Accounting for IGCSE & O level - Final Statements (Section 1)
1
What is the purpose of calculating the gross profit?
Svar(B)
To determine the profitability of the business's core operations before considering operating expenses.
2
What is the main advantage of using a perpetual inventory system?
Svar(B)
It provides more immediate and continuous inventory information.
3
Making a profit is the main reason people invest their time, effort and money in businesses. Why is this so important?
4
What does "cost of goods sold" represent?
Svar(A)
The total cost of all goods sold during a period.
5
A business's current assets are $20,000 and its current liabilities are $15,000. What is its working capital?
6
What are the elements of gross profit?
7
It is important to identify the contribution to profit or loss of each department in a business because it allows for:
8
How do you know if you have a good closing inventory?
Svar(A)
It becomes the opening inventory of next year.
9
Which account is used to record inventory at the start of the year?
10
What impact does including carriage outwards charges have on the income statement?
11
What is included in expenses?
12
What does a business bank account allow?
13
Which of the following affect gross profit?
14
A company uses the FIFO method. During a period of deflation, how does this impact their COGS and profit?
Svar(A)
COGS is higher and profit is lower.
15
What are the types of assets?
16
What do we add to the purchases to calculate the cost of goods available for sale?
17
What is the main purpose of inventory valuation?
18
What is the primary purpose of a departmental income statement?
Svar(A)
To show the profitability of each department.
19
Why is it important for a business to identify the contribution to profit or loss of each department?
20
How do businesses typically establish the quantity of inventory on hand?
Svar(B)
Through a physical count or stock take.
21
Which of the following is usually included in the current liabilities section of a financial position?
22
What is the difference between current and non-current liabilities?
Svar(A)
Current liabilities are due within one year, while non-current liabilities are due after one year.
23
What is the main advantage of AVCO?
Svar(A)
It minimizes the impact of price fluctuations
24
What is the effect of a higher inventory valuation on a company's financial statements?
25
In a horizontal statement of financial position, where is the value of owner's equity recorded?
26
Which of the following are examples of current liabilities?
27
What are the limitations of the 'first-in, first-out' (FIFO) method?
28
What does an increase in sales returns affect?
29
Which of the following items is considered in calculating the gross profit?
30
Where can a business record the value of the owners' equity?
31
What does 'Net Realizable Value' (NRV) represent when valuing inventory?
Svar(C)
The estimated selling price less any costs of completion and disposal.
32
If a business takes drawings for personal use, what happens?
Svar(A)
Reduces the net assets and owner's equity
33
What is the purpose of an income statement for each department?
Svar(C)
To show the income, expenses, and profit/loss of each department.
34
What does a trial balance assist in?
Svar(B)
Identifying errors and checking arithmetical accuracy
35
Why do we need to carry out valuation of inventory?
36
What is included in the current assets?
37
What does "depreciation" mean?
Svar(B)
The allocation of the cost of a tangible asset over its useful life.
38
Which of the following is an example of direct expenses?
Svar(B)
Salaries of shop assistants
39
What is the formula for calculating profit for the year?
40
What account is used to calculate the value of goods sold?
41
What happens to the total expenses in the event of a net loss?
Svar(C)
Expenses are more than revenues
42
What financial statements are used to see the ending equity?
43
What is included in the Statement of Financial Position?
44
What does the calculation of net profit for the year involve?
45
Which of the following is an example of a current asset?
46
What is the accounting equation?
Svar(B)
Assets = Liabilities + Equity
47
What formula shows cost of goods sold?
Svar(A)
Opening Inventory + Purchases - Closing Inventory
48
Which of these accounts would typically be found on an income statement?
49
In the income statement, what represents the cost of the goods a company has sold during the year?
50
For the year ended, What are the total expenses for business C?
