Month: August 2017

What does the abbreviation ‘Ltd’ indicate in the name of a company?

Select ONE answer:

1. The amount of debentures that can be issued is limited
2. The company’s capital is limited to a fixed account
3. The shareholder’s liability for the company’s debts is limited
4. The shareholder’s liability for the company’s debts is unlimited
5. The amount of debentures that can be issued is unlimited

What is a public limited company?……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – Limited mean Ltd is a suffix that follows the name of a company, indicating it is a private limited company. In a limited company, shareholders’ liability is limited to the capital they originally invested.

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Which of the following current assets should be ignored when calculating the liquid capital ratio?

Select ONE answer:

1. Cash and cash equivalents
2. Inventory
3. Other receivables
4. Trade receivables
5. Prepayments

What is the definition of inventory?……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 2 – This ratio is an indicator of a company’s short-term liquidity. The ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets, and is calculated as follows: Ratio = (current assets – inventories) / current liabilities, or (cash and equivalents + marketable securities + accounts receivable) / current liabilities

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The purchase of a non-current asset was debited to the purchases account.

What is this type of accounting error called?

Select ONE answer:

1. Commission
2. Omission
3. Original entry
4. Prudence
5. Principle

What is an accounting error?

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 5 – An accounting error is a non-fraudulent discrepancy in financial documentation. The term is used in financial reporting. Types of accounting errors include: Error of omission — a transaction that is not recorded; Error of commission — a transaction that is calculated incorrectly. One example of an error of commission is subtracting a figure that should have been added; Error of principle — a transaction that is not in accordance with generally accepted accounting principles ( GAAP). One example of an accounting error of principle is an expenditure that is placed in an inappropriate category.

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How will the recovery of a debt, previously written off, affect the profit, current assets and capital of a business?

Select ONE answer:

What is the definition of a bad debt?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – Recovery of a debt, previously written off, will reverse the original transaction which was Dr Profit Cr Current Assets, leading to a increase in retained profits.

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Bob, Michael, and Simon are proposing to set up a limited company with a share capital of £180 000. They will be the only shareholders and originally planned to invest in the share capital using Ratio 1 below. However, circumstances have changed and they have to use Ratio 2.

What difference will it make to Bob’s investment when Ratio 2 is chosen?

Select ONE answer:

1. Invests £21 000 less
2. Invests £21 000 more
3. Invests £24 000 less
4. Invests £24 000 more
5. Invests £30 000 more

Explain your answer
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – In Ratio 1 the £180,000 is divided by 5 shares (1+2+2) which makes Bob’s investment = £36,000. In Ratio 2 the £180,000 is divided by 15 (2+9+4) which makes Bob’s investment now = £12,000 which means he will invest £24,000 less.

This work is licensed under a Creative Commons Attribution 4.0 International License.