Income Statements & Balance Sheets: Further Considerations

Carriage inwards is included in the cost of sales calculation because . . .

• it is a cost associated with the purchase of goods.

• it should not be shown in the balance sheet.

• carriage outwards is shown as an expense in the profit and loss account.

• None of the above.

The following information concerns a retailing firm. The firm's cost of sales for July is . . .

• £6,200

• £6,800

• £7,000

• None of the above.

The cost incurred by a firm of bringing goods to a merchantable condition should be included in . . .

• its trading account.

• its profit and loss account.

• its balance sheet.

• None of the above.

The following data relates to a firm which has been trading for several years. Assuming that the firm's cost of sales is calculated by reference to its purchases and stock figures only, the total of its purchases during 2000 was:

• £100,000

• £170,000

• £450,000

• £550,000

A sole trader incurred a loss of £10,000 during his most recent accounting period, yet had more money in his bank account at the end of the period than he had at the beginning of it. Which of the following, on its own, could explain this ?

• An increase in the amount of his stock over the course of the period.

• The introduction of £ 15,000 new capital during the period.

• His customers taking longer than normal to pay the amounts they owe to him.

• The purchase of fixed assets during the period.

The correct way to record stock taken by the proprietor of a finn for his own personal use, without him paying for it, is . . .

• Account to Debit - Drawings

  Account to Credit - Sales

• Account to Debit - Drawings

  Account to Credit - Stock

• Account to Debit - Sales

  Account to Credit - Drawings

• Account to Debit - Drawings

  Account to Credit - Purchases

The proprietor of a firm took some of the firm's stock for his own use without paying for it. As he considered this to be his 'right', he did not record this transaction. The result of this is that, when final accounts are prepared for the firm, . . .

• both its net profit and its closing stock will be overstated.

• its net profit will be understated and its closing stock will be unaffected.

• both its net profit and its closing stock will be understated.

• its net profit will be overstated and its closing stock will be unaffected.

If, in the accounts of a sole trader, £2,500 was debited to the purchases account, instead of being debited to the drawings account . . .

• gross profit would be overstated.

• the total of expenses would be understated.

• net profit would be understated.

• capital would be understated.

Tom set up a business on l January.

He bought fixed assets costing £53,000 and stock costing £6,600. He had financed these in advance of commencing business with a personal loan of £25,000 from his brother and a business loan from a bank. On 31 December of the same year his net assets totalled £37,200. His net profit for the year was £21,100.

Tom's drawings during the year were:

• £1,300

• £8,900

• £16,100

• £18,500

The value of a firm's stock at the end of an accounting period is found by . . .

• stocktaking.

• looking in the stock account in the nominal (general) ledger.

• deducting the total of the firm's purchases from that of its sales.

• deducting the firm's cost of sales from the total of its sales.