MCQ on Final accounts A balance sheet is a financial statement that records a firms liabilities, assets, and shareholders equity at a particular time. It is a basis for evaluating rates of return and its capital structure. The financial statements such as a statement of cash flows and the income statement along with balance sheet are used to prepare and analyse the financial status of a company. Balance Sheet MCQs

1. On balance sheet, accruals, notes payables, and account payable are listed under which category?

A) Current Liabilities

B) Accumulated Liabilities

C) Noncurrent Liabilities

D) Accrued Liabilities

2. Inventories, cash and equivalents, and accounts receivables are listed as

A) Earnings on Income Statement

B) Payments on Income Statement

C) Assets on the Balance Sheet

D) Liabilities on the Balance Sheet

3. Salaries and wages employees are recorded in which accounts are called

A) Accruals Accounts

B) Accrued Expenses

C) Zero Liabilities

D) Both A and B

4. In the situation of bankruptcy, a stock which is recorded above common stock and below debt account is

A) Preferred Stock

B) Debt Liabilities

C) Common Liabilities

D) Hybrid Stock

5. A firm buys products but does not pay to suppliers instantly. This is recorded as

A) Account Receivable

B) Account Payable

C) Accumulated Liabilities

D) Current Liabilities

6. In a balance sheet, the total of common stock and retained earnings are examined as

A) Common Equity

B) Due Equity

C) Preferred Equity

D) Common Perpetuity

7. In the Income statement, the process of recording inventory that gives a lower cost of a commodity sold is categorized as

A) First Out Receivable

B) Last in First Out

C) Last Out Receivable

D) First in First Out

8. Financial securities which can be changed into cash to their book value price are categorized as

A) Short-term Investments

B) Inventories

C) Long-term Investments

D) Cash Equivalents

9. Earnings that have a cumulative amount and are not paid to the stockholder as a dividend is known as

A) Common Earnings

B) Preferred Earnings

C) Non-paid Earnings

D) Retained Earnings

10. Information that is used by investors for forecasting future earnings is documented in

A) Annual Report

B) Five Years Report

C) Exchange Report

D) Stock Report

Income Statement

Please note that all fields followed by an asterisk must be filled in.

1. Which statement is the first component of the financial statements?*

a) Balance Sheet

b) Cash flow statement

c) Income Statement

d) Statement of Changes in Equity

e) None of the above

2. The income statement is also known as the __________?*

a) Profit and Loss Statement

b) Statement of Basic Income

c) Net Income and Expense Statement

d) Cash Flow Statement

e) None of the above

3. The income statement's primary purpose is to show the __________ of a business.*

a) financial position

b) financial performance

c) cash position

d) expenses

e) None of the above

4. The income statement is drawn up from the figures in the __________.*

a) Debtors ledger

b) Creditors Ledger

c) Cash Flow Statement

d) Trial Balance

e) None of the above.

5. Which of the following statements are true?*

a) An income statement usually covers a full year.

b) The income statement may be drawn up for shorter periods, such as one month or three months.

c) These shorter periods are used by managers to make internal business decisions.

d) The period of time that is covered by the income statement (and other financial statements) is called the accounting period.

e) All of the above.

6. A business has $250,000 income and $60,000 expenses. What is the net profit?*

a) $310,000 b) $250,000 c) $160,000 d) $190,000

e) None of the above. Questions

7-10 below relate to the income statement for a trading business.

7. Which of the following statements are true?*

a) The first section of the income statement for a trading business shows the buying and selling of goods.

b) The first section of the income statement for a trading business shows net profit.

c) The first section of the income statement for a trading business shows the tax expense.

d) None of the above.

8. Which of the following statements are true?*

a) Cost of goods sold is also known as cost of sales.

b) Cost of goods sold is the direct costs of the inventory that we have sold during the year.

c) Cost of goods sold is an expense charged against sales to work out a gross profit.

d) None of the above.

e) All of the above.

XYZ Inc. had the following figures in its income statement:

Sales $920,000

Cost of Goods Sold $320,000

Gross Profit ________

Other Income $50,000

Salaries $220,000

Advertising $100,000

Rent $80,000

Other Expenses $50,000

Net Profit _________

9. The gross profit figure is:*

a) $920,000

b) $970,000

c) $600,000

d) $500,000

10. The net profit figure is:*

a) $650,000

b) $150,000

c) $600,000

d) $200,000