Question 1

Corporation tax payable would be classified as:

Accepted Answer

A)   Equity on statement of financial position
B)   Liability on statement of financial position
C)   Asset on statement of financial position
D)   Expense on income statement

Question 2

An example of a long-term liability is:

Accepted Answer

A)   Current taxation payable
B)   Mortgage
C)   Proposed dividend
D)   Accumulated depreciation B

Question 3

If non-current assets are £250,000,current assets £70,000,long-term borrowing £50,000 and current liabilities £10,000 ,what is the value of owner's equity?

Accepted Answer

A)   £240,000
B)   £260,000
C)   £120,000
D)   £270,000

Question 4

Which of the following statements is correct?

Accepted Answer

A)   The bank balance is always a current asset, whether it is "in credit" on the statement or "overdrawn"
B)   If the bank account is "in credit" on the statement then it must be a current asset
C)   If the bank account is "overdrawn" on the statement then it is a current asset
D)   If the bank account is "in credit" on the statement then it is a liability B

Question 5

What a company owns is known as assets and what a company owes is known as expenses.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct?

Accepted Answer

A)   Financial Accounting is a legal requirement. It is concerned with producing the accounts of an entity, and is produced for stakeholders. Management accounting is not a legal requirement, and is for use within the company.
B)   Financial Accounting is a legal requirement. It is concerned with the financing of the entity. Management accounting is also a legal requirement, and together they are used to produce the accounts of the entity.
C)   Financial Accounting is not a legal requirement. It is concerned with the cash flow of the entity. Management Accounting is a legal requirement, and this is used to produce the accounts of the entity.
D)   Financial Accounting is not a legal requirement. It is concerned with the financing of the entity. Management accounting is also not legally required, and is for use within the company.

Question 7

Non-current assets include inventories and trade receivables.

Accepted Answer

A) True 
 B)False

Question 8

Non-current liabilities include long-term borrowings such as mortgages.

Accepted Answer

A) True 
 B)False

Question 9

The accounting equation can be stated as:

Accepted Answer

A)   Assets = Liabilities + Owner's Equity
B)   Assets + Liabilities = Owner's Equity
C)   Liabilities = Owner's Equity + Assets
D)   Assets = Liabilities - Owner's Equity

Question 10

Revenue from sales decrease assets and decrease equity.

Accepted Answer

A) True 
 B)False

Question 11

The statement of financial position of Rosie Ltd.includes the following entries: inventory £25,000,trade receivables £12,000,cash £11,000 and current liabilities £25,000 (made up of trade payables £16,000,short-term borrowing £800 and £8,200 current tax payable) .Calculate the current ratio.

Accepted Answer

A)   0.9: 1
B)   1:1
C)   0.4:1
D)   1.9:1 D

Question 12

Which of the following statements is correct?

Accepted Answer

A)   Assets are future cash outflows
B)   Liabilities are future cash inflows
C)   Assets are the sum of liabilities and owner's equity
D)   Assets are the difference between liabilities and owner's equity

Question 13

If a company has long-term borrowings of £12,000 and equity of £138,000,what is its gearing ratio?

Accepted Answer

A)   8.7%
B)   11.5%
C)   8%
D)   9.5%

Question 14

The main purpose of financial accounting information is to:

Accepted Answer

A)   Provide financial information for taxation purposes
B)   Provide financial information to managers
C)   Provide financial information for external users, such as shareholders and creditors
D)   Provide financial information to customers

Question 15

Which of the following statements is correct?

Accepted Answer

A)   "Equity" is the original money invested in the business that belonged to the owners of the business.
B)   "Equity" is money that the business has used to grow - for example the original investment from owners or money from the sale of shares, and any loans made to the business
C)   "Equity" is the value of the business
D)   "Equity" is made up of not only the original investment in the business, but also any profits that were retained over the years.

Question 16

An example of a current asset is:

Accepted Answer

A)   Inventory
B)   Equipment
C)   Retained earnings
D)   Owner's equity

Question 17

Which of the following statements is false?

Accepted Answer

A)   A successful business is usually worth the statement of financial position figure for its net assets
B)   A statement of financial position shows you how a company has been financed
C)   A balance can indicate whether a company has excessive liabilities
D)   All of the above statements are false

Question 18

The accounting equation can be stated as:

Accepted Answer

A)   Owner's Equity = Assets - Liabilities
B)   Assets + Liabilities = Owner's Equity
C)   Liabilities = Owner's Equity + Assets
D)   Assets = Liabilities - Owner's Equity

Question 19

An example of a current liability is:

Accepted Answer

A)   Retained earnings
B)   Accumulated depreciation
C)   Owner's equity
D)   Bank overdraft

Question 20

Inventory,trade receivables and cash are classified as:

Accepted Answer

A)   Current liabilities
B)   Long-term assets
C)   Current assets
D)   Long-term liabilities

Exam 1: The Statement of Financial Position Balance Sheetand What It Tells Us

Corporation tax payable would be classified as:

Correct AnswerverifiedShow Answer

An example of a long-term liability is:

Correct AnswerverifiedB

If non-current assets are £250,000,current assets £70,000,long-term borrowing £50,000 and current liabilities £10,000 ,what is the value of owner's equity?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedB

What a company owns is known as assets and what a company owes is known as expenses.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Non-current assets include inventories and trade receivables.

Correct AnswerverifiedShow Answer

Non-current liabilities include long-term borrowings such as mortgages.

Correct AnswerverifiedShow Answer

The accounting equation can be stated as:

Correct AnswerverifiedShow Answer

Revenue from sales decrease assets and decrease equity.

Correct AnswerverifiedShow Answer

The statement of financial position of Rosie Ltd.includes the following entries: inventory £25,000,trade receivables £12,000,cash £11,000 and current liabilities £25,000 (made up of trade payables £16,000,short-term borrowing £800 and £8,200 current tax payable) .Calculate the current ratio.

Correct AnswerverifiedD

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If a company has long-term borrowings of £12,000 and equity of £138,000,what is its gearing ratio?

Correct AnswerverifiedShow Answer

The main purpose of financial accounting information is to:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

An example of a current asset is:

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The accounting equation can be stated as:

Correct AnswerverifiedShow Answer

An example of a current liability is:

Correct AnswerverifiedShow Answer

Inventory,trade receivables and cash are classified as:

Correct AnswerverifiedShow Answer

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D

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