O-Level Principles of Accounts 2

Question 1

How is gross profit calculated in the Trading account?

Accepted Answer

Sales minus cost of goods sold

Answer

Sales minus all expenses

Answer

Net sales plus cost of goods sold

Answer

Sales minus opening stock only

Question 2

Where does accumulated depreciation appear in the financial statements?

Accepted Answer

Balance Sheet as a deduction from the fixed asset's cost

Answer

Profit and Loss account as an income

Answer

Trading account as an expense

Answer

Balance Sheet under current liabilities

Question 3

When a debtor is unable to pay and the debt is written off, where is this loss recorded?

Accepted Answer

As a bad debt in the Profit and Loss account

Answer

As an expense in the Balance Sheet

Answer

As a deduction directly from capital

Answer

As a credit entry in the Sales account

Question 4

Prepaid expenses are classified in the Balance Sheet as:

Accepted Answer

A current asset

Answer

A current liability

Answer

A non-current asset

Answer

Part of capital

Question 5

Which depreciation method allocates an equal charge to each year of an asset's useful life?

Accepted Answer

Straight-line method

Answer

Reducing balance method

Answer

Units of production method

Answer

Sum-of-years-digits method

Question 6

Accrued expenses are shown on the Balance Sheet as:

Accepted Answer

Current liabilities

Answer

Current assets

Answer

Non-current assets

Answer

Non-current liabilities

Question 7

The formula 'Opening Stock + Purchases − Closing Stock' gives which figure?

Accepted Answer

Cost of goods sold

Answer

Gross profit

Answer

Net profit

Answer

Sales revenue