LECTURE 2 SOFP - SELF STUDY SHORT QUESTIONS

1 Which of the following is a correct version of the fundamental accounting equation?

a. Assets = Liabilities
b. Assets = Proprietors capital less liabilities
c. Assets plus liabilities = Proprietors capital
d. Assets = Proprietors Capital plus liabilities

2 Capital is?

a. The amount borrowed to set up a business

b. The amount owed by a business to its proprietor(s)
c. The value of the assets in a business
d. The total amount invested in a business by all the providers of capital

3 What is a statement of financial position?

a. A list of all the assets and liabilities of a business

b. A statement of the net worth of a business
c. A statement which shows how the net assets of a business have changed over time
d. A statement of the assets and liabilities of a business at a point in time in financial
terms

4 Which of the following is NOT a current asset?

a. Machinery
b. Inventory
c. Cash at the bank
d. Receivables

5 Which of the following is the correct formula for cost of sales?

a. Opening inventory purchases + closing inventory

b. Purchases closing inventory + sales
c. Opening inventory closing inventory + purchases
d. Opening inventory + closing inventory purchases

6 The MAIN aim of accounting is to:

a. maintain ledger accounts for every asset and liability

b. provide financial information to users of such information
c. produce a trial balance
d. record every financial transaction individually

7 Which one of the following is NOT a necessary part of the stewardship function?

a. To maximise profits
b. To safeguard assets
c. To ensure adequate controls exist to prevent or detect fraud
d. To prepare the financial statements