Tag: Directors

In the course of preparing a sole trader’s cash flow statement, the following figures are to be included in the calculation of net cash from operating activities.

Depreciation charges – £980,000
Profit on sale of non-current assets – £40,000
Increase in inventory – £130,000
Decrease in accounts receivables – £100,000
Increase in accounts payable – £80,000

What will the net effect of these items be in the cash flow statement?

Select ONE answer:

1. Addition to operating profit – £890,000
2. Subtraction from operating profit – £890,000
3. Addition to operating profit – £1,070,000
4. Addition to operating profit – £990,000

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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – Add depreciation charge == > Less profit on sale of non-current assets == > Less increase in inventory == > Add decrease in accounts receivables == > Add increase in accounts payable = Addition to operating profit

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

Part of the process of preparing a sole trader’s cash flow statement is the calculation of cash inflow from operating activities.

Which of the following statements about that calculation (using the indirect method) are correct?

1 Loss on sale of operating non-current assets should be deducted from operating profits.
2 Increase in inventory should be deducted from operating profits.
3 Increase in accounts payable should be added to operating profits.
4 Depreciation charges should be added to operating profits.

Select ONE answer:

1. 1, 2 and 3
2. 1, 2 and 4
3. 1, 3 and 4
4. 2, 3 and 4

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 – Loss on sale of NCA should be added back to net operating profits.

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

Which ONE of the following would be classified as current liabilities in the statement of financial position of a sole trader?

Select ONE answer:

1. Owner’s capital
2. Petty Cash
3. Goods Taken For Own Use
4. Accrued Interest Charges

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

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