Question 1

Which of the following statements is not reflective of revenue expenditure?

Accepted Answer

A)  Expenditure to carry on the trade of the business 
B)  Expenditure which is charged to the income statement in the period to which it relates 
C)  Expenditure which provides benefit to the business for several periods 
D)  Expenditure which provides benefit to the business in one period only 
A)  Expenditure to carry on the trade of the business 
B)  Expenditure which is charged to the income statement in the period to which it relates 
C)  Expenditure which provides benefit to the business for several periods 
D)  Expenditure which provides benefit to the business in one period only C

Question 2

Which of the following statements is correct?

Accepted Answer

A)  Opening capital less profits less drawings equals closing capital 
B)  Opening capital less losses less drawings equals closing capital 
C)  Opening capital less drawings less capital introduced equals closing capital 
D)  Opening capital less closing capital equals drawings plus capital introduced. 
A)  Opening capital less profits less drawings equals closing capital 
B)  Opening capital less losses less drawings equals closing capital 
C)  Opening capital less drawings less capital introduced equals closing capital 
D)  Opening capital less closing capital equals drawings plus capital introduced. B

Question 3

An entity's net profit may be calculated using the following:

Accepted Answer

A)  Closing capital - drawings + capital introduced - opening capital 
B)  Closing capital + drawings - capital introduced - opening capital 
C)  Opening capital + drawings - capital introduced - closing capital 
D)  Opening capital - drawings + capital introduced - closing capital 
A)  Closing capital - drawings + capital introduced - opening capital 
B)  Closing capital + drawings - capital introduced - opening capital 
C)  Opening capital + drawings - capital introduced - closing capital 
D)  Opening capital - drawings + capital introduced - closing capital B

Question 4

Which of the following best explains what is meant by capital expenditure? Capital expenditure is expenditure:

Accepted Answer

A)  To maintain non-current assets 
B)  To repair non-current assets 
C)  Relating to the cost, renewal and repair of non-current assets 
D)  To improve non-current assets 
A)  To maintain non-current assets 
B)  To repair non-current assets 
C)  Relating to the cost, renewal and repair of non-current assets 
D)  To improve non-current assets

Question 5

Which of the following is regarded as capital expenditure in a retail store?

Accepted Answer

A)  Hangers 
B)  Carrier bags 
C)  Mannequins 
D)  Clothes for resale 
A)  Hangers 
B)  Carrier bags 
C)  Mannequins 
D)  Clothes for resale

Question 6

If drawings exceed opening capital plus net profit, and no new capital has been introduced, then the:

Accepted Answer

A)  Business is healthy. 
B)  Drawings account has a credit balance 
C)  Business is bankrupt 
D)  Capital account has a credit balance 
A)  Business is healthy. 
B)  Drawings account has a credit balance 
C)  Business is bankrupt 
D)  Capital account has a credit balance

Question 7

A business has a property worth £60,000, a motor vehicle worth £7,000, fixtures and fittings worth £15,000, cash in the bank of £6,000. The business owes £20,000 to its suppliers and £5,000 is still outstanding on a loan. How much capital does the business have?

Accepted Answer

A)  £39,000 
B)  £53,000 
C)  £81,000 
D)  £95,000 
A)  £39,000 
B)  £53,000 
C)  £81,000 
D)  £95,000

Question 8

If opening capital is £120,000, closing capital is £140,000, profits for the period are £20,000 and capital introduced is £10,000, then drawings are:

Accepted Answer

A)  £0 
B)  £10,000 
C)  £20,000 
D)  £30,000 
A)  £0 
B)  £10,000 
C)  £20,000 
D)  £30,000

Question 9

Owner's capital is:

Accepted Answer

A)  Opening capital plus drawings minus net profit 
B)  Total assets minus external liabilities 
C)  Opening capital plus net profit plus trade payables 
D)  Current assets less working capital 
A)  Opening capital plus drawings minus net profit 
B)  Total assets minus external liabilities 
C)  Opening capital plus net profit plus trade payables 
D)  Current assets less working capital

Question 10

Which of the following is regarded as capital expenditure in a builder's yard?

Accepted Answer

A)  Sand 
B)  Wood 
C)  Delivery van 
D)  Tools for sale 
A)  Sand 
B)  Wood 
C)  Delivery van 
D)  Tools for sale

Question 11

Which of the following is regarded as capital expenditure in a car dealership?

Accepted Answer

A)  The purchase of motor vehicles for resale 
B)  Improvements made to trade-in cars for resale 
C)  Gift bags and car mats 
D)  Expenditure on advertising on the side of the managing directors car 
A)  The purchase of motor vehicles for resale 
B)  Improvements made to trade-in cars for resale 
C)  Gift bags and car mats 
D)  Expenditure on advertising on the side of the managing directors car

Question 12

Where does the following item appear in the financial statements? The purchase of a Camcorder for the business for taking video clips for the website.

Accepted Answer

A)  Drawings in the statement of financial position 
B)  Purchases in the income statement 
C)  Equipment in the statement of financial position 
D)  Sundry expenses in the income statement 
A)  Drawings in the statement of financial position 
B)  Purchases in the income statement 
C)  Equipment in the statement of financial position 
D)  Sundry expenses in the income statement

Question 13

A business has a motor vehicle worth £5,000 and equipment worth £10,000. It has £500 cash. The business owes £10,000 to its suppliers and is owed £25,000 from its customers, has a £500 overdraft and has £1,000 outstanding on a loan. How much capital does the business have?

Accepted Answer

A)  £4,000 
B)  £29,000 
C)  £29,500 
D)  £49,000 
A)  £4,000 
B)  £29,000 
C)  £29,500 
D)  £49,000

Question 14

Which of the following costs would be classified as capital expenditure for a restaurant business?

Accepted Answer

A)  Knives and forks for the business 
B)  Glasses for the tables 
C)  A replacement broken window 
D)  A new sign advertising the restaurant 
A)  Knives and forks for the business 
B)  Glasses for the tables 
C)  A replacement broken window 
D)  A new sign advertising the restaurant

Question 15

A business has a property worth £100,000, a motor vehicle worth £5,000 and equipment worth £10,000. The business owes £20,000 to its suppliers and is owed £5,000 from its customers, has a £1,000 overdraft and has £4,000 outstanding on a loan.
How much capital does the business have?

Accepted Answer

A)  £34,000 
B)  £76,000 
C)  £81,000 
D)  £86,000 
A)  £34,000 
B)  £76,000 
C)  £81,000 
D)  £86,000

Question 16

If opening capital is £10,000 and closing capital is £13,000 then the movement can be explained by which of the following:

Accepted Answer

A)  The entity made a loss of £2,000. The owner introduced £5,000 
B)  The entity made a profit of £2,000. The owner introduced £5,000 
C)  The entity made a loss of £1,000. The owner introduced £4,000 and withdrew £1,000. 
D)  The entity made a profit of £1,000. The owner introduced £5,000 and withdrew £1,000 
A)  The entity made a loss of £2,000. The owner introduced £5,000 
B)  The entity made a profit of £2,000. The owner introduced £5,000 
C)  The entity made a loss of £1,000. The owner introduced £4,000 and withdrew £1,000. 
D)  The entity made a profit of £1,000. The owner introduced £5,000 and withdrew £1,000

Exam 7: The Accounting Equation and Its Components

Which of the following statements is not reflective of revenue expenditure?

Which of the following statements is correct?

An entity's net profit may be calculated using the following:

Which of the following best explains what is meant by capital expenditure? Capital expenditure is expenditure:

Which of the following is regarded as capital expenditure in a retail store?

If drawings exceed opening capital plus net profit, and no new capital has been introduced, then the:

A business has a property worth £60,000, a motor vehicle worth £7,000, fixtures and fittings worth £15,000, cash in the bank of £6,000. The business owes £20,000 to its suppliers and £5,000 is still outstanding on a loan. How much capital does the business have?

If opening capital is £120,000, closing capital is £140,000, profits for the period are £20,000 and capital introduced is £10,000, then drawings are:

Owner's capital is:

Which of the following is regarded as capital expenditure in a builder's yard?

Which of the following is regarded as capital expenditure in a car dealership?

Where does the following item appear in the financial statements? The purchase of a Camcorder for the business for taking video clips for the website.

A business has a motor vehicle worth £5,000 and equipment worth £10,000. It has £500 cash. The business owes £10,000 to its suppliers and is owed £25,000 from its customers, has a £500 overdraft and has £1,000 outstanding on a loan. How much capital does the business have?

Which of the following costs would be classified as capital expenditure for a restaurant business?

A business has a property worth £100,000, a motor vehicle worth £5,000 and equipment worth £10,000. The business owes £20,000 to its suppliers and is owed £5,000 from its customers, has a £1,000 overdraft and has £4,000 outstanding on a loan. How much capital does the business have?

If opening capital is £10,000 and closing capital is £13,000 then the movement can be explained by which of the following:

Entities and Financial Reporting Standards

International Accounting: Institutional Framework and Standards

The Nature and Objectives of Financial Accounting

Accounting Principles, Concepts and Policies

The Conceptual Framework of Accounting

Auditing, Corporate Governance and Ethics

Basic Documentation and Books of Accounts

The General Ledger

The Balancing of Accounts and the Trial Balance

Day Books and the Journal

The Cash Book

The Petty Cash Book

The Final Financial Statements of Sole Traders

Depreciation and Non-Current Assets

Bad Debts and Provisions for Bad Debts

Accruals and Prepayments

The Preparation of Final Financial Statements From the Trial Balance

The Bank Reconciliation Statement

Control Accounts

Errors and Suspense Accounts

Single Entry and Incomplete Records

Inventory Valuation

Financial Statements for Manufacturing Entities

The Final Financial Statements of Clubs

The Final Financial Statements of Partnerships

Changes in Partnerships

Partnership Dissolution and Conversion to Company Status

The Nature of Limited Companies and Their Capital

The Final Financial Statements of Limited Companies

Statement of Cash Flows

The Appraisal of Company Financial Statements Using Ratio Analysis

Filters