2

1. 1The accounting equation can be written as:

   1. AAssets + profits – drawings – liabilities = closing capital
   2. BAssets – liabilities – drawings = opening capital + profit
   3. CAssets – liabilities – opening capital + drawings = profit
   4. DOpening capital + profit – drawings – liabilities = asset
2. 2The capital of a sole trader would change as a result of:

   1. Aa credit customer paying by bank transfer
   2. Braw materials being purchased on credit
   3. Cnon-current assets being purchased on credit
   4. Dpersonal petrol being paid for out of the business's petty cash
3. 3A business can make a profit and yet have a decreased bank balance. Which of the
   following might cause this to happen?

   1. AThe sale of non-current assets at a loss
   2. BThe charging of depreciation in the statement of profit or loss
   3. CThe lengthening of the period of credit given to customers
   4. DThe lengthening of the period of credit taken from suppliers
4. 4The purpose of the financial statement that lists an entity's total assets and total
   capital/liabilities is to show:

   1. Athe financial performance of the entity over a period of time
   2. Bthe amount the entity could be sold for in liquidation
   3. Cthe amount the entity could be sold for as a going concern
   4. Dthe financial position of the entity at a particular moment in time
5. 5A sole trader is £5,000 overdrawn at her bank and receives £1,000 from a credit customer
   in respect of its account.
   Which element(s) of the accounting equation will change due to this transaction?
   

   1. AAssets and liabilities
   2. BLiabilities only
   3. CAssets only
   4. DAssets, liabilities and capital
6. 6A sole trader purchases goods on credit.
   Which element(s) of the accounting equation will change due to this transaction?
   

   1. AAssets and liabilities
   2. BAssets and capital
   3. CCapital and liabilities
   4. DAssets only
7. 7A sole trader borrows £10,000 from a bank.
   Which element(s) of the accounting equation will change due to this transaction?
   

   1. AAssets and liabilities
   2. BAssets and capital
   3. CCapital and liabilities
   4. DAssets only
8. 8A sole trader sells goods for cash for £500 which had cost £300.
   Which element(s) of the accounting equation will change due to this transaction?

   1. AAssets and liabilities
   2. BAssets and capital
   3. CCapital and liabilities
   4. DAssets only
9. 99 A sole trader increases the business's number of motor vehicles by adding his own car to
   the business's fleet.
   Which element(s) of the accounting equation will change due to this transaction?
   
   

   1. AAssets only
   2. BCapital only
   3. CAssets and capital
   4. DAssets and liabilities
10. 10Which three of the following are elements of financial statements as identified by the IASB’s
    Conceptual Framework?
    

    1. AIncome
    2. BExpenses
    3. CProfits
    4. DLosses
    5. EObligations
    6. FResources
    7. GEquity

11. 11Capital = [blank_start]........................................[blank_end] less [blank_start]........................................[blank_end]

    1. Aassets
    2. Bliabilities
12. 12How would each of these transactions affect the accounting equation in terms of increase or
    decrease in asset, capital or liability? write in order
    (a) Purchasing £800 worth of goods on credit
    An [blank_start]x[blank_end] in [blank_start]y[blank_end] and [blank_start]z[blank_end].
    (b) Paying the telephone bill £25
    An [blank_start]x[blank_end] in [blank_start]y[blank_end] and [blank_start]z[blank_end].
    (c) Selling £450 worth of goods for £650
    An [blank_start]x[blank_end] in [blank_start]y[blank_end]
    An [blank_start]a[blank_end] in [blank_start]b[blank_end] and [blank_start]c[blank_end]
    (d) Paying £800 to a supplier
    An [blank_start]x[blank_end] in [blank_start]y[blank_end] and [blank_start]z[blank_end]

    1. Aincrease
    2. Bdecrease
    3. Cassets
    4. Dcapital
    5. Eliabilities
    6. Fassets
    7. Gcapital
    8. Hliabilities
    9. Iincrease
    10. Jdecrease
    11. Kassets
    12. Lcapital
    13. Mliabilities
    14. Nassets
    15. Ocapital
    16. Pliabilities
    17. Qincrease
    18. Rdecrease
    19. Sassets
    20. Tcapital
    21. Uliabilities
    22. Vincrease
    23. Wdecrease
    24. Xassets
    25. Ycapital
    26. Zliabilities
    27. AAassets
    28. ABcapital
    29. ACliabilities
    30. ADincrease
    31. AEdecrease
    32. AFassets
    33. AGcapital
    34. AHiabilities
    35. AIassets
    36. AJcapital
    37. AKliabilities
13. 13Suppose a business buys a car for £10,000. It expects to keep the car for three years and then to
    sell it for £3,400. How much depreciation should be accounted for in each year of the car's
    useful life? the depreciation is £[blank_start]x[blank_end]

    1. A2200
14. 14Asset,Business, and fill in: current, noncurrent, either
    Van,Delivery firm, [blank_start]x[blank_end]
    Machine, Manufacturing company, [blank_start]x[blank_end]
    Car, Car trader, [blank_start]x[blank_end]
    Investment, Any, [blank_start]x[blank_end]

    1. Anoncurrent
    2. Bnoncurrent
    3. Ccurrent
    4. Deither
15. 15Which of the following is an asset?

    1. AA trade payable
    2. BA loan
    3. CDrawings
    4. DA prepayment
16. 16Which of the following is a liability?

    1. ADepreciation
    2. BAn accrual
    3. CCash at bank
    4. DPlant and machinery
17. 17Capital is the amount:

    1. AThe entity's owners owe to it
    2. BThe entity's customers owe to it
    3. CThe entity owes to its creditors
    4. DThe entity 'owes' to its owners
18. 18Which of the following are assets of an entity?

    1. ATrade payables
    2. BTrade receivables
    3. CBank overdraft
    4. DCash in hand
    5. EFunds introduced by the owner
19. 19Which of the following best describes the accruals concept?

    1. AAssets are matched with liabilities
    2. BIncome is matched with expenses
    3. CExpenses are matched with assets
    4. DIncome is matched with liabilities
20. 20Which of the following is a non-current liability?
    

    1. AA bank overdraft
    2. BA bank loan repayable within a year
    3. CA mortgage repayable in five years' time
    4. DA trade payable
21. 21The statement of financial position sets out the entity's:

    1. AFinancial position over a period of time
    2. BFinancial performance over a period of time
    3. CFinancial position at one point in time
    4. DFinancial performance at one point in time
22. 22Which of the following expenses is included in cost of sales?

    1. ASales people's salaries
    2. BManagement salaries
    3. COverdraft interest
    4. DCost of raw material
23. 23A business has sales of £100,000, cost of sales of £60,000 and expenses of £20,000. The
    gross profit margin is:

    1. A60%
    2. B40%
    3. C20%
    4. D80%
24. 24Which figure from a sole trader's statement of profit or loss would appear in its statement of
    financial position?

    1. AGross profit
    2. BDrawings
    3. CRevenue
    4. DNet profit
25. 25Prepare a statement of financial position for Sunken Arches as at 31 December 20X6, given the
    information below.
    £
    Capital as at 1 January 20X6 51,100
    Profit for the year to 31 December 20X6 8,000
    Premises, carrying amount at 31 December 20X6 50,000
    Motor vehicles, carrying amount at 31 December 20X6 9,000
    Fixtures and fittings, carrying amount at 31 December 20X6 8,000
    Non-current loan 25,000
    Bank overdraft * 2,000
    Inventories 16,000
    Trade receivables 500
    Cash in hand * 100
    Trade payables 1,200
    Drawings 4,000
    Accrued costs of rent 600
    Prepayment of insurance premium 300
    * A shop might have cash in its cash registers, but an overdraft at the bank.
    Solution-fill in blanks
    Sunken Arches
    Statement of financial position as at 31 December 20X6
    £ £
    ASSETS
    Non-current assets
    Property, plant and equipment
    Premises [blank_start]X[blank_end]
    Fixtures and fittings [blank_start]X[blank_end]
    Motor vehicles [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Current assets
    Inventories [blank_start]X[blank_end]
    Trade and other receivables [blank_start]X[blank_end]
    Prepayments [blank_start]X[blank_end]
    Cash and cash equivalents [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Total assets [blank_start]X[blank_end]
    CAPITAL AND LIABILITIES
    Capital
    As at 1 January 20X6 [blank_start]X[blank_end]
    Profit for the year [blank_start]X[blank_end]
    Less drawings [blank_start]X[blank_end]
    At 31 December 20X6 [blank_start]X[blank_end]
    Non-current liabilities
    Long-term borrowings [blank_start]X[blank_end]
    Current liabilities
    Short-term borrowings (bank overdraft) [blank_start]X[blank_end]
    Trade and other payables [blank_start]X[blank_end]
    Accrued costs [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Total capital and liabilities [blank_start]X[blank_end]
    

    1. A50000
    2. B8000
    3. C9000
    4. D67000
    5. E16000
    6. F500
    7. G300
    8. H100
    9. I16900
    10. J83900
    11. K51100
    12. L8000
    13. M-4000
    14. N55100
    15. OX
    16. P2000
    17. Q1200
    18. R600
    19. S3800
    20. T83900
26. 26You are given the following information about Liza Doolittle at the end of her first full month of
    trading, 31 July 20X6:
    £
    Capital at 1 July 20X6 2,500
    Additional capital introduced 250
    Profit for the month 3,620
    Stall at cost 1,800
    Van at cost 700
    Drawings in month 960
    Loan 50
    Inventories 1,250
    Cash in hand 20
    Trade payables 675
    Cash at bank 1,475
    Trade receivables 890
    Requirement
    Prepare a statement of financial position for Liza Doolittle as at 31 July 20X6.
    ASSETS
    Non-current assets
    Stall [blank_start]X[blank_end]
    Van [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Current assets
    Inventories [blank_start]X[blank_end]
    Trade receivables [blank_start]X[blank_end]
    Cash in hand [blank_start]X[blank_end]
    Cash at bank [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Total assets [blank_start]X[blank_end]
    
    CAPITAL AND LIABILITIES
    Capital
    Opening capital [blank_start]X[blank_end]
    Additional capital introduced [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Profit for month [blank_start]X[blank_end]
    Less drawings [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Non-current liabilities
    Loan [blank_start]X[blank_end]
    
    Current liabilities
    Trade payables [blank_start]X[blank_end]
    Total capital and liabilities [blank_start]x[blank_end]

    1. A1800
    2. B700
    3. C2500
    4. D1250
    5. E890
    6. F20
    7. G1475
    8. H3635
    9. I6135
    10. J2500
    11. K250
    12. L2750
    13. M3620
    14. N960
    15. O2660
    16. P5410
    17. Q50
    18. R675
    19. S6135
27. 27On 1 June 20X5, Jock Heiss commenced trading as an ice cream salesman, using a van.
    (a) He borrowed £2,000 from his bank, and the interest cost of the loan was £25 per month.
    (b) He rented the van for £1,000 for three months. Running expenses for the van averaged
    £300 per month.
    (c) He hired an assistant for £100 per month.
    (d) His main business was to sell ice cream to customers in the street, but he also did special
    catering for business customers, supplying ice creams for office parties. Sales to these
    customers were usually on credit.
    (e) For the three months to 31 August 20X5, his total sales were as follows.
    • Cash sales £8,900
    • Credit sales £1,100
    58 Accounting ICAEW 2020
    (f) He purchased his ice cream from a local manufacturer, Floors Co. The purchase cost in the
    three months to 31 August 20X5 was £6,200, and at 31 August he had sold every item. He
    still owed £700 to Floors Co for unpaid purchases on credit.
    (g) One of his credit sale customers has gone bankrupt (insolvent), owing Jock £250. Jock has
    decided to write off the debt in full, with no prospect of getting any of the money owed.
    (h) He used his own home for his office work. Telephone and postage expenses for the three
    months to 31 August were £150, which he paid in cash.
    (i) During the period he paid himself £300 per month.
    A statement of profit or loss can be presented in various formats, but here we will use a vertical
    format similar to the one used in IAS 1. (It is not exactly the same.)
    Jock Heiss
    Statement of profit or loss
    for the three months ended 31 August 20X5
    £ £
    Revenue [blank_start]X[blank_end]
    Cost of sales [blank_start]X[blank_end]
    Gross profit [blank_start]X[blank_end]
    
    Expenses
    Wages [blank_start]X[blank_end]
    Van rental [blank_start]X[blank_end]
    Van expenses [blank_start]X[blank_end]
    Irrecoverable debt written off [blank_start]X[blank_end]
    Telephone and postage [blank_start]X[blank_end]
    Interest charges [blank_start]X[blank_end]
    [blank_start]X[blank_end]
    Profit for the period [blank_start]X[blank_end]
    

    1. A10000
    2. B-6200
    3. C3800
    4. D300
    5. E1000
    6. F900
    7. G250
    8. H150
    9. I75
    10. J2675
    11. K1125
28. 28On 1 June 20X5, Jock Heiss commenced trading as an ice cream salesman, using a van.
    (a) He borrowed £2,000 from his bank, and the interest cost of the loan was £25 per month.
    (b) He rented the van for £1,000 for three months. Running expenses for the van averaged
    £300 per month.
    (c) He hired an assistant for £100 per month.
    (d) His main business was to sell ice cream to customers in the street, but he also did special
    catering for business customers, supplying ice creams for office parties. Sales to these
    customers were usually on credit.
    (e) For the three months to 31 August 20X5, his total sales were as follows.
     Cash sales £8,900
     Credit sales £1,100
    58 Accounting ICAEW 2020
    (f) He purchased his ice cream from a local manufacturer, Floors Co. The purchase cost in the
    three months to 31 August 20X5 was £6,200, and at 31 August he had sold every item. He
    still owed £700 to Floors Co for unpaid purchases on credit.
    (g) One of his credit sale customers has gone bankrupt (insolvent), owing Jock £250. Jock has
    decided to write off the debt in full, with no prospect of getting any of the money owed.
    (h) He used his own home for his office work. Telephone and postage expenses for the three
    months to 31 August were £150, which he paid in cash.
    (i) During the period he paid himself £300 per month.
    A statement of profit or loss can be presented in various formats, but here we will use a vertical
    format similar to the one used in IAS 1. (It is not exactly the same.)
    Jock Heiss
    Statement of profit or loss
    for the three months ended 31 August 20X5
    £ £
    Revenue (8,900 + 1,100) 10,000
    Cost of sales (6,200)
    Gross profit 3,800
    
    Expenses
    Wages (3  100) 300
    Van rental 1,000
    Van expenses (3  300) 900
    Irrecoverable debt written off 250
    Telephone and postage 150
    Interest charges (3  25) 75
    (2,675)
    Profit for the period 1,125
    
    Prepare a statement of financial position as at 31 August 20X5 for Jock Heiss, using the
    information from the Worked example above.
    
    Statement of financial position as at 31 August 20X5
    £
    ASSETS
    Current assets
    Trade receivables [blank_start]X[blank_end]
    Cash at bank and in hand [blank_start]X[blank_end]
    Total assets [blank_start]X[blank_end]
    CAPITAL AND LIABILITIES
    Capital
    Opening capital [blank_start]X[blank_end]
    Profit for the period [blank_start]X[blank_end]
    Drawings [blank_start]X[blank_end]
    Closing capital [blank_start]X[blank_end]
    Non-current liabilities
    Loan [blank_start]X[blank_end]
    Current liabilities
    Trade payables [blank_start]X[blank_end]
    Total capital and liabilities [blank_start]X[blank_end]
    

    1. A850
    2. B2075
    3. C2925
    4. D0
    5. E1125
    6. F900
    7. G225
    8. H2000
    9. I700
    10. J2925

Descripción

Test sobre 2, creado por Dhriti Manupriya el 02/09/2020.

Autor

Dhriti Manupriya

Idioma

English

Visitas

0

Historial

Creado el 2 sep 2020 · actualizado el 7 sep 2020

Etiquetas

qlts

Valoración

Aún sin valoraciones

Valora este test

Valora este test

Más sobre The Accounting Equation