Introduction to financial statements and bookkeeping

Question 1

What are the minimum items of the income statement?

Answer 1

• Revenues
• Finance costs
• Share of the profit or loss of associated and joint ventures accounted for using the equity method
• Post tax profit or loss of discontinued operations
• Tax expenses

Question 2

Raw materials, staff costs, depreciation, etc. are expenses classified by
a) Nature
b) Function
c) A mix

Answer 2

a) Nature

Question 3

Cost of goods sold, distribution costs, administrative expenses, etc. are expenses classified by
a) Nature
b) Function
c) A mix

Answer 3

b) Function

Question 4

• Changes in revaluation surplus
• Actuarial gains and losses on defined benefit plans
• Exchange differences (gains and losses) on translating the financial statements of foreign operations
• Gains and losses on re-measuring available-for-sale financial assets
• The effective portion of gains and losses on hedging instruments in a cash flow hedge
• Income tax relating to other comprehensive income

The above are examples of items in the:
a) Income statement
b) Cash flow statement
c) Comprehensive income statement
d) Balance sheet

Answer 4

c) Comprehensive income statement

Question 5

• Retained earnings
• Revelation reserves
• Currency translations
• Fair value adjustments
• Increase in share capital
• Share repurchases

The above are examples of items in the:
a) Statement of changes in owner’s equity
b) Cash flow statement
c) Comprehensive income statement
d) Balance sheet

Answer 5

a) Statement of changes in owner’s equity

Question 6

Which of the following classify current assets?

a) It is expected to be realised in, or is intended for sale or consumption within a normal operating cycle
b) It is due to be settled within 12 months after the reporting date
c) It is held primarily for the purpose of being traded
d) It is expected to be realized within 12 months after the reporting date

Answer 6

a, c, d)

Question 7

In the ______, the left (debit) side represents resources owned by the firm

Answer 7

Balance sheet

Question 8

The _____________ shows revenues on the right (credit) side

Answer 8

income statement

Question 9

An expense is followed by a ______ in assets or an_______ in liabilities

Answer 9

decrease // increase

Question 10

Income is followed by an ____________ in assets (cash or accounts receivables)

Answer 10

increase

Question 11

Illustrate the transaction:

Sales on account

Answer 11

Debit: Accounts receivable

Credit: Net revenue

Question 12

Illustrate the transaction:

Salaries to employees paid by increasing bank loan

Answer 12

Debit: Personnel expenses

Credit: Bank loan

Question 13

Illustrate the transaction:

Purchase of inventory paid by a new loan and on account

Answer 13

Debit: Inventory

Credit: Accounts payable and bank loan

Question 14

Illustrate the transaction:

Payment made by customers who bought on account

Answer 14

Debit: Bank loan

Credit: Accounts receivables

Question 15

Illustrate the transaction:

Payment made to suppliers for purchases made on account

Answer 15

Debit: Acccounts payable

Credit: Cash/bank loan

Question 16

What is the formula for adjusting COGS to make the EOP transaction of inventory?

Answer 16

COGS=Inventory_BOP+Inventory_(Purchased during p)-Inventory_EOP