The Multiple Choice Questions Blog

Which of the following is NOT normally found in the capital and reserves section of a company’s balance sheet?

Select ONE answer:

1. Share premium account
2. Profit and loss account balance
3. Dividends payable
4. Ordinary share capital

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. Not correct
2. Not correct
3. Correct – Dividends payable are a current liability.
4. Not correct

 

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In the balance sheet of a limited company, the profit and loss account balance is shown under the heading. . .?

Select ONE answer:

1. current liabilities
2. fixed assets
3. current assets
4. capital and reserves

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 4

1. Not correct – Current liabilities are liabilities which are due to be discharged within one year.
2. Not correct – Fixed assets are assets which have an expected useful economic life of more than one year and were purchased in order to be used on a continuing basis rather than solely for resale.
3. Not correct – Current assets are cash and positive bank balances and other assets likely to be converted into cash or bank balances within a year as a result of normal trading operations.
4. Correct – The company is being financed, in part, by the amount of its retained profit.

 

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The balance on the profit and loss account, as shown in the balance sheet of a company, represents?

Select ONE answer:

1. any profit earned by the company during the most recent accounting period.
2. the cumulative profits earned by the company since the date of its incorporation, less any losses, dividends, or transfers to reserves.
3. money set aside for specific future uses.
4. money available for daily operations.

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. Not correct – The profit earned during the most recent accounting period is shown in the Profit and Loss Account.
2. Correct
3. Not correct – The balance on the profit and loss account is a profit or a loss – cash is not the same as profit.
4. Not correct – As for answer C above.

 

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The authorised share capital of a company is comprised of £150,000 of 50p ordinary shares and 50,000 6% preference shares of £1 each.  Ordinary shares with a nominal (par) value of £100,000 and all of the preference shares have been issued and are fully paid.

If the company pays the preference dividend and proposes to pay an ordinary dividend of 10p per share, then the total dividends payable by the company will be?

Select ONE answer:

1. £13,000
2. £18,000
3. £23,000
4. £33,000

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. Not correct
2. Not correct
3. Correct – Preference dividend is £50,000 * 6% = £3,000 + Ordinary dividend is 200,000 shares * 10p = £20,000 – Therefore, total is £23,000
4. Not correct

 

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A limited company‘s revenue reserves increased from £15,000 at 1 January to £31,000 at 31 December.

If the company earned a profit for the year of £27,000, after tax dividends for the year were?

Select ONE answer:

1. £4,000
2. £11,000
3. £12,000
4. £45,000

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. Not correct
2. Correct – Earning a profit will increase revenue reserves while paying (or proposing) dividends will reduce revenue reserves.  Therefore, revenue reserves at 31 December = revenue reserves at 1 January + profit – dividends.  Therefore, £31,000 = £15,000 + £27,000 – dividends.  Therefore, dividends = £11,000.
3. Not correct
4. Not correct

    

 

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