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Questions and Answers
Which of the following actions would cause a reduction in cash flow?
Which of the following actions would cause a reduction in cash flow?
What is the main purpose of a financial statement that shows an entity's total assets, liabilities, and capital?
What is the main purpose of a financial statement that shows an entity's total assets, liabilities, and capital?
A sole trader has a £5,000 bank overdraft. If they receive £1,000 from a customer, which part(s) of the accounting equation will be impacted?
A sole trader has a £5,000 bank overdraft. If they receive £1,000 from a customer, which part(s) of the accounting equation will be impacted?
When a sole trader buys goods on credit, which components of the accounting equation are affected?
When a sole trader buys goods on credit, which components of the accounting equation are affected?
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If a sole trader borrows £10,000 from a bank, what changes occur within the accounting equation?
If a sole trader borrows £10,000 from a bank, what changes occur within the accounting equation?
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A sole trader sells goods for £500 in cash, which originally cost £300. Which elements of the accounting equation are impacted by this transaction?
A sole trader sells goods for £500 in cash, which originally cost £300. Which elements of the accounting equation are impacted by this transaction?
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What is the balance on London’s capital account?
What is the balance on London’s capital account?
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Which of the following is NOT a common error in computerized accounting software?
Which of the following is NOT a common error in computerized accounting software?
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Which error occurs when only one side of a journal entry is posted?
Which error occurs when only one side of a journal entry is posted?
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What might indicate that a suspense account has been utilized?
What might indicate that a suspense account has been utilized?
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Which of the following balances is considered a current liability?
Which of the following balances is considered a current liability?
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In computerized accounting software, an error involving repeated incorrect data entry leads to results known as what?
In computerized accounting software, an error involving repeated incorrect data entry leads to results known as what?
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What impact does an accrued expense have on financial statements?
What impact does an accrued expense have on financial statements?
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When should an accountant consider using a suspense account?
When should an accountant consider using a suspense account?
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Which option correctly reflects the double entry for recording revenue received from a credit customer?
Which option correctly reflects the double entry for recording revenue received from a credit customer?
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What event would necessitate a debit entry in the payables account?
What event would necessitate a debit entry in the payables account?
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What is the appropriate double-entry to record the receipt of funds when the early settlement discount was not taken?
What is the appropriate double-entry to record the receipt of funds when the early settlement discount was not taken?
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Which of the following should be classified as a non-current asset on a balance sheet?
Which of the following should be classified as a non-current asset on a balance sheet?
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If Gerrard Ltd sells goods for £89,436 excluding VAT and purchases for £86,790 including VAT, what is the net amount in their VAT account at the end of April?
If Gerrard Ltd sells goods for £89,436 excluding VAT and purchases for £86,790 including VAT, what is the net amount in their VAT account at the end of April?
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Given a sole trader with trade receivables of £2,700 at the beginning of May, what is the total after accounting for cash and credit sales and received payments?
Given a sole trader with trade receivables of £2,700 at the beginning of May, what is the total after accounting for cash and credit sales and received payments?
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What financial entry is required when recording early settlement discounts given to customers?
What financial entry is required when recording early settlement discounts given to customers?
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Which of the following amounts reflects the total purchases made by Gerrard Ltd including VAT?
Which of the following amounts reflects the total purchases made by Gerrard Ltd including VAT?
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What is the total cost of the purchases made by Lamp Ltd for the year ending 31 December 20X9?
What is the total cost of the purchases made by Lamp Ltd for the year ending 31 December 20X9?
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How much is the value of the damaged items in the inventory of Lamp Ltd as of 31 December 20X9?
How much is the value of the damaged items in the inventory of Lamp Ltd as of 31 December 20X9?
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Using the FIFO method, what is the value of the inventory at 31 December 20X9 for Lamp Ltd?
Using the FIFO method, what is the value of the inventory at 31 December 20X9 for Lamp Ltd?
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What is the net realizable value per unit for the damaged units in Bouncy Balls plc inventory?
What is the net realizable value per unit for the damaged units in Bouncy Balls plc inventory?
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How many total units in inventory were sold after the year-end for Stacks plc?
How many total units in inventory were sold after the year-end for Stacks plc?
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What is the total selling expense for the defective items sold in Stacks plc?
What is the total selling expense for the defective items sold in Stacks plc?
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What is the total production cost for the remaining non-defective units in Bouncy Balls plc inventory?
What is the total production cost for the remaining non-defective units in Bouncy Balls plc inventory?
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What was the selling price for each item in the defective batch sold by Stacks plc?
What was the selling price for each item in the defective batch sold by Stacks plc?
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What is the correct accounting entry for a sale including VAT of £4,800 with VAT of £960?
What is the correct accounting entry for a sale including VAT of £4,800 with VAT of £960?
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What does the journal entry 'Debit Rent, Credit Payables' signify?
What does the journal entry 'Debit Rent, Credit Payables' signify?
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In double-entry bookkeeping, which statement accurately reflects the effect of debit entries?
In double-entry bookkeeping, which statement accurately reflects the effect of debit entries?
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Which journal entry correctly reflects the payment of an invoice from a credit supplier while taking an early settlement discount?
Which journal entry correctly reflects the payment of an invoice from a credit supplier while taking an early settlement discount?
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What is the total amount payable calculated if opening trade payables were £24,183, closing payables £34,655, and purchases £254,192?
What is the total amount payable calculated if opening trade payables were £24,183, closing payables £34,655, and purchases £254,192?
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How should an invoice raised to a credit customer who will not take an early settlement discount be recorded?
How should an invoice raised to a credit customer who will not take an early settlement discount be recorded?
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If a company has recorded cash purchases alongside credit transactions, how are these recorded in the financial ledgers?
If a company has recorded cash purchases alongside credit transactions, how are these recorded in the financial ledgers?
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What is impacted when a business makes a rental payment and records it as 'Debit Rent, Credit Cash'?
What is impacted when a business makes a rental payment and records it as 'Debit Rent, Credit Cash'?
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What amount should be shown in the company's financial statements at 31 October 20X3 for closing inventory after returning goods that cost £1,800?
What amount should be shown in the company's financial statements at 31 October 20X3 for closing inventory after returning goods that cost £1,800?
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What will be the effect on profit if closing inventory is understated by £300,000 and the error remains uncorrected?
What will be the effect on profit if closing inventory is understated by £300,000 and the error remains uncorrected?
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What is the closing inventory amount at 30 September 20X3 given specific sold items and their costs?
What is the closing inventory amount at 30 September 20X3 given specific sold items and their costs?
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If a company returns goods costing £1,800, how does this impact the total closing inventory amount?
If a company returns goods costing £1,800, how does this impact the total closing inventory amount?
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If closing inventory stands at £386,400 and consists of multiple sold items, what is critical when calculating this inventory?
If closing inventory stands at £386,400 and consists of multiple sold items, what is critical when calculating this inventory?
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In assessing profit effects, how does an understatement of closing inventory impact the next fiscal year's profit?
In assessing profit effects, how does an understatement of closing inventory impact the next fiscal year's profit?
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If inventory is sold at a lower price than its cost, what would be the primary impact on financial statements?
If inventory is sold at a lower price than its cost, what would be the primary impact on financial statements?
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What is a likely consequence if closing inventory is inaccurately accounted for in financial statements?
What is a likely consequence if closing inventory is inaccurately accounted for in financial statements?
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Study Notes
Accounting Equation
- Changes in assets, liabilities, and capital impact the accounting equation.
- Transactions involving credit purchases affect assets and liabilities.
- Borrowing money from a bank increases both assets and liabilities.
- Selling goods for cash affects assets and capital.
- Details of journal entries for sales and costs need to be balanced.
Financial Statements
- The balance sheet (or statement of financial position) shows a company's financial position at a specific time, listing assets, capital, and liabilities.
- It does not show the financial performance over a period.
Inventory Valuation
- Inventory valuation methods, like FIFO, need to be applied correctly to determine the cost of goods sold and ending inventory.
- Inventory includes both undamaged and damaged items, along with rectifiication and selling expenses.
- Damaged goods are valued at their net realizable value
- Incorrect values will affect the reported profit.
- Closing inventory is valued at the lower of cost and net realizable value
Errors and Suspense Accounts
- Errors in data entry, coding, or posting transactions lead to the creation of a suspense account to correct the discrepancy.
- A thorough review and reconciliation of balances will identify errors.
VAT and Ledger Accounts
- VAT calculations impact the net amount in a VAT account (credit or debit).
- Payments to suppliers affect the payables account.
- Sales to credit customers affect receivables account.
- Early settlement discounts affect entries for both payables and receivables.
Non-Current Assets
- Assets like land are classified as non-current assets.
Trial Balance
- Errors in inputting data are possible in computerized accounting.
- The debits must equal the credits in the trial balance.
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Description
This quiz covers the fundamentals of the accounting equation, financial statements, and inventory valuation methods. Test your understanding of how transactions affect assets, liabilities, and capital, as well as the principles of balance sheets and inventory valuation. Great for students of accounting or finance.
