Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 8)
1
What does the term 'unlimited liability' mean in the context of partnerships?
Answer
(C)
Partners are personally liable for all business debts, even if it exceeds their investment.
2
What is the formula for calculating net profit?
Answer
(B)
Gross Profit - Operating Expenses
3
Which financial statement provides a snapshot of a company's assets, liabilities, and equity at a specific point in time?
Answer
(C)
Statement of Financial Position
4
What is the purpose of a balance sheet?
Answer
(B)
To show a company's financial position at a specific point in time
5
What is the formula for calculating purchases given the Cost of goods sold, Opening inventory and Closing inventory?
Answer
(B)
Purchases = Cost of goods sold + Opening inventory - Closing inventory
6
What is a common feature of a partnership agreement?
Answer
A
B
D
7
Which financial statement would show the company's assets, liabilities, and equity?
Answer
(C)
Balance Sheet
8
Which of the following accounts are affected when a company records depreciation?
Answer
A
B
9
Limited companies are financed with:
Answer
(B)
shares
10
When goods are withdrawn by the owner for their own use, what is the effect on the statement of financial position?
Answer
(B)
Decrease owner's equity
11
Which of the following is typically found on an income statement?
Answer
(C)
Expenses
12
Which type of business focuses on goods to be sold to consumers?
Answer
(B)
Trading business
13
What does the matching principle state?
Answer
(B)
Revenues should be recognized when earned, and expenses should be recognized in the same period as the revenues they help generate.
14
Which of the following statements is TRUE about public companies?
Answer
B
C
15
Where would a 'surplus' from the Income and Expenditure Account be shown?
Answer
(B)
Statement of Financial Position, increasing accumulated fund.
16
A partnership's income statement is also known as:
Answer
(B)
Profit and loss account
17
If a business has only limited accounting records, it is still possible to prepare a record of your financial statement to include which?
Answer
(C)
Both
18
The amount of the Singapore Altimus measured the following information for the year ended 14 October 2013, indicating clearly the amount to transfer to the income and expenditure account.
Answer
(A)
a)
19
The company’s capital structure is in the:
Answer
(B)
Statement of changes in equity
20
What is a primary advantage of a sole trader business structure?
Answer
(C)
Ease of establishment
21
How are drawings typically treated at the end of an accounting period?
Answer
(C)
They are transferred to the partners' current accounts.
22
What is the effect of recording depreciation expense?
Answer
(C)
Decrease in assets and decrease in profit.
23
What does a high inventory turnover ratio generally indicate?
Answer
(B)
Efficient inventory management
24
What is the typical impact on net profit when accrued expenses are recognized?
Answer
(B)
Decrease net profit
25
Which of the following items is NOT included when calculating cost of sales?
Answer
(D)
Sales revenue
26
What is a key advantage that limited companies have over sole traders and partnerships?
Answer
(C)
Easier access to capital
27
The surplus or deficit from the income and expenditure account is carried to:
Answer
(B)
The statement of financial position.
28
What is an accumulated fund?
Answer
(C)
The accumulated surplus.
29
What is 'cost of goods sold' (COGS)?
Answer
(C)
The costs of producing or acquiring the goods that a company sells.
30
Which accounting principle states that expenses should be recognized in the same period as the revenues they help generate?
Answer
(B)
Matching principle
31
What type of liability is a trade creditor?
Answer
(A)
Current liability
32
What is the impact of recognizing accrued expenses on the income statement?
Answer
(A)
Increases expenses
33
Which of the following is correct regarding the structure of the statement of financial position?
Answer
A
B
C
34
What is the purpose of a Cash Flow Statement?
Answer
(C)
To show the movement of cash in and out of a company over a period.
35
Which financial statement would be used to assess a company's profitability over a period of time?
Answer
(C)
Income Statement
36
When is depreciation usually recorded?
Answer
(C)
Annually
37
What is a characteristic of a service business?
Answer
(C)
Provides intangible services
38
What is the main difference between a sole trader and a limited company?
Answer
(A)
Sole traders have unlimited liability, limited companies have limited liability.
39
What is the function of a balance sheet?
Answer
(C)
To report a company's financial position
40
Which of the following are included in the cost of raw materials used?
Answer
A
C
D
41
Which of these is not part of the preparation for financial statements?
Answer
(C)
Creating a budget
42
The accumulated fund can also be described as:
Answer
(C)
The organization's net worth.
43
What is the effect of accrued expense on the income statement and the statement of financial position?
Answer
(A)
Increase expense and increase liability
44
What are the main components of a balance sheet?
Answer
(B)
Assets, liabilities, and equity
45
Which of the following is typically found on a statement of financial position?
Answer
(C)
Trade payables
46
What does the concept of "limited liability" protect?
Answer
(B)
The shareholders' personal assets from the company's debts.
47
Which of the following is a capital expenditure?
Answer
(B)
Purchase of a new computer.
48
In the case of smaller companies, the owners are very likely to be actively involved in the management of the income and will be the directors of the company; in many cases all the shareholders will also be:
Answer
(B)
Directors
49
If the closing inventory is overstated, what happens to the cost of goods sold?
Answer
(B)
COGS is understated
50
What is the term for money or other assets that a partner contributes to the business?
