Accounting for IGCSE & O level - Final Statements (Section 14)
1
If gross profit is greater than total expenses in the same year, the business will make which of the following?
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(C)
A profit for the year.
2
What will happen to the business if the sales return is increased?
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(C)
Net profit will decrease.
3
Which of the following best describes 'cost of goods sold'?
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(C)
The direct costs attributable to the production of the goods sold by a company.
4
What is the purpose of the 'Allowance for Doubtful Accounts'?
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(B)
To reduce the reported value of accounts receivable.
5
What is a major advantage of departmental accounts?
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(B)
They provide a detailed overview of the profitability of each department.
6
What are financial statements primarily prepared for?
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(A)
To calculate and record profits and capital gains.
7
Which item is usually valued at the lower of cost or net realisable value (NRV)?
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(B)
Inventory
8
Which of the following statements is true about inventory valuation methods?
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A
B
9
What accounting concept is most closely related to the valuation of assets at 'historic cost'?
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(C)
Objectivity
10
How are the figures of assets, liabilities, and owner's equity in a statement of financial position recorded?
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(C)
The assets are on the left-hand side, and liabilities and owner's equity are on the right-hand side.
11
What does the income statement help a business owner measure?
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(B)
How profitable the business is
12
What happens to the balance sheet at the end of the accounting year?
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(B)
It is updated to reflect the value of assets and capital.
13
What are the primary categories presented in a statement of financial position?
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(B)
Assets, liabilities, and owner's equity
14
What impact would a decrease in sales revenue have on the gross profit, assuming COGS remains constant?
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(B)
Decrease gross profit
15
Carriage outwards are usually classified as:
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(A)
An operating expense
16
What is the difference between 'historic cost' and 'net book value' of an asset?
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(B)
Historic cost is the original cost, and net book value is the cost less accumulated depreciation.
17
What is the formula to calculate Capital Employed?
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(C)
Total Assets - Current Liabilities
18
What does working capital measure?
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(C)
A company's ability to meet short-term obligations.
19
What is one of the key things that a statement of financial position helps assess?
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(B)
The creditworthiness of the business and the liquidity risk.
20
What is point-of-sale inventory recording?
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(C)
A method to record sales
21
Which inventory valuation method will give the highest valuation when prices are rising?
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(B)
FIFO
22
Which of the following statements is true regarding the selection of inventory valuation methods?
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A
B
D
23
If Assets = $500,000 and Liabilities = $200,000, what is the owner's equity?
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(B)
$300,000
24
When should we use the actual purchase price paid for specific items to value our inventory?
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(B)
When goods are easily distinguishable
25
What type of asset is cash held in the business bank account?
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(B)
Current asset
26
Which of the following is a current asset?
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(C)
Inventory
27
What is the main purpose of the statement of financial position?
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(C)
To show a company's financial condition at a specific point.
28
If a company's net loss for the year is $5,000, and the owner's beginning capital was $20,000, what will be the ending capital amount, assuming no other transactions?
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(A)
$15,000
29
What is the first part of the income statement also called?
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(C)
Trading Account
30
What is the main purpose of the 'Cost of Goods Sold' section in the income statement?
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(B)
To show the expenses directly related to producing the revenue.
31
What does the term "capital employed" include?
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A
B
C
D
32
Which of the following statements is true regarding carriage inwards?
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(B)
It increases the cost of purchases.
33
Which of the following is not a component of calculating cost of goods sold?
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(B)
Sales revenue
34
What will happen if the business had $10,000 in sales revenue, a cost of goods sold of $4,000 and operating expenses of $3,000? (Ignoring income tax).
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(B)
The business will make a profit.
35
What is the formula to calculate the cost of inventory?
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(C)
Quantity x Price
36
What transactions would increase working capital?
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A
C
37
What is the first step in preparing the first part of the income statement?
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(D)
Write the sales account with the final profits balance to 'Sales'
38
What is the main purpose of the 'Gross Profit' line item in the income statement?
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(C)
To show the profit before any operating expenses are deducted.
39
In the context of an income statement, what does the term 'cost of sales' refer to?
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(B)
The costs directly related to the goods sold.
40
Which of the following is an example of a non-current asset?
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(C)
Equipment
41
Which of the following is classified as a liability?
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(C)
Accounts Payable
42
How is Net Assets calculated?
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(B)
Assets - Liabilities
43
Which of the following is the correct sequence of steps in preparing an income statement?
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(C)
Follow the trial balance, transfer balances for sales, purchases, etc., calculate gross profit, and calculate profit/loss.
44
Which of the following statements describes the main purpose of a Statement of Financial Position?
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(B)
To present a company's assets, liabilities and equity at a specific point in time.
45
What are examples of costs that might be included when calculating the net realisable value of inventory?
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A
D
46
Which items are generally included in the calculation of current liabilities?
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A
B
C
47
What is the definition of Net Profit?
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(A)
Total revenues - Total expenses
48
In a statement of financial position, what items are typically listed under 'Assets'?
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(C)
Items the business owns and controls
49
What impact does recording a loss for the year have on net assets and the owner's equity?
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(A)
Reduces net assets and owner's equity.
50
What does the term "liquidity" refer to in business?
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(B)
The ability of a business to convert assets into cash quickly.
