TEST: Week 6 MCQ Flashcards
(50 cards)
Accounting standards are:
Effectively mandatory statements of acceptable accounting practice
Which of the following are classed as a non-current asset?
a. cash,
b. prepayments,
c. land,
d. receivables.
c. land
The major financial statements normally produced by uk companies are:
The statement of financial position, the statement of profit loss, the statement of cash flows and the statement of changes in equity.
True or false: Investors use financial statements to analyse whether they should invest in a company or not.
True
What is the accounting equation?
Assets-liabilities = owners capital.
How can the accounting equation be rewritten?
a.
assets + profit - drawings - liabilities = closing capital
b.
assets - liabilities - drawings = opening capital + profit
c.
opening capital + profit - drawings - liabilities = assets
d.
assets - liabilities - opening capital + drawings = profit
d.
assets - liabilities - opening capital + drawings = profit
Doves Ltd had opening non-current assets of £254,000, opening current assets of £25,000 and opening liabilities of £59,000. It had closing non-current assets of £300,000, closing current assets of £10,000 and closing liabilities of £75,000. The owner took drawings of £35,000 in the year for personal expenses. What was the profit or loss for the year?
Opening net assets are £254k + £25k - £59k = £220k, closing net assets are £235k but the owner had withdrawn £35k. Using the Accounting Equation (in brief), Closing NA = opening NA + profit + owner’s additions - owners’ withdrawals = £50k
A business had net assets of £150,000 at 1 January 2020 and £100,000 at 31 December 2020. During 2020, the owner introduced £30,000 and made drawings of £10,000. What was the profit or loss for 2020?
(£70,000)
Financial information which does not favour the perspective of one set of users over another is:
a. relevant
b. verifiable
c. timely
d. neutral
d. neutral
The concept of money measurement means:
only items that can be objectively measured in money terms are accounted for
Which of the following is an aspect of relevance according to the Conceptual Framework?
a. Neutrality
b. Free from error
Your answer is incorrect
c. Completeness
d. Materiality
d. materiality
When are expenses recorded?
In the period they are incurred.
A company’s financial statements reflect information about:
a. future projections of sales and expenses
b. product information and information about competitors
c. the general economy of the industry in which the company operates
d. transactions and economic events which affect the company and can be translated into accounting numbers
d. transactions and economic events which affect the company and can be translated into accounting numbers
State whether the total assets would increase, decrease or remain unchanged by a loan received from a friend.
Increase - Cash (and therefore total assets) goes up. Liabilities go up
Rahim received £40 cash when he carried out his first car wash job. The effect of this transaction on the accounting equation is:
a. Liabilities and assets are both increased by £40.
b. Liabilities and assets are both decreased by £40.
c. The owner’s equity and the assets are both increased by £40.
d. The owner’s equity and the assets are both decreased by £40.
c.
The owner’s equity and the assets are both increased by £40.
He earns income, which increases owner’s equity, and cash which increases assets.
State whether the total assets would increase, decrease or remain unchanged by payment of cash to acquire a vehicle for business use.
No change. Cash goes down and non-current assets go up, leaving total assets unchanged.
Which of the following is not a fundamental accounting principle?
a. solvency
b. going concern
c. consistency
d. accruals
a. solvency
Which of the following is correct? Where accounting records are maintained on an accruals basis:
a. Income should be accounted for only when received.
b. Expenses should be accounted for only to the extent they have been paid for.
c. Income should be accounted on an accruals basis and expenses on a payments basis.
d. Income and expenses relating to the accounting period should be fully accounted for even if income is still to be received and expenses have yet to be paid.
d. Income and expenses relating to the accounting period should be fully accounted for even if income is still to be received and expenses have yet to be paid.
Revenues usually should be recognised when:
a. goods are manufactured.
b. a sale is made and goods are delivered.
c. orders for merchandise are placed.
d. cash is collected.
b. a sale is made and goods are delivered.
A loss is ascertained by comparing:
Revenues and expenses
A trial balance shows whether:
a. Transactions have been posted to the correct T accounts.
b. The balance sheet includes all transactions for the period.
c. Total debits equals total credits.
d. Profit has been correctly calculated.
c. Total debits equals total credits.
After reporting the profit for the year it is found that £13,200 of stationery
reported as an asset by the year-end had in fact already been fully used. The effect of the correction of this error would be:
a.
The gross profit as well as net profit would both increase by £13,200.
b. The gross profit and net profit would both decrease by £13,200.
c. The gross profit would decrease by £13,200 but net profit would remain unchanged.
d. The gross profit will remain unchanged but net profit will decrease by £13,200.
d. The gross profit will remain unchanged but net profit will decrease by £13,200.
The extra stationery introduces extra expenses but does not affect gross profit which only includes cost of sales expenses (product costs)
Which of the following would be a credit balance in a trial balance?
a. Bank overdraft
b. Drawings
c. Discounts allowed
d. Carriage outwards
a. Bank overdraft
Which of the following would normally appear on the debit side of the trial balance?
a. Asset and income
b. Liability and expense
c. Asset and expense
d. Expense and capital
c. Asset and expense
