AAT L3 Final Accounts Preparation 4

Question 1

Which financial statement shows the assets and liabilities of a business at a specific point in time?

Accepted Answer

Statement of financial position

Answer

Statement of profit or loss

Answer

Statement of cash flows

Answer

Statement of changes in equity

Question 2

For a limited company, retained earnings brought forward plus profit for the year minus dividends paid equals:

Accepted Answer

Retained earnings carried forward

Answer

Net assets

Answer

Share capital

Answer

Total equity

Question 3

The going concern concept means financial statements are prepared on the assumption that:

Accepted Answer

The business will continue trading for the foreseeable future

Answer

The business will be sold within one year

Answer

All assets will be liquidated at market value

Answer

The business has been trading for at least five years

Question 4

Depreciation for the year is treated in the final accounts as:

Accepted Answer

An expense in the income statement

Answer

A non-current asset deducted from revenue

Answer

A liability in the balance sheet

Answer

Deducted from gross profit before reaching operating profit

Question 5

Interest on partners' capitals is credited to partners because:

Accepted Answer

It compensates partners for the use of their capital investment in the business

Answer

It is a tax deduction for the partnership

Answer

It is required by UK company law

Answer

It replaces drawings

Question 6

When inventory is damaged and written down to net realisable value, the journal entry is:

Accepted Answer

Debit Inventory Write-Down Expense, Credit Inventory

Answer

Debit Inventory, Credit Cost of Sales

Answer

Debit Cash, Credit Inventory

Answer

Debit Revenue, Credit Inventory