Deck 18: The Preparation of Final Financial Statements From the Trial Balance

Question 1

Which of the following is not typically a post trial balance adjustment?

A) Closing inventory
B) Depreciation
C) Sale of an asset
D) Carriage out

Answer 1

Carriage out

Question 2

A building contractor has used his own workmen to redecorate his home. Which of the following adjustments is necessary to reflect this.

A) Debit purchases account and credit bank account
B) Debit drawings account and credit wages account
C) Debit repairs account and credit building contractor a/c
D) Debit wages account and credit drawings a/c

Answer 2

Debit drawings account and credit wages account

Question 3

Which of the following statements is correct?

A) Owner's capital will remain constant if he only withdraws his net profit each year and does not introduce any new capital
B) Owner's capital will remain constant if he only withdraws his net profit each year, and also introduces new capital
C) Owner's capital will increase if his drawings are higher than his net profit and he does not introduce any new capital
D) Owners capital will decrease if his net profit is greater than his drawings and he does not introduce any new capital

Answer 3

Owner's capital will remain constant if he only withdraws his net profit each year and does not introduce any new capital

Question 4

A business buys £40,000 worth of goods and sells three-quarters of them for £50,000. His gross profit is:

A) £10,000
B) £20,000
C) £30,000
D) £40,000

Question 5

Carriage inwards of £10,000 has been recorded in the income statement as an expense, as a result:

A) Net profit is understated by £10,000
B) Net profit is overstated by £10,000
C) Gross profit is overstated by £10,000, net profit is unchanged
D) Gross profit is understated by £10,000

Question 6

An asset cost £15,000 on 1 January 20X9. The directors expect to use it economically for three full years and to sell it for £3,000. What is the depreciation charge for the first year if they decide to apply the sum of digits method?

A) £4,000
B) £6,000
C) £6,225
D) £6,500