PTA Level 1

Question 1

Which of the following estimates a trader's net profit over a certain period?

Accepted Answer

Closing net assets + drawings - capital introduced - opening assets

Answer

Net profit represents the increase in owner's equity from business operations, excluding owner contributions or withdrawals. To calculate it, you start with the closing net assets, add back any drawings (owner withdrawals), subtract any new capital introduced, and then subtract the opening net assets. This formula isolates the profit generated by the business itself over the period.

Question 2

A Statement of Financial Position is intended to show:

Accepted Answer

the business's assets and the claims against them.

Answer

The Statement of Financial Position, also known as the Balance Sheet, provides a snapshot of a company's financial health at a specific point in time. It details the company's assets (what it owns) and its liabilities (what it owes to others) and equity (the owners' claim on the assets). This fundamental accounting statement adheres to the accounting equation: Assets = Liabilities + Equity.

Question 3

A grocery store's net assets were $64,800 as of January 31, 2008, with a net profit of $30,600 for the year. On August 31, 2007, the proprietor invested an extra $7,200. He also withdrew $960 each month and $840 worth of products on December 24, 2007. What were the net assets on February 1, 2007?

Accepted Answer

$39,360

Answer

To find the opening net assets, we use the formula: Closing Net Assets = Opening Net Assets + Net Profit + Capital Introduced - Drawings. First, calculate total drawings: ($960/month * 12 months) + $840 = $11,520 + $840 = $12,360. Then, rearrange the formula: Opening Net Assets = Closing Net Assets - Net Profit - Capital Introduced + Drawings. So, $64,800 - $30,600 - $7,200 + $12,360 = $39,360.

Question 4

Which of the following things may show on a company's Statement of Cash Flows?

(1) Surplus from revaluation of non-current assets
(2) Proceeds from the issuing of shares.
(3) Proposed dividend.
(4) Dividends received.

Accepted Answer

2 and 4

Answer

The Statement of Cash Flows reports actual cash inflows and outflows from operating, investing, and financing activities. Proceeds from the issuing of shares (2) represent a cash inflow from financing activities. Dividends received (4) are a cash inflow, typically from investing activities. Surplus from revaluation (1) is a non-cash item, and proposed dividends (3) are not cash outflows until they are actually paid.

Question 5

Which of the following would not show on a Statement of Cash Flows?

Accepted Answer

The Statement of Profit or Loss for Taxation for the Year

Answer

The Statement of Cash Flows focuses exclusively on actual cash movements within a business. While the acquisition of investments, redemption of debentures, and dividends paid are all cash transactions, the 'Statement of Profit or Loss for Taxation' is an accrual-based accounting report that calculates taxable income, not a record of cash flows. It includes non-cash items and adjustments for tax purposes.

(PTA) Practice Tests Academy Practice Test

(PTA) Practice Tests Academy Practice Test

PTA Level 1