Accountig Knowledge Test 19/12

Question 1

Income Statement

Answer 1

This calculates the profit or loss made by a business over a period of time

Question 2

Statement of Financial Position

Answer 2

This shows the financial position of a business at a specific moment in time.
It summarises the assets (what a business owns), the liabilities (what a business owes) and capital

Question 3

Revenue

Answer 3

The value of goods and services sold

Question 4

Sales returns

Answer 4

(‘Returns In’) are shown below ‘Revenue’ and deducted from it

Question 5

Cost of sales

Answer 5

The cost to the business of the goods that it has sold.
It is equal to:
Opening inventory + Purchases – Purchase returns + Carriage In – Closing inventory

Question 6

Gross profit

Answer 6

Revenue – Cost of Sales

Question 7

Profit for the year

Answer 7

Gross Profit + Other income – Expenses

Question 8

Non-Curremt Assets

Answer 8

They are resources owned by the business that it intends to keep for more than one year. They are used to generate profits and are not intended for resale until the end of their useful life

Question 9

Current Assets

Answer 9

They are resources that are owned by a business and are already cash or are intended to be cash within the next 12 months. They can include inventory, trade receivables, prepayments, cash in the bank and cash in hand.

Question 10

Inventory

Answer 10

Goods that are intended for resale but have not yet been sold

Question 11

Trade receivables

Answer 11

Customers that owe money to the business because they have bought goods on credit

Question 12

Current liabilities

Answer 12

amounts owed by the business that must be repaid within one year. They can include trade payables, accruals, bank overdraft and taxation

Question 13

Trade payables

Answer 13

suppliers that are owed money by a business because they have sold goods to the business on credit

Question 14

Non-current liability

Answer 14

amounts owed by a business that will be fully repaid after more than one year. They may include bank loans and mortgages

Question 15

Capital

Answer 15

Balance at start of the year + Capital Introduced + Profit for the Year – Drawings

Question 16

Capital introduced

Answer 16

any money or goods provided by the owner for the business

Question 17

Drawings

Answer 17

money or goods taken out of the business by the owner

Question 18

Prepayment

Answer 18

an expense that has been paid in advance and relates to the next accounting period.
It is shown as a current asset and decreases the expense to which it relates

Question 19

Accrual

Answer 19

an expense for services that have been used but not yet invoiced to the business at the end of the accounting period.
It is shown as a current liability and increases the expense to which it relates

Question 20

Irrecoverable debt

Answer 20

a business will not receive the amount owed by a customer who has been sold goods on credit

Question 21

Depreciation

Answer 21

spreading the cost of a non-current asset over its useful life. It is the decrease in value of non-current assets over a period of time