Accounting Quiz

Given that the inventory as at 31 December 2015 was $27 000, what was the cost of goods sold for the year ended 31 December 2015?

• $54 500

• $58 000

• $60 000

• $63 000

Answer explanation

Always a formula to guide

Cost of goods sold

= opening inventory 15 000

+ Purchases $75 000

-returns outwards 3 000

+ carriage inwards

- closing inventory $27000

= $60 000

Given that the net profit for the year ended 31 December 2015 was $9000, what was the gross profit for the year?

• $53 500

• $57 000

• $59000

• $54 000

Answer explanation

Always a formula to guide:

Gross profit

+ other income $2000

- Expenses

($10000 + $36500+3500)

= net profit $9000

Gross profit = $57000

On 1 January 2015, Mr Lee set up a firm with cash of $100 000.

On the same day, the firm took out a loan of $200 000 from a bank.

At the end of that year, total assets and total liabilities of the firm were $980 000 and $560 000 respectively. 

During the year, Mr Lee made regular cash drawings of $5 000 per month.

What is the net profit of the firm for the year 2015?

• $180 000

• $260 000

• $325 000

• $380 000

Answer explanation

Always a formula to guide:

Capital b/d $100 000

+ additional capital $0

+ net profit ?

-drawings ($5000 x 12)

= capital c/d

($980 000 - 560 000)

Net profit = $380 000

Which of the following would affect the calculation of cost of goods sold?

• rental expenses for the office

• carriage expenses for the delivery of goods to customers

• discounts given by suppliers for early settlement of outstanding balances

• discounts given by suppliers for purchasing a large quantity of goods

Answer explanation

Cost of goods sold

= opening inventory

+ purchases

+ carriage inwards

- returns outwards

- closing inventory

Rental = expense

carriage expenses for the delivery of goods to customers = carriage outwards = expenses

discounts given by suppliers for early settlement

= cash discount received

= other income

discounts given by suppliers for purchasing a large quantity of goods

= trade discount

= (-) purchases

Which of the following statements about non-current assets is correct?

• Their cost of purchases exceeds $100 000

• They are used for the operations of the business

• Their balances are presented in the income statement

• Accounts receivable is a non-current asset.

Answer explanation

Definition of non-current assets

= for use in operations

= more than 1 year

Which of the following is not a use of financial statements?

• assist different users in making decisions

• provide information about the financial position of a business

• provide information to employees for assessing their job security

• provide qualitative information regarding the performance of a business

Answer explanation

Accounting

= quantitative

not qualitative

Which of the following should be credited to the purchases account of a firm?

(1) goods withdrawn by owners for personal use

(2) goods returned to a supplier

(3) goods donated to a non-profit making organisation

• (1) only        

• (1) and (3) only

• (2) and (3) only

• (1), (2) and (3)

Answer explanation

Credited to the purchases

= reduce purchases

(1) goods withdrawn by owners for personal use

= Dr. drawings + Cr. purchases

(2) goods returned to a supplier

Dr. Trade payables +Cr. returns outwards

(3) goods donated to a non-profit making organisation

Dr. donation expenses + Cr. purchases

Which of the following should be recorded as an expense of a firm?

(1) wages paid to the part-time workers of the firm in cash

(2) insurance paid for owner's private apartment by the firm's cheque

(3) rent paid for the firm's warehouse by owner's personal cheque

• (1) and (2) only

• (1) and (3) only

• (2) and (3) only

• (1), (2) and (3)

Answer explanation

Q: expense of a firm

(1) wages paid to the part-time workers "of the firm" = YES

(2) insurance paid "for owner's "private apartment" --> NO!

(3) rent paid for the firm's warehouse by : YES

Which of the following would increase the gross profit of a trading firm?

• decrease in returns outwards

• decrease in carriage outwards

• increase in trade discounts offered by the supplier

• increase in cash discounts offered by the supplier

Answer explanation

Always formula!!

gross profit

= Net sales (sales - RI)

- Cost of goods sold

(op inv + Pur + CI - RO - cl )

Returns outwards decrease

= COＧS increase

Carriage outwards and cash discount : not relate to GP

Trade discount by suppliers

= reduce Purchases

= - COGS

= + Gross profit

Which of the following about an income statement is not correct?

• Information is mostly quantitative.

• Information mainly reflects past events.

• Its preparation involves professional judgements.

• Its preparation is based on cash receipts and cash payments only.

Answer explanation

financial statement

= numbers

= quantitative

= accrual basis

= record when incurred