AAT L3 Final Accounts Preparation 6

Question 1

In a partnership, if losses exceed the credit balance on a partner's current account, the deficit is:

Accepted Answer

Transferred to a debit balance on the current account or to the capital account

Answer

Written off as a business expense

Answer

Charged to the other partners only

Answer

Ignored until the next profitable year

Question 2

When preparing the final accounts of a sole trader, the net profit is transferred to:

Accepted Answer

The capital account in the balance sheet

Answer

The income statement

Answer

A reserve account

Answer

The drawings account

Question 3

Carriage outwards is classified as:

Accepted Answer

A selling and distribution expense

Answer

Part of cost of sales

Answer

A financial cost

Answer

An administrative expense

Question 4

A limited company's reserves shown on the balance sheet include:

Accepted Answer

Share premium, revaluation reserve, and retained earnings

Answer

Unpaid dividends only

Answer

Directors' remuneration

Answer

Bank overdraft

Question 5

The materiality concept means that:

Accepted Answer

Insignificant items may be aggregated or omitted if they would not affect users' decisions

Answer

All transactions must be recorded regardless of size

Answer

Only items above £1,000 are material

Answer

Material items are shown in the notes only

Question 6

Which section of the balance sheet shows the funding of a business's assets?

Accepted Answer

Equity and liabilities section

Answer

Non-current assets section

Answer

Current assets section

Answer

Working capital section