Deck 3: Balancing the Basics

Question 1

A statement of financial position aims to show:

A) The market value of the firm's net assets.
B) That all the transactions have been recorded in the books of the business.
C) The assets and liabilities of the business at a particular date and the capital invested in the business.
D) How much a business is worth.

Answer 1

C

Question 2

Which of the following is NOT a current asset?

A) Trade receivables
B) Bank overdraft
C) Inventories
D) Prepayment

Answer 2

B

Question 3

The closing capital account balance is always equal to:

A) Non-current assets PLUS current assets PLUS current liabilities LESS long-term liabilities.
B) Non-current assets PLUS current assets LESS current liabilities LESS long-term liabilities.
C) Non-current assets LESS current assets LESS current liabilities LESS long-term liabilities.
D) Non-current assets PLUS current assets LESS current liabilities PLUS long-term liabilities

Answer 3

B

Question 4

Which of the following is a current liability?

A) An accrual
B) Equipment
C) Trade receivables
D) Loan repayable in three years

Question 5

Which of the following statements regarding trade receivables is true?

A) Trade receivables owe money to the business.
B) Cash sales give rise to trade receivables.
C) Trade receivables are suppliers of the business who have supplied goods on credit.
D) Trade receivables are a non-current asset of a business.

Question 6

Lucy had the following balances on her trial balance at 30 June 2024: Trade receivables of £21,000, inventories of £34,500, balance at bank of £2,020, accruals of £1,200, loan of £11,000 repayable on 31 March 2025, and motor vehicles with a value of £30,000. What is the value of Lucy's non-current assets and current assets at 30 June 2024?

A) Non-current assets of £30,000 and current assets of £36,520.
B) Non-current assets of £nil and current assets of £58,720.
C) Non-current assets of £nil and current assets of £57,520.
D) Non-current assets of £30,000 and current assets of £57,520.

Question 7

Josh has been trading for one year as at 31 December 2024 and during that year he paid electricity bills amounting to £760. On 14 January 2025 he received an electricity bill for the three months to 31 December 2024 for £310. He eventually paid the bill on 31 January 2025. His accounts for the year ended 31 December 2024 should show:

A) A statement of profit or loss charge for electricity of £1,070 and an accrual of £310 on the statement of financial position.
B) A statement of profit or loss charge for electricity of £760 and an accrual of £310 on the statement of financial position.
C) A statement of profit or loss charge for electricity of £1,070 and a prepayment of £310 on the statement of financial position.
D) A statement of profit or loss charge for electricity of £760 and a prepayment of £310 on the statement of financial position.

Question 8

Which of the following would NOT be classified as a liability on the statement of financial position?

A) A loan
B) An accrual
C) Trade receivables
D) Bank overdraft

Question 9

Which of the following would be a non-current asset of a bakery?

A) The shop fittings
B) The inventories of bread and flour
C) The delivery van, hired from Special Wheels
D) The capital put into the business by the owner

Question 10

Arjun's business pays rent quarterly in advance. The business year end is 31 December 2023 and the trial balance at that date shows a figure for rent of £2,150, before any adjustments. On 1 December 2023, Arjun had paid rent of £570 for the three months to the end of February 2024. His accounts for the year ended 31 December 2023 should show the following:

A) The rent expense charged in the statement of profit or loss should be £1,580.
B) The rent expense charged in the statement of profit or loss should be £2,150.
C) The rent expense charged in the statement of profit or loss should be £2,530.
D) The rent expense charged in the statement of profit or loss should be £1,770.