Final Accounts 1, 2, 3, 4, 5☀️

Question 1

What is Gross Profit/Gross Loss?

Answer 1

The difference between the total amount of sales during the period and the total amount it cost the firm to purchase and prepare these goods for sale

Question 2

What is Cost of Sales?

Answer 2

The total amount it cost the firm to produce the goods they actually sold. It includes the cost of buying the materials, the cost of transporting the materials to the factory and any taxes/duties we had to pay if any of the materials were imported from abroad.

Question 3

What is stocktaking?

Answer 3

Counting the amount of stock that a firm has at a particular time.

Question 4

What are the reasons for stocktaking?

Answer 4

1. The goods were faulty
2. They were damaged while being delivered
3. They were not the goods that were ordered

Question 5

What is the procedure for stocktaking?

Answer 5

1. The warehouse should be closed for the stock-take
2. The warehouse should be divided into sections and two people should be in charge of each section
3. One member of each team should count the stock while the other records the figures and makes a note of any damaged goods or goods that do not appear to be selling well
4. Stock sheets should be checked, totals calculated and returned to person in charge
5. Total value of all stock is then calculated and a report written up

Question 6

What is the use of IT in stocktaking?

Answer 6

1. The computer can adjust stock levels automatically each time an item is sold
2. Purchasing manager only needs to check the computer screen or request a printout to see how much of a particular product is still in stock and what the value is

Question 7

What is net profit/net loss?

Answer 7

The difference between the Gross Profit during the period and the total amount of the expenses of running the business

Question 8

What are the ways a business keeps control of its expenses?

Answer 8

1. Compare bills with previous bills to see which are increasing
2. Check the bills to make sure they are correct and that we are not being overcharged
3. Turning off lights/heat when not needed to minimise expenses

Question 9

What are the reasons for retaining profits?

Answer 9

1. To have a fund of money available to expand the business in the future
2. To have money available to pay for unexpected bills

Question 10

What are assets?

Answer 10

Assets are anything of value that the business owns, e.g. machinery and stock.

Question 11

What are liabilities?

Answer 11

Liabilities are anything that the business owes, e.g. bank loans and creditors.

Question 12

What is working capital?

Answer 12

The figure we get when we subtract the total value of current liabilities from the total value of current assets. It is the amount of money available for the day to day running of the business.

Question 13

What is depreciation?

Answer 13

When a fixed asset goes down in value because it has got older, it has been used a lot or it has gone out of date.