Category: Accounting

Categorise the three items below as either “current liabilities” or “long-term liabilities” of a firm as at 31 December 2018 and choose the option 1,2,3 or 4 which correctly categorises all three items.

Item 1 – a bank loan repayable by the firm as a single lump sum on 31 March 2021

Item 2 – an electricity bill relating to November and December 2018 but unpaid as at 31 December 2018, because the bill was not received by the firm until 10 January 2019, at which time it was recorded in the appropriate ledger accounts

Item 3 – The portion of a five-year bank loan due to be paid by the firm in 2019. The loan was taken out on 1 January 2017 and is repayable in equal annual instalments over the term of the loan

Select ONE answer:

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple choice question is suitable for Accounting KS5 classes.

The answer is 4

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A firm’s current liabilities, at its balance sheet date, are ……….. ?

Select ONE answer:

1. its bank overdrafts, if any, and any portions of its long term loans which the firm is due to repay within one year of the balance sheet date
2. all liabilities which it is due to discharge within one year of that date
3. any trade creditors which it is due to pay within three months of that date
4. all liabilities which it incurred in the six months prior to that date

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple choice question is suitable for Accounting KS5 classes.

The answer is 3
1 – any amount payable by the firm within one year of its balance sheet date is a current liability
3 – any amount payable by the firm within one year of its balance sheet date is a current liability
4 – could have already been discharged before the balance sheet date

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When preparing a firm’s balance sheet, which of the following should be classified as a long-term liability?

Select ONE answer:

1. An amount payable by the firm within six months of the date of the balance sheet
2. An amount payable by the firm within nine months of the date of the balance sheet
3. An amount payable by the firm after more than one year from the balance sheet date
4. None of the above

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple choice question is suitable for Accounting KS5 classes.

The answer is 3
1 – would be treated as a current liability
2 – would be treated as a current liability

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A firm’s current assets are ……….. ?

Select ONE answer:

1. amounts which it is due to receive within one year of its balance sheet date
2. its cash and positive bank balances and other assets likely to be converted into cash and bank balances within one year of its balance sheet date as a result of its normal trading operations
3. the total of its debtors, its stocks and its cash and bank balances
4. amounts which it is due to receive as a result of credit sales made by the firm within the last year

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple choice question is suitable for Accounting KS5 classes.

The answer is 2
3 – current assets can comprise than more than just debtors, stock and cash
4 – current assets can comprise than more than just debtors

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A firm’s fixed assets are ……….. ?

Select ONE answer:

1. all of its assets which have a long life and a substantial value
2. all of its assets which have an expected useful economic life of more than one year, and were purchased in order to be used in the business on a continuing basis rather than solely for resale
3. all assets which have a physical substance
4. none of the above

Show your workings to arrive at your answer, and explain and justify your reasons:

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

This multiple choice question is suitable for Accounting KS5 classes.

The answer is 2
1 – fixed assets do not have to be of substantial value
3 – fixed assets can be intangible such as patents and trademarks

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