Purpose of Accounting

A company employs a book-keeper and an accountant.

Which task would the accountant perform?

• extracting balances from the ledger accounts to produce a trial balance

• making entries in the journal to adjust a provision for doubtful debts

• preparing a monthly report that analyses the profitability of the company

• recording sales and purchase invoices in the books of prime (original) entry

Which is a trading business?

• food store

• hairdresser

• investment adviser

• motor vehicle repairer

Which task would be carried out by a book-keeper?

• comparison of financial statements of one year with another

• preparation of financial statements

• provision of information for decision-making

• recording financial transactions

Which item does not appear in the financial statements of a service business?

• gross profit

• non-current assets

• non-current liabilities

• profit for the year

What is prepared by a book-keeper?

• appropriation account

• cash book

• income statement

• statement of financial position

Businesses make use of both book-keeping and accounting procedures.

What is the purpose of book-keeping?

• to interpret the double entry records

• to prepare financial statements at regular intervals

• to record all the financial transactions of the business

• to summarise the financial position of the business

Which item is an intangible non-current asset?

• balance at bank

• goodwill

• premises

• trade receivables

Which is a service business?

• a business which sells computers and printers

• a business which trains computer operators

• a stationery supplier

• a TV and video supplier

For which purpose does a sole trader not use the information provided in his financial statements?

• to assist with decision-making

• to compare performance with previous years.

• to determine the amount of his bank overdraft

• to plan for the future

How should the owner of a business use his annual financial statements?

• to calculate the cash drawings for the year

• to determine the amount due to trade payables

• to measure the change in the bank balance

• to monitor the progress of the business