FAPS Financial statements introduction

Which of these would appear under additional income in the profit and loss account?

• Loss on disposal

• Rent paid

• Profit on disposal

• Interest paid

Answer explanation

Profit on disposal is addtional income all of the others are expenses

Gross profit is a useful calculation to determine how profitable products are?

Answer explanation

Gross profit is deemed important by businesses as they can assess the profitability of individual products

Which of these is a non-current asset

• Bank

• Inventory

• Trade receivables

• Land and buildings

Answer explanation

A non-current asset is an asset that is owned for more than a year. Therefore land and buildings is an example of a non-current asset

Which of these would show as a current liability?

• Loan repayable in 5 years time

• VAT owing from HMRC

• VAT owing to HMRC

• Allowance for doubtful debts

Answer explanation

Current liabilities are short-term therefore VAT owing to HMRC is an example of this. VAT is normally paid every quarter.

Assets - liabilities =

Closing Inventory is part of the cost of sales calculation on the the statement of profit or loss?

• True

• False

Answer explanation

True Closing inventory is deducted as part of the calculation of the cost of sales.