Tag: Accounting

The total of the net assets of a company is equal to . . . ?

Select ONE answer:

1. The nominal (par) value of the company‘s share capital.
2. The market value of the company’s share capital.
3. The amount paid by shareholders for their shares.
4. The book value of the shareholders’ interest in the company.

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
2. Not correct
3. Not correct
4. Correct – The net assets of a company is the total of its assets less the total of its liabilities, that is, the total of the top part of the balance sheet. The (book value of the) shareholders’ interest in the company (shareholders’ funds) is the total of the (book value of the) capital contributed by them plus the company’s reserves. This is also equal to the total of the capital and reserves section (bottom part) of the balance sheet. Since the top and bottom parts of the balance sheet must agree, the total of the net assets of a company must be equal to the book value of the shareholders’ interest in the company.

 

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Which of the following cannot normally be determined from the financial statements of a public limited company whose shares are quoted on the Stock Exchange?

Select ONE answer:

1. The nominal (par) value of the issued ordinary share capital of the company.
2. The book value of the company’s fixed assets.
3. The current market value of the issued ordinary share capital of the company.
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. Not correct – The nominal (par) value of the issued ordinary share capital of the company is shown in the capital and reserves section of the balance sheet.
2. Not correct – The (net) book value of the company’s fixed assets is shown in the fixed assets section of the balance sheet.
3. Correct – The market value of ordinary shares can change on a daily basis. Therefore, even if the market value at the end of the year was shown in the financial statements when they are being printed, this figure would be out of date by the time the financial statements were published. Therefore, while a market value could be shown in the financial statements, it cannot be the current market value.
4. Not correct

 

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Which of the following should be shown in the profit and loss appropriation account of a limited company?

Select ONE answer:

1. Debenture interest paid during the current accounting period, in respect of the same period.
2. Dividends paid during the current accounting period. in respect of the same period.
3. Directors’ remuneration paid during the current accounting period, in respect of the same period.
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. Not correct – Debenture interest paid during the current accounting period, in respect of the same period is an expense. and, just like any other expense, is charged as an expense in the profit and loss account (in accordance with the accruals concept) not the profit and loss appropriation account.
2. Correct
3. Not correct – Remuneration paid to directors, during the current accounting period, in respect of the same period is an expense, and, just like any other expense, is charged as an expense in the profit and loss account (in accordance with the accruals concept) not the profit and loss appropriation account.
4. Not correct

 

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In the accounts of a limited company. debenture interest paid during the current accounting period, in respect of the same period . . .?

Select ONE answer:

1. is part of the company’s cost of sales.
2. is an expense.
3. is an appropriation of profit.
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. Not correct
2. Correct – Debenture interest paid during the current accounting period, in respect of the same period is an expense, and. just like any other expense, is charged as an expense in the profit and loss account (in accordance with the accruals concept).
3. Not correct
4. Not correct

 

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In the accounts of a limited company, the balance on a provision for depreciation account . . . ?

Select ONE answer:

1. is shown under the heading ‘current liabilities’.
2. is shown under the heading ‘capital and reserves’.
3. is shown as an appropriation of profit.
4. is deducted from the cost or valuation of the related fixed assets.

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
2. Not correct
3. Not correct
4. Correct – Fixed assets are shown in the balance sheet at their net book value i.e. their cost or valuation less the cumulative provision for depreciation on them.

 

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