Tag: AQA

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.

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The owner of a business has decided to create a provision for doubtful debts.

Which TWO accounting concepts are being applied?

Select ONE answer:

1. Accruals and going concern
2. Accruals and prudence
3. Consistency and business entity
4. Consistency and prudence
5. Prudence and business entity

What is the prudence concept?
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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

The answer is 2 – The provision is a prudent one and an accrual to ensure it is booked in the right accounting period.

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