ACCOUNTING (OCT/ NOV)

At the end of his first year of trading, the trader lost all of his inventory in a fire. He knows the values of sales and purchases and wishes to calculate the value of the inventory lost. Which ratio should he use?

• gross margin

• profit margin

• trade payables turnover

• trade receivables turnover

What is included in the reserves of a limited company?

• debentures

• ordinary shares

• preference shares

• share premium

A business values its inventory at the lower of cost and net realisable value. Which accounting concept is being applied?

• business entity

• duality

• matching

• prudence

Which ratio will help a business assess its ability to meet its immediate cash requirements?

• expenses to revenue

• liquid (acid test)

• non-current asset turnover

• return on capital employed

A trader has been making a provision for irrecoverable debts for some years. He is now considering reducing the percentage rate of the provision. Which ratios would be affected by this reduction? 1) Current ratio. 2) Gross margin. 3) Profit margin.

• 1 and 2

• 1 and 3

• 2 and 3

• 3 only

Which ratios are usually calculated to measure the efficiency of a business?

1) Current. 2) Gross margin. 3) Inventory turnover. 4) Trade receivables turnover.

• 1 and 2

• 1 and 3

• 2 and 3

• 3 and 4

The following information is available for a limited company at the end of its financial year. 1) Ordinary shares of $1 each 400,000. 2) Retained earnings (including profit for the year $94 500) 250,000. (3) 8% debenture (2028) 100,000. (4) Bank overdraft 20,000. What is the return on capital employed?

• 12.27%

• 12.60%

• 13.31%

• 13.67%

Why might a business prepare a budget?

• to determine the amount of bank loan it needs

• to determine the skills of labour force

• to identify its market share

• to identify the quality of its products

A trader’s income statement recorded sales, $10 000, and cost of sales, $7070. The trader had taken goods for his own use during the year, cost $280, selling price $410, but had omitted to record this. What effect did the omission have on the gross margin?

• 2.8% overstated

• 2.8% understated

• 4.1% overstated

• 4.1% understated

The non-current asset turnover of a business improved between 2020 and 2021, even though the net revenue was the same for both years. What caused the improvement in the ratio?

• a reduction in the level of irrecoverable debts being incurred

• an upwards revaluation of the premises at the year end

• depreciation charged being higher than the cost of new non-current assets

• purchases of new non-current assets being greater than disposals