1.

In what part of The Statement of Cash Flows will ‘Dividend paid’

appear?

A. Cash flows from Operating activity

B. Cash flows from Investing activity
C. Cash flows from Financing activity
D. Non- operating non cash item

2. On which financial statement do you see the cash flows of a

company?
A. Statement of financial position
B. Statement of profit and loss
C. Statement of cash flows
D. Audit report

3. Assets are categorized as:

A. Current and non- current
B. Non-current, current and fixed.
C. Non-current and fixed
D. Long term and non-current
4. Finance/capital is:
A. Not important in a business.
B. The domain of the finance team only.
C. Crucial to managing a business effectively
D. The only thing that managers should consider when running a
business.

5. The matching concept ensures that:

A. Income and expenditure are recognized in the period ordered.
B. Income and expenses are recognized in the period invoiced.
C. Income and expenses are recognized in the period paid.
D. Income and expenses are recognized in the period earned/
incurred.

6. Profit and cash are:

A. Always the same
B. Sometimes the same
C. Never the same
D. Inversely related
7. Daryl runs a small business which packages and sells household
and industrial cleaning products. One of the items on the following
list is an asset of his business. Which item is the business asset?
Select one:
A. Capital
B. Bank overdraft
C. Delivery vehicle
D. Amounts due to cleaning fluid supplier

8. Barry runs a small auditing firm with his partners Terry and Gerry.
One of the items on the following list is a liability of their business.
Which item is the liability?
Select one:
A. £2000 drawn out of the business by Terry
B. Office furniture
C. Professional subscriptions payable
D. Amounts due from clients in respect of audit fee

9. Burgess's business has non-current assets of £64 000, current

assets of £26 000, current liabilities of £21 000 and long-term
liabilities of £5000. Which one of the following statements is
correct?
Select one:
A. Capital is less than non-current assets
B. The total of capital is the same as non-current assets
C. The total of non-current plus current assets is £4000 less than
capital.
D. Total assets are greater than long-term liabilities by £90 000

10. Lucy had the following balances on her trial balance at 30 June
2021: Trade receivables of £21,000, inventories of £34,500,
balance at bank of £2,020, accruals of £1,200, loan of £11,000
repayable on 31 March 2022, and motor vehicles with a value of
£30,000.
What is the value of Lucy's non-current assets and current assets
at 30 June 2021?
A. Non-current assets of £30,000 and current assets of £57,520.
B. Non-current assets of £nil and current assets of £58,720.
C. Non-current assets of £30,000 and current assets of £36,520.
D. Non-current assets of £nil and current assets of £57,520.
11. Limited liability means that:
A. The liability of the shareholders is restricted to the amount they
have invested in the company.
B. The liability of a company is restricted to the amount it owes its
suppliers and lenders.
C. The liability of the shareholders is restricted to the amount of
dividends they have received.
D. The liability of the company is restricted to the amount it owes its
shareholders.

12. A tangible asset has no physical existence.

A. True
B. False

13. Legal fee paid in connection with the purchase of a building is

capital expenditure.
A. True
B. False

14. Which one of the following would reduce the cash balance of a
business and not reduce the profit for the year?
a) Rent payable for the year
b) Electricity paid for the year
c) Loan repaid during the year
d) Wages paid for the year

15. Which of the following would give rise to an outflow of cash

during a financial year?
a) An increase in trade payable
b) A decrease in trade receivable
c) An increase in inventory
d) Issue of new shares during the year

16. Jeff has recently started buying and selling commemorative

mugs. He buys them for £4 per mug and sells them for £7 each.
Since he started trading, he has bought 2,000 and sold 1,800
mugs, all for cash.
Which of the following statements is true for the period since trading
started?
a) The business has made a profit of £6,000 and has increased its
bank balance by £4,600.
b) The business has made a profit of £6,000 and has increased its
bank balance by £1,4000.
c) The business has made a profit of £5,400 and has increased its
bank balance by £4,600.
d) The business has made a profit of £5,400 and has increased its
bank balance by £5,400.

17. An extract from London Ltd's accounts is given below:

Sales 1,780
Cost of sale (710)
Gross profit 1,070
Operating expenses (800)
Operating Profit 270

Which of the following statements is true?

a) London Ltd made a gross profit margin of 40% and an operating
profit margin of 25%.
b) London Ltd made a gross profit margin of 60% and an operating
profit margin of 15%.
c) London Ltd made a gross profit margin of 60% and an operating
profit margin of 25%.
d) London Ltd made a gross profit margin of 40% and an operating
profit margin of 15%.

18. An extract from Jambo Ltd's accounts is given below:

Sales 320,000
Cost of sale
Opening inventory 28,000
Purchases 240,000
Closing inventory (32,000) (236,000)
Gross profit 84000

All sales and purchases were made on credit, and at 31 December

2021, trade receivables were £52,000 and trade payables were
£29,000.
Which of the following statements is true?
a) On average, debts are collected in 79 days and the average trade
payable days is 44 days.
b) On average, debts are collected in 59 days and the average trade
payable days is 33 days.
c) On average, debts are collected in 79 days and the average trade
payable days is 33 days.
d) On average, debts are collected in 59 days and the average trade
payable days is 44 days.
19. Sales are on credit: 40% received in the same month and
60% to be received in the following month:
Jan: £200,000
Feb: £400,000
March: £350,000
 April: £200,000
The total receipts due to be received in March are?
a) £350,000
b) £380,000
c) £360,000
d) £400,000

20. Purchase of an asset appear in cash flow from investing

activities.
1) True
2) False

21. Sale of an inventory is an example capital income.

a) True
b) False

22. Asset and expense have debit balance while income, liability
and drawing have credit balance.
a) True
b) False

23. The capital of a business is $60,000 and the liabilities are

$40,000. What are the total assets?
(A) $20,000
(B) $60,000
(C) $100,000
(D) $40,000

24. The withdrawal of inventory by the owner for personal use

should appear in the trading account as a deduction from
(A) sales
(B) purchases
(C) overdrafts
(D) none of these

25. A company had opening inventory of $300. Sales and

purchases during the period were of $500 and $150 respectively.
What is the gross profit for the period if the closing inventory
was worth $100?
(A) $200
(B) $150
(C) $350
(D) $500
26. A debit entry usually represents
(A) Assets and Expenses
(B) Assets and Income
(C) Liabilities and Income
(D) Liabilities and Expenses

27. A credit entry usually represents

(A) Assets and Income
(B) Assets and liabilities
(C) Liabilities and Income and capital
(D) Liabilities and Expenses

28 Prepayment is recorded as an expense in the current period and

as a current asset in the SOFP
(A) True
(B) False

29. Bad debts is recorded as an expense in the profit & loss and
also deducted from the trade receivable in the SOFP
(A) True
(B) False

30. Which ONE of the following statements about Cash Budgets is NOT
true?

a) The cash budget shows all of the business’s receipts and payments for
the year ahead
b) The cash budget shows the forecasted profit for the year
c) The cash budget is a tool for planning and controlling cashflow
d) The cash budget is usually produced in a month-by-month format