Introduction To Final Accounts - 10%

Question 1

What are the two key statements in the final accounts ?

Answer 1

• statement of profit or loss
• statement of financial position

Question 2

What is a statement of profit or loss?

Answer 2

It is a record of income generated and expenses incurred over a given period

Question 3

What is a statement of financial position ?

Answer 3

A list of all the assets owed and liabilities owed at a particular date.

Question 4

Statement of profit and loss characteristics

Answer 4

This statement matched revenue earned in a period with the costs incurred in earning it

Question 5

Gross profit calculation

Answer 5

Revenue - cost of sales = gross profit

Question 6

Profit calculation

Answer 6

Gross profit - expenses = profit

Question 7

Statement of financial position characteristics

Answer 7

This is the list of assets, liabilities and capital of a business

Question 8

What is an asset ?

Answer 8

Something valuable which a business owns or has use of

Question 9

Give 3 examples of an asset

Answer 9

• a factory warehouse
• inventories of good for resale
• Cash

Question 10

What is a liability ?

Answer 10

Something that is owed to somebody else

Question 11

Give 3 examples of a liability

Answer 11

• bank loan
• amounts owed to suppliers
• taxation owed to government

Question 12

What is capital ?

Answer 12

-Funds which belong to the owner/ owners
- the investment of funds with the intention of earning a return

Question 13

How to calculate capital

Answer 13

• capital contribution
• add profit for the year
• less drawings

Question 14

What is profit ?

Answer 14

The excess of income over expenditure

Question 15

What is the accounting equation

Answer 15

Asset= capital + liabilities

Question 16

What is drawings ?

Answer 16

The amounts withdrawn from the business by the proprietor

Question 17

What is capital expenditure ?

Answer 17

This results in the acquisition of non- current assets or an increase in their earning capacity

Question 18

What is revenue expenditure

Answer 18

Incurred for the purpose of trade or to maintain the existing earning capacity of the non- current asset

Question 19

Which financial statement does the capital expenditure go on ?

Answer 19

Statement of financial position

Question 20

What’s financial statement does the revenue expenditure go on ?

Answer 20

Statement of profit or loss

Question 21

Give an example of capital income

Answer 21

• sale of a non current asset

Question 22

Give 3 examples of revenue income

Answer 22

• sales ( trading income )
• interest received
• dividends received

These all go to the statement of profit and loss

Question 23

What are the 3 types of coding systems

Answer 23

• numeric code e.g invoice 1307, 1308
• Alphabetical e.g customers filed alphabetically by name
• alpha- numeric e.g codes ABB001, ABB002

Question 24

What are the 4 advantages of coding systems

Answer 24

• unique identifiers
• saves time
• saves storage space
• used extensively in computer systems