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AP Intermediate 2nd Year Financial Statements of a Company — practice questions

Explore 29 free Financial Statements of a Company questions in AP Intermediate 2nd Year Accountancy. Open each question or exercise to read its content, reference answers and available explanation.

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Financial Statements of a Company questions and exercises with answers

Showing questions 1–29 of 29.

A statement of profit or loss shows Fees Earned of $30,000 and total operating expenses of $17,000. What is net income?Read the answer and worked solution →On a statement of profit or loss, how is a net loss conventionally presented?Read the answer and worked solution →When are closing entries prepared in the accounting cycle?Read the answer and worked solution →Into which account are the balances of revenue and expense accounts transferred during closing?Read the answer and worked solution →Match the Statement (ACCA FA)Read the answer and worked solution →P&L or Position? (ACCA FA)Read the answer and worked solution →Finish the Term (ACCA FA)Read the answer and worked solution →An owner pays for a family holiday from her own pocket. That payment stays out of the business records under the business:Read the answer and worked solution →A single individual runs a bakery with no partners and no shares issued. That structure is a:Read the answer and worked solution →Two friends pool money and skills to run a design studio as co-owners. That structure is a:Read the answer and worked solution →A company collapses owing money, yet its shareholders lose only what they invested. That protection is called:Read the answer and worked solution →A company pays tax on its profits, then shareholders pay tax again on the dividends. This drawback is called:Read the answer and worked solution →A statement showing how a business performed across a given period of time is the:Read the answer and worked solution →A landscaper earned 1,400 and spent 1,150 in August. Her net income for the month is:Read the answer and worked solution →The value of goods and services a business provides to customers over a period is its:Read the answer and worked solution →The cost of providing those goods and services to customers is recorded as an:Read the answer and worked solution →A firm's revenues come to 90,000 and its expenses to 96,000. The firm has recorded a net:Read the answer and worked solution →A landscaper sells a spare plot bought for 1,500 for 2,000. The extra 500 is recorded as a:Read the answer and worked solution →An analyst prefers profit that comes from sustainable trading rather than one-off sales. She is judging earnings:Read the answer and worked solution →A delivery van that will serve the business for eight years is classified as a:Read the answer and worked solution →Inventory expected to be sold within six months is classified as a:Read the answer and worked solution →A supplier's bill falling due in ninety days appears on the balance sheet as a:Read the answer and worked solution →The balance sheet is the accounting equation in statement form: assets equal liabilities plus:Read the answer and worked solution →A shop has assets of 18,700 and liabilities of 1,850. Its owner's equity is:Read the answer and worked solution →The ability of a business to turn assets into cash to meet short-term needs is its:Read the answer and worked solution →Current assets of 6,200 less current liabilities of 1,850 gives working capital of:Read the answer and worked solution →Dividing current assets of 6,200 by current liabilities of 1,850 gives a current ratio of about:Read the answer and worked solution →A firm reports a current ratio of 0.8. This tells a lender the firm should watch its short-term:Read the answer and worked solution →Managers at Waste Management deferred expenses to hit earnings targets and were charged in 2002 by the:Read the answer and worked solution →

Worked practice questions

A statement of profit or loss shows Fees Earned of $30,000 and total operating expenses of $17,000. What is net income?

  1. $13,000
  2. $47,000
  3. $17,000
  4. $30,000
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Correct answer: A. $13,000

1. Net income equals $\text{Revenue} - \text{Expenses}$. 2. Substitute: $30{,}000 - 17{,}000 = 13{,}000$. 3. Option A wrongly adds revenue and expenses; options C and D simply repeat input figures. 4. Therefore net income is $13,000. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.1 "Income Statement", p.22_

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On a statement of profit or loss, how is a net loss conventionally presented?

  1. As a positive number in bold
  2. Omitted from the statement entirely
  3. As a negative number in parentheses
  4. Added to total revenue
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Correct answer: C. As a negative number in parentheses

1. If revenue minus expenses is negative, the result is a net loss. 2. A net loss is typically presented in parentheses as a negative number. 3. It is not shown as a positive figure (A) and is never omitted (C). 4. A loss reduces, rather than adds to, results, so option D is wrong. 5. Therefore a net loss appears in parentheses. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.1 "Income Statement", p.22_

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When are closing entries prepared in the accounting cycle?

  1. Before any transactions are journalized
  2. Daily, as each transaction occurs
  3. Only when the business is dissolved
  4. After the financial statements are prepared
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Correct answer: D. After the financial statements are prepared

1. Closing entries set income statement account balances back to zero for a fresh start. 2. They are made at period end, after the financial statements are prepared but before the next period's first transaction. 3. They are not done before transactions (A) or daily (B), which describe journalizing and posting. 4. They occur every period end, not only at dissolution, ruling out D. 5. Therefore closing entries follow the financial statements. _Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.4.4 "Closing Entries", p.24_

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