Financial Accounting Basics Quiz
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Questions and Answers

Which of the following represents the calculation for Net Profit?

  • Gross Profit - Sales
  • Sales + Cost of Sales - Expenses
  • Gross Profit + Expenses
  • Sales - Cost of Sales - Expenses (correct)

    • Current liabilities are debts that must be paid within a year.

    True (A)

    What is the formula for calculating Gross Profit?

    Gross Profit = Sales - Cost of Sales

    The statement of financial position provides a snapshot of a company's assets, liabilities, and ______ at a specific point in time.

    <p>equity</p> Signup and view all the answers

    Match the following terms with their corresponding definitions:

    <p>Current Assets = Assets that can be easily converted to cash within a short period Non-Current Liabilities = Long-term debts payable in more than one year Working Capital = The difference between a company's current assets and current liabilities Capital Employed = The total amount of funds used by a business in its operations</p> Signup and view all the answers

    What type of expenditure is a new machine purchased for €10,000?

    <p>Capital Expenditure (B)</p> Signup and view all the answers

    Payment for repairs to the machine is classified as capital expenditure.

    <p>False (B)</p> Signup and view all the answers

    What are two examples of revenue expenditure?

    <p>Wages of the machine operator and power to operate the machinery.</p> Signup and view all the answers

    The cost of _______ to bring the machine to the firm is classified as capital expenditure.

    <p>transportation</p> Signup and view all the answers

    Match the following expenditures with their classifications:

    <p>Interest on bank loan = Revenue Expenditure Legal fees for machine purchase = Capital Expenditure Wages of the machine operator = Revenue Expenditure Installation costs = Capital Expenditure</p> Signup and view all the answers

    Which of the following is NOT considered capital expenditure?

    <p>Materials used in production (A)</p> Signup and view all the answers

    Revenue expenditure increases the value of non-current assets.

    <p>False (B)</p> Signup and view all the answers

    Distinguish between capital and revenue expenditure.

    <p>Capital expenditure is for acquiring non-current assets or improving them, while revenue expenditure is for day-to-day operational costs.</p> Signup and view all the answers

    What are two primary functions of the Malta Financial Services Authority (MFSA)?

    <p>Supervision and consumer protection (D)</p> Signup and view all the answers

    Fixed costs vary with the level of production and sales volume.

    <p>False (B)</p> Signup and view all the answers

    Define the term 'variable costs'.

    <p>Variable costs are costs that vary with the level of production and sales volume.</p> Signup and view all the answers

    What is one reason businesses require financing?

    <p>To cover startup costs (A)</p> Signup and view all the answers

    Sole proprietorships typically rely on venture capital for financing.

    <p>False (B)</p> Signup and view all the answers

    Examples of fixed costs include ______ and _____ .

    <p>rent, insurance</p> Signup and view all the answers

    What type of financing is essential for companies undergoing expansion and growth?

    <p>Business financing</p> Signup and view all the answers

    Match the following costs to their definitions:

    <p>Fixed costs = Costs that remain constant regardless of production level Variable costs = Costs that change with the level of production Total costs = Sum of fixed and variable costs</p> Signup and view all the answers

    How much are the variable costs per unit in Mr. Camilleri's proposed business?

    <p>€13 (C)</p> Signup and view all the answers

    Corporations often have access to a wider range of financing options, including ___ financing through public offerings.

    <p>equity</p> Signup and view all the answers

    Which type of business organization may depend on external funding sources like bank loans?

    <p>Small to Medium-Sized Enterprises (SMEs) (A)</p> Signup and view all the answers

    The total cost is the sum of fixed costs and variable costs.

    <p>True (A)</p> Signup and view all the answers

    What are two examples of variable costs?

    <p>Packaging materials, cost of raw materials</p> Signup and view all the answers

    Startups usually have low initial capital requirements.

    <p>False (B)</p> Signup and view all the answers

    Match the following business types with their primary financing needs:

    <p>Sole Proprietorships = Personal savings or family loans SMEs = Bank loans or government grants Corporations = Equity and debt financing Startups = Venture capital or crowdfunding</p> Signup and view all the answers

    Why do industry-specific businesses have different financial needs?

    <p>Because financial requirements vary depending on the nature of the industry.</p> Signup and view all the answers

    What is the gross profit margin calculated for Susan's retail firm?

    <p>23.9% (D)</p> Signup and view all the answers

    Current liabilities exceed current assets in Susan's financial statement.

    <p>False (B)</p> Signup and view all the answers

    What is capital employed?

    <p>Total assets minus current liabilities</p> Signup and view all the answers

    The _____ of Profit or Loss shows the revenues and expenses of a company over a specific period.

    <p>Statement</p> Signup and view all the answers

    What are two disadvantages of having a high inventory level?

    <p>Increased holding costs and risk of obsolescence (C)</p> Signup and view all the answers

    What are purchases in the context of a business?

    <p>The act of acquiring goods or services for resale.</p> Signup and view all the answers

    Match the following financial statements with their purposes:

    <p>Statement of Profit or Loss = Shows revenues and expenses during a period Statement of Financial Position = Provides a snapshot of assets, liabilities, and equity Income Statement = Also known as the Statement of Profit or Loss Balance Sheet = Another term for Statement of Financial Position</p> Signup and view all the answers

    The cost of sales formula includes averaging the _____ and closing inventory.

    <p>opening</p> Signup and view all the answers

    What is the fixed cost derived from the following equation: Fixed cost + 700 × 15 = 11,000?

    <p>€500 (D)</p> Signup and view all the answers

    What type of expenditure is incurred when purchasing an extra piece of machinery?

    <p>Capital Expenditure</p> Signup and view all the answers

    Painting an extension of a business when it was first built is classified as __________.

    <p>Capital Expenditure</p> Signup and view all the answers

    Match the following items with their classification as Capital or Revenue Expenditure:

    <p>Building of extension to warehouse = Capital Expenditure Wages of shop assistants = Revenue Expenditure Cost of transport of machinery = Capital Expenditure Water and electricity bill = Revenue Expenditure</p> Signup and view all the answers

    Which of the following is classified as revenue expenditure?

    <p>Wages paid to employees (B)</p> Signup and view all the answers

    Repairs to the roof are considered capital expenditure.

    <p>False (B)</p> Signup and view all the answers

    In financial statements, how does capital expenditure affect the Statement of Financial Position?

    <p>Increases the value of non-current assets</p> Signup and view all the answers

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    Description

    Test your knowledge on financial accounting concepts including net profit calculations, gross profit formulas, and the distinctions between capital and revenue expenditures. This quiz will also cover definitions and roles of financial authorities.

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