjusted when adjusting for drawings of owner?
Answer
(B)
Drawing Account, Purchases Account