1-2c. Pearson Test

Question 1

In a limited liability​ company, shareholders limit their losses to which ONE of the​ following?

A. Their share of the total liabilities of the company
B. The nominal value of their shares
C. The equity figure shown on the​ company’s statement of financial position
D. What they had​ paid, or had agreed to​ pay, for their shares

Answer 1

D. What they had​ paid, or had agreed to​ pay, for their shares

Question 2

After the accountant of Ruxin Engineering Co had prepared the draft financial statement for the year ended 31 March Year​ 5, the following errors came to​ light:

1. A trade receivable of ​£3000 was recorded as outstanding at the year end but had been paid in full during the year.
2. A credit sale for ​£6000 had been incorrectly recorded as ​£5100.
3. The insurance expense had been adjusted for an accrual of ​£900 rather than for a prepayment of ​£900 at the end of the year.

4.Interest charges of ​£700 had been treated as interest received.

The profit for the year before these errors were discovered was ​£66000.

What is the profit for the year after adjusting for these​ errors?

Answer 2

= 67 300

Question 3

Not-for-profit organisations have​ ___________ user groups to​ private-sector businesses. These groups use accounting information for​ ___________ purposes.

Answer 3

similar, decision-making

(Not-for-profit organisations have​ similar user groups to​ private-sector businesses. These groups use accounting information for​ decision-making purposes.)

Question 4

It has been stated that accounting can be seen​ as:

1. a form of​ service;
2. part of a​ business’s total information system.

Are the above statements true or​ false?

Answer 4

1. True
2. True

Question 5

Consider the following two statements concerning management​ accounting:

1. Management accounting tends to place more emphasis on providing​ objective, verifiable information than financial accounting.
2. Management accounting tends to place less emphasis on providing reports of a​ non-financial nature than financial accounting.

Which one of the following combinations concerning the above statements​ (true/false) is​ correct?

Answer 5

1. False
2. False

Question 6

Benitez Co incurred the following​ transactions:

  1. Introduction of motor car by owner​ £12,000
  2. Repayment of a loan​ £17,000
  3. Sale of inventories at cost​ £8,000 for cash
  4. Purchase of computer equipment for cash​ £11,000

Which two of the above transactions will affect the total value of assets​ held?

Answer 6

1 and 2

Question 7

Consider the following​ statements:
Business profits are subject to taxation. These will be levied​ on:

1. the​ business, where the business is a limited company
2. the​ owners, where the business is a partnership

Are the above statements true or​ false?

Answer 7

1. True
2. True

Question 8

In determining the profit of an​ entity, which one of the following measurement principles states that revenue and expenses are recognised as they are earned or​ incurred, and not as money is received or​ paid?

A. Completeness
B. Prudence
C. Consistency
D. Accruals

Answer 8

D. Accruals

Question 9

Jayantha commenced business on 1 January 2021 with equity of 100,000. During the year ending on 31 December 2021 he paid ​£94,000 to purchase goods for sale​ (all of which were​ sold) and 32,450 for various expenses. He received from the sale of goods. Jayantha has drawn 12,000 in cash and introduced a motor car valued at ​£11,000 to the business.

​What is Jayantha’s equity on the 31st of December 2021?

Answer 9

Jayantha’s equity at 31 December 2021 is ​£111,800

Question 10

Which one of the following would not decrease if a business decided to increase its depreciation charges for the financial​ period?

A. Profit for the year
B. Non-current assets
C. Equity
D. Cash

Answer 10

D. Cash

Question 11

Only one of the following statements correctly describes the effect of a transaction on the financial statements. Which​ one?

A. The payment of a trade payable by ​3,000 will decrease the claims​ (payables) by ​3,000 and decrease equity by ​3,000

B. Goods purchased on credit ​2,000 will increase inventories by ​2,000 and increase trade payables by ​2,000

C. A debtor who pays an amount owed ​1,000 will result in an increase in sales by ​1,000 and an increase in cash by ​1,000

D. The purchase of a motor van for ​10,000 cash will increase the assets​ (motor van) by ​10,000 and decrease equity by ​10,000

Answer 11

B. Goods purchased on credit ​2,000 will increase inventories by ​2,000 and increase trade payables by ​2,000