Accounting for IGCSE & O level - Final Statements (Section 10)
1
What is the effect of writing off a bad debt?
2
Which of the following is the correct formula to find out the working capital?
Răspuns(C)
Current Assets - Current Liabilities
3
What is the impact on the accounting equation of a company declaring and paying cash dividends?
Răspuns(D)
Assets decrease, Equity decreases.
4
Which of the following is true regarding the valuation of inventory at the lower of cost or net realisable value (NRV)?
Răspuns(C)
The value reported on the balance sheet is the lower of these two values.
5
Where is the final profit or loss for the year transferred to, in a simplified example?
6
Which of the following is an example of a current asset?
7
What is the primary purpose of recording opening inventory and closing inventory in the income statement?
Răspuns(B)
To calculate gross profit.
8
Why would a business owner consider closing a poorly performing department?
9
What does the phrase 'profit for the year' measure?
Răspuns(A)
Gross profit less expenses.
10
If beginning inventory is $5,000, purchases are $20,000 and closing inventory is $2,000. What is the cost of goods sold?
11
Which of the following statements best describes the purpose of an income statement?
Răspuns(C)
To summarize a company's revenues, expenses, and profitability over a period.
12
What is the most important factor in deciding if a business can quickly and easily pay its short-term debts?
13
What does the income statement show?
Răspuns(B)
Revenues, expenses, and profit/loss.
14
What is the order of presentation on an income statement?
Răspuns(C)
Revenue, cost of sales, gross profit, expenses, profit for the year
15
What are some advantages of using departmental accounts?
16
Which of the following is true about the allocation of shared expenses in departmental accounting?
17
What does the term 'capital employed' represent?
Răspuns(C)
The total funds invested in a business
18
Which of the following would typically be included in the 'current assets' section of a statement of financial position?
19
How are carriage inwards and carriage outwards handled in the income statement?
Răspuns(B)
Carriage inwards is part of cost of goods sold, carriage outwards is an operating expense.
20
What is the primary reason to carry out valuation of inventory?
Răspuns(D)
To determine the balance sheet and income statement figures
21
What does 'Net Assets' represent?
Răspuns(C)
Assets minus liabilities.
22
What is the main difference between the two sections of an income statement?
Răspuns(A)
One calculates gross profit and the other, the profit for the year.
23
How do you calculate the net purchases?
Răspuns(B)
Purchases - Purchase Returns
24
In the calculation of gross profit, what is subtracted from sales?
25
In a vertical statement of financial position, what is the purpose of Column 1?
Răspuns(C)
To list the individual values of assets, liabilities, and capital.
26
If the closing inventory is understated, what is the effect on the gross profit?
Răspuns(A)
Gross profit will be understated.
27
In what situations is the net realisable value of inventory likely to be less than cost?
28
Which method is suitable for small businesses with low inventory?
29
Which of the following is an example of a business expense?
30
Which of the following is typically NOT a non-current asset?
31
What is one of the potential outcomes when closing a poorly performing department?
Răspuns(A)
Increased overall business profitability.
32
Which of the following elements is included in calculating 'profit for the year'?
33
What are considered 'sundry expenses'?
Răspuns(B)
Expenses not recorded in the ledger
34
What is the effect of writing off a bad debt?
Răspuns(B)
It decreases the value of trade receivables.
35
Which of the following is the best method to allocate shared expenses (such as rent) between departments in a fair and reasonable manner?
Răspuns(C)
Allocate rent based on the proportion of floor space each department occupies.
36
What is a key use of departmental accounts?
Răspuns(C)
To assess the performance of each department separately.
37
What is the primary function of depreciation?
Răspuns(B)
To allocate the cost of an asset over its useful life.
38
What items must be considered when calculating profit for the year?
39
What type of information might be revealed by running inventory records?
40
What is the formula for calculating gross profit?
Răspuns(B)
Sales Revenue - Cost of Goods Sold
41
What is the role of the 'Cost of Sales' in calculating the gross profit?
Răspuns(B)
It is subtracted from the revenue.
42
If a company has a net loss for the year, what is the effect on owner's equity?
43
What two pieces of information are needed to calculate the value of closing inventory?
44
Which of the following statements about the income statement is correct?
Răspuns(B)
It summarizes the company's revenues and expenses over a period of time.
45
What is the impact of increasing the 'cost of goods sold' on the gross profit?
46
What is the definition of opening equity?
Răspuns(C)
Owner's equity at the start of the accounting year.
47
What is the key function of the statement of financial position?
Răspuns(B)
To show the financial standing of a business at a specific point.
48
What is one of the main objectives of preparing separate departmental accounts?
Răspuns(C)
To identify and investigate poor performance in a department.
49
What type of information is found in the 'Net Assets' portion of a Statement of Financial Position?
Răspuns(C)
The owner's stake in the business, after liabilities
50
What is the main aim for business owner?
Răspuns(C)
For profit and capital gains
