Tag: Business Entity

Part of a draft cash flow statement is shown below:

Operating profit   £8,640

Depreciation charges   (£2,160)

Proceeds of sale of non-current assets  £360

Increase in Inventory   (£330)

Increase in accounts payable   £440

The following criticisms of the above extract have been made:

1.Depreciation charges should have been added, not deducted.

2.Increase in inventory should have been added, not deducted.

3.Increase in accounts payable should have been deducted, not added.

4.Proceeds of sale of non-current assets should not appear in this part of the cash flow statement.

Select ONE answer:

1. 2 and 3 only
2. 1 and 4 only
3. 1 and 3 only
4. 2 and 4 only

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. Notcorrect
2. Correct
3. Not correct
4. Not correct

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

Alex started a trading business on 1 May 2023 with capital of £40,000.

In his first year of trading, he made a profit for the year of £117,000, selling goods at a mark-up on cost of 60%.

He injected additional capital of £30,000 in the year and withdrew a monthly amount of £3,200 for his living expenses.

He also took drawings from his inventory of goods for his own use with a resale value of £7,200.

He had no inventory at the year end.

What were Alex’s net assets as at 30 April 2024?

Select ONE answer:

1. £141,400
2. £144,100
3. £144,280
4. £179,300

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. Notcorrect
2. Correct – Opening net assets £40,000 + profit for the year £117,000 + Capital Injection £30,000 – Drawings (12 * £3,200) £38,400 – Goods Taken For Own Use (£7,2000 * 100/160) £4,500 == > £144,100
3. Not correct
4. Not correct

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

Alex started his business on 1 December 2022 with cash of £5,000.

He has not yet prepared a full set of financial statements.

As at the end of his first reporting period, 30 November 2023, he has cash at bank of £1,726. He made sales of £33,498 during the period and paid expenses in cash of £19,385. He has no outstanding creditors at the end of the period, and has no fixed assets or stock, but one customer owes him £2,387.

Assuming Alex made no other capital injections but took drawings of £15,000 in the period – then identify his profit for the 12-month reporting period to 30 November 2023 and his net assets at the end of the period on an accruals basis of accounting.

Select ONE answer:

1. Net profit of £11,726, net assets of £1,726
2. Net profit of £14,113, net assets of £4,113
3. Net profit of £11,726, net assets of £4,113
4. Net profit of £14,113, net assets of £1,726

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. Notcorrect
2. Correct – Using the Accounting Equation == > Closing Net Assets (£1,726 + £2,387) £4,113 + Drawings £15,000 – Opening Capital £5,000 = Profit For The Year £14,113
3. Not correct
4. Not correct

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