Question 1

Kate sells candles at £5 each and each one costs her £2. During June she bought 300 candles and sold 220 candles. Her expenses amounted to £130 for the month. Kate's profit for June was:
A) £930.
B) £660.
C) £770.
D) £530.

Accepted Answer

D

Question 2

Which of the following statements regarding trade receivables is NOT true?
A) Trade receivables owe money to the business.
B) Trade receivables have supplied goods to the business.
C) Trade receivables are customers of the business who owe for the goods they have received.
D) Trade receivables are treated as current assets.

Accepted Answer

Trade receivables are customers who owe money to the business for goods or services provided to them, not suppliers who have provided goods to the business.

Question 3

Shirley has made the following predictions for her business for the first six months of trading to 30 June:
Sales in Jan, Feb and March = £30,000 per month.
Sales in Apr, May and June = £45,000 per month.
Sales will be on one month's credit.
The trade receivables figure as of 30 June will be:
A) £NIL
B) £30,000.
C) £45,000.
D) £90,000.

Accepted Answer

Explanation: Sales are on one month's credit, so the sales made in June (£45,000) will still be outstanding as trade receivables by 30 June.

Question 4

Which of the following payments is capital expenditure?
A) Money put into the business by the owner.
B) Purchase of a motor van.
C) Cost of servicing the motor van.
D) Cost of hiring a motor van.

Accepted Answer

Purchase of a motor van is a capital expenditure because it is an asset that will be used in the business for more than one year.

Question 5

Which of the following is not a revenue expense?
A) Drawings
B) Rent and rates.
C) Salaries.
D) Advertising.

Accepted Answer

Drawings are withdrawals made by the owner from the business for personal use and are not considered a revenue expense.

Question 6

Which of the following is prepared to determine a business's net profit or net loss for the year?
A) A trial balance.
B) A statement of financial position.
C) A statement of cash flows.
D) A statement of profit or loss.

Accepted Answer

A statement of profit or loss, also known as an income statement, is prepared to determine a business's net profit or net loss for the year by summarizing revenues and expenses.

Question 7

During the year ended 31 December, the business made sales of £35,000 and purchases of £20,000. Inventory at the beginning of the year was valued at £6,000 and, at 31 December, inventory was valued at £3,500. The gross profit for the year was:
A) £17,500.
B) £24,500.
C) £12,500.
D) £5,500.

Accepted Answer

Gross profit is calculated as Sales minus Cost of Goods Sold (COGS). COGS is calculated as Opening Inventory plus Purchases minus Closing Inventory. Here, COGS = £6,000 + £20,000 - £3,500 = £22,500. Therefore, Gross Profit = £35,000 - £22,500 = £12,500.

Question 8

Ben started trading on 1 January. His trial balance at 31 December, the end of his first year of trading is given below.
 If the closing inventory at 31 December was £5,000 and depreciation is to be ignored, which one of the following is true?
A) The gross profit will be £31,500 and the net profit will be £25,000.
B) The gross profit will be £36,000 and the net profit will be £9,000.
C) The gross profit will be £31,000 and the net profit will be £3,000.
D) The gross profit will be £36,000 and the net profit will be £3,000.

Accepted Answer

The answer of Ben started trading on 1 January. His...

Question 9

If the purchase of shop fitting for £25,000 is included in the cost of sales, then:
A) Gross profit ONLY will be understated by £25,000.
B) Gross profit ONLY will be overstated by £25,000.
C) Net profit ONLY will be understated by £25,000.
D) Both gross profit and net profit will be understated by £25,000.

Accepted Answer

Including shop fitting in the cost of sales incorrectly increases the cost of goods sold, reducing both gross profit and net profit by £25,000.

Question 10

In accounting what is meant by the term 'purchases'?
A) All items bought.
B) All good purchased and paid for.
C) All good bought for re-sale.
D) All goods held in inventory.

Accepted Answer

In accounting, 'purchases' refers to all goods bought specifically for the purpose of resale, not just any items bought or goods held in inventory.

Quiz 2: Introduction to the Statement of Profit or Loss

Kate sells candles at £5 each and each one costs her £2. During June she bought 300 candles and sold 220 candles. Her expenses amounted to £130 for the month. Kate's profit for June was:

Which of the following statements regarding trade receivables is NOT true?

Shirley has made the following predictions for her business for the first six months of trading to 30 June: Sales in Jan, Feb and March = £30,000 per month. Sales in Apr, May and June = £45,000 per month. Sales will be on one month's credit. The trade receivables figure as of 30 June will be:

Which of the following payments is capital expenditure?

Which of the following is not a revenue expense?

Which of the following is prepared to determine a business's net profit or net loss for the year?

During the year ended 31 December, the business made sales of £35,000 and purchases of £20,000. Inventory at the beginning of the year was valued at £6,000 and, at 31 December, inventory was valued at £3,500. The gross profit for the year was:

Ben started trading on 1 January. His trial balance at 31 December, the end of his first year of trading is given below. If the closing inventory at 31 December was £5,000 and depreciation is to be ignored, which one of the following is true?

If the purchase of shop fitting for £25,000 is included in the cost of sales, then:

In accounting what is meant by the term 'purchases'?