AAT L3 Final Accounts Preparation 2

Question 1

When preparing a profit or loss account, accrued income at year end is:

Accepted Answer

Added to revenue as income earned but not yet received

Answer

Accrued income is revenue earned during the period but not yet received; it is added to revenue in the income statement and shown as a current asset (accrued income) on the balance sheet.

Question 2

In a limited company's income statement, corporation tax is shown as:

Accepted Answer

A tax charge after profit before tax

Answer

In a limited company's income statement, corporation tax is shown as a tax charge deducted from profit before tax to arrive at profit after tax (profit for the year).

Question 3

Partners' capital accounts are normally fixed. Changes are made for:

Accepted Answer

Additional capital introduced or permanent changes to the partnership agreement

Answer

Fixed capital accounts only change for significant events such as additional capital contributions, permanent withdrawals of capital, or changes agreed in the partnership agreement; routine items go through current accounts.

Question 4

Carriage inwards is classified as:

Accepted Answer

Part of cost of sales (cost of goods sold)

Answer

Carriage inwards is the cost of having goods delivered to the business; as it is part of the cost of acquiring inventory, it is included in cost of sales, not treated as a selling or administrative expense.

Question 5

The revaluation reserve in a limited company balance sheet arises from:

Accepted Answer

An upward revaluation of non-current assets

Answer

When a non-current asset is revalued upwards, the gain is not recognised in profit or loss but instead credited to a revaluation reserve within equity on the balance sheet.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Final Accounts Preparation 2