Deck 10: Trial Balance to Final Accounts

Question 1

The following information is available from the trial balance of Valentines company as at 31 Dec Year 3:
$$\begin{array} { l c c } & \text { Debit } & \text { Credit } \\& £ & £ \\\text { Sales revenue } & & 110,000\\\text { Inventory at 31st Dec Year 1 } & 7,000 \\\text { Purchases } & 18,750 &\end{array}$$

Closing inventory as at 31st Dec year 3 is £5,250.Calculate the cost of goods sold.

A) £31,000
B) £20,500
C) £25,750
D) £20,750

Answer 1

£20,500

Question 2

Closing inventory appears twice in the final accounts,as a debit on the balance sheet and a credit on the income statement

Answer 2

True

Question 3

The trail balance of Gibson company as at 31st December was as follows:

What will the total equity figure be on the statement of financial position as at 31st December??

A) £600,00
B) £555,000
C) £5,000
D) £45,000

Answer 3

B

Question 4

Which of the following statements is correct?

A) Sole traders pay income tax as individuals but there is no taxation on the profits of the business itself
B) On the accounts of a sole trader, retained earnings and capital are usually kept separate
C) The owners of limited companies receive payment as "drawings"
D) None of the above statements are correct

Question 5

Where there is an increase in an accrual,the amount of the increase is included as a revenue on the income statement

Question 6

The following information is available from the trial balance of Powerage Ltd as at 31 Dec Year 2:
$$\begin{array} { l c c } & \text { Debit } & \text { Credit } \\ &£& £ \\\text { Sales revenue }&& 260,000\\\text { Inventory at 31st Dec Year 1 } & 9,000 \\\text { Purchases } & 29,000 &\end{array}$$
Closing inventory as at 31st Dec year 2 is £6,000.Calculate the cost of goods sold

A) £38,000
B) £32,000
C) £228,000
D) £44,000

Question 7

Which of the following statements is correct?

A) A prepayment is shown as a debit on the statement of financial position, as a current asset
B) A prepayment is shown as a credit on the income statement, reducing the amount of the expense that has already been recorded
C) When there is an increase in a prepayment, thee amount of the increase is deducted from the expense on the income statement
D) All of the above statements are correct

Question 8

The trail balance of Gibson company as at 31st December was as follows:

What is the profit for the year?

A) £600,00
B) £555,000
C) £5,000
D) £45,000

Question 9

If it is known that a debtor cannot pay because of bankruptcy,the amount to be written off is shown as:

A) A credit on the income statement, as a negative expense, and as a debit on the balance sheet
B) A credit on the income statement and as a debit on the statement of financial position by increasing the amount shown for receivables
C) A debit on the income statement and as a credit on the statement of financial position by reducing the amount shown for receivables
D) None of the above statements are correct

Question 10

If an electricity prepayment is increased,the accounting adjustment will be:

A) Dr: Electricity Cr: Prepayments
B) Dr: Prepayments Cr: Electricity
C) Dr: Prepayments Cr: Trade payables
D) Dr: Trade payables

Question 11

The trail balance of Gibson company as at 31st December was as follows:

What will the figure for total assets be on the statement of financial position as at 31st December?

A) £600,00
B) £555,000
C) £5,000
D) £45,000

Question 12

Which of the following would be the correct adjustment if there was an increase in an accrual?

A) The amount of the increase is included as an expense (a debit) on the income statement and the increase is added (credited) to the existing accrual in the statement of financial position
B) The amount of the increase is deducted (credited) from the expense on the income statement and the increase is added (debited) to the existing accrual in the statement of financial position
C) The amount of the increase is added (credited) to the expense on the income statement and the increase is deducted (debited) to the existing accrual in the statement of financial position
D) None of the above statements are correct

Question 13

If the provision for bad debt is increased,the accounting adjustment will be:

A) Dr: Bad debt expense Cr: Provision for bad debts
B) Dr: Provision for bad debts Cr: Bad debt expense
C) Dr: Bad debt expense Cr: Trade receivables
D) Dr: Trade receivables

Question 14

The following information is available from the trial balance of Powerage Ltd as at 31 Dec Year 2:
$$\begin{array} { l c c } & \text { Debit } & \text { Credit } \\ &£& £ \\\text { Sales revenue }&& 260,000\\\text { Inventory at 31st Dec Year 1 } & 9,000 \\\text { Purchases } & 29,000 &\end{array}$$

Closing inventory as at 31st Dec year 2 is £6,000.Calculate the gross profit.

A) £238,000
B) £32,000
C) £228,000
D) £244,000

Question 15

When there is an increase in a provision for bad debt,the amount of the increase is included as an expense on the income statement

Question 16

The following information is available from the trial balance of Valentines company as at 31 Dec Year 3:
$$\begin{array} { l c c } & \text { Debit } & \text { Credit } \\& £ & £ \\\text { Sales revenue } & & 110,000\\\text { Inventory at 31st Dec Year 1 } & 7,000 \\\text { Purchases } & 18,750 &\end{array}$$
Closing inventory as at 31st Dec year 3 is £5,250.Calculate the gross profit.

A) £141,000
B) £79,000
C) £89,500
D) £130,500

Question 17

If land is revalued upwards,the accounting adjustment will be:

A) Dr: Land Cr: Revaluation reserve
B) Dr: Revaluation reserve Cr: Land
C) Dr: Land Cr: Cash
D) Dr: Revaluation reserve

Question 18

If a bad debt is written off,the accounting adjustment will be:

A) Dr: Bad debt expense Cr: Provision for bad debts
B) Dr: Provision for bad debts Cr: Bad debt expense
C) Dr: Bad debt expense Cr: Trade receivables
D) Dr: Trade receivables

Question 19

Revenue will appear as a debit item on a trail balance

Question 20

On a trail balance,almost all debit items are either assets to be shown on the balance sheet or expenses to be shown on the income statement

Question 21

A Sole Trader has a number of debtors.The total amount in the Sales Ledger at the end of the financial year is £5,600.However,it is discovered that one debtor who owes £400 has just been declared bankrupt.Past experience shows that approximately 2% of debts are never repaid,and therefore a provision equal to 2% of closing debtors is required.There is currently a provision of £80.Which of the following is the correct adjustment for the provision for bad debts?

A) Make a new provision for bad debts at £112
B) Increase the current provision by £24
C) Make a new provision for bad debts at £104
D) Increase the current provision by £32

Question 22

A Sole Trader owns a company vehicle which cost £10,000 at the beginning of year 1,and is depreciated at 25% reducing balance method.In year 2,the end of year accounts are being drawn up.Which of the following is the correct adjustment for the depreciation of the vehicle?

A) Annual Depreciation charge of £2,500 shown in the income Statement. On the Statement of Financial Position, the Carrying Amount of the vehicle is £7,500
B) Annual Depreciation charge of £2,500 shown in the income Statement. On the Statement of Financial Position, the Carrying Amount of the vehicle is £5,000
C) Annual Depreciation charge of £4,375 shown in the income Statement. On the Statement of Financial Position, the Carrying Amount of the vehicle is £5,625
D) Annual Depreciation charge of £1,875 shown in the Income Statement. On the Statement of Financial Position, the Carrying Amount of the vehicle is £5,625

Question 23

What are "Drawings" and what is their treatment?

A) "Drawings" are amounts taken out of the business for personal use by the owner of the business. They are not shown on the Income Statement, but at the bottom of the Statement of Financial Position.
B) "Drawings" are amounts taken out of the business for personal use by the owner of the business. They reduce the profit of the business.
C) "Drawings" are amounts taken out of the business for personal use by the owner. As most drawings are cash, they reduce the cash available to the business. They also reduce profits.
D) "Drawings" is when the business owes money to the owner of the business. It is part of the Capital of the business. Drawings should be kept to a minimum to avoid potential cashflow problems.

Question 24

When drawing up accounts for Partnerships,additional personal accounts must be shown:
(i)Individual Current Accounts
(ii)Individual Capital Accounts
(iii)Individual Drawings Accounts
(iv)Individual Revenue Accounts

A) All of the above
B) (ii) only
C) (i) and (ii) only
D) (i), (ii) and (iii) only

Question 25

In drawing up a Trial Balance,the following figures are shown:
$$\begin{array} { | l | l | l | } \hline \text { Accaunt } & \text { Dr } & \text { Cr } \\\hline \text { Bank } & & 1,800 \\\hline \text { Cash } & & 200\\\hline\end{array}$$
What can be deduced from the extract above?

A) There is a total of £2,000 in the business - £1,800 at the bank, and £200 in the cash tin
B) There is an overdraft of £1,800 at the bank and the cash tin is owed £200
C) The bank is showing as overdrawn by £1,800. The cash account must be incorrect
D) The bank balance is £1,800 "in credit" meaning there is £1,800 at the bank. The cash tin is owed £200