Q. In the final accounts, how is the owner's equity calculated?
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A.
Assets - Liabilities
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B.
Revenue - Expenses
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C.
Net Income + Drawings
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D.
Assets + Liabilities
Solution
Owner's equity is calculated as total assets minus total liabilities.
Correct Answer:
A
— Assets - Liabilities
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Q. What is the impact of drawings on the final accounts of a sole trader?
-
A.
Increase profit
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B.
Decrease profit
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C.
Increase owner's equity
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D.
Decrease owner's equity
Solution
Drawings reduce the owner's equity in the final accounts, as they represent withdrawals made by the owner for personal use.
Correct Answer:
D
— Decrease owner's equity
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Q. What is the purpose of a trial balance in the accounting process?
-
A.
To prepare the final accounts
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B.
To ensure that debits equal credits
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C.
To calculate net income
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D.
To assess cash flow
Solution
The trial balance is prepared to ensure that total debits equal total credits before preparing final accounts.
Correct Answer:
B
— To ensure that debits equal credits
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Q. What is the typical format of the income statement for a sole trader?
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A.
Single-step format
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B.
Multi-step format
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C.
Both formats
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D.
None of the above
Solution
Sole traders can use either a single-step or multi-step format for their income statement.
Correct Answer:
C
— Both formats
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Q. When preparing the income statement, which of the following is subtracted from revenue?
-
A.
Assets
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B.
Liabilities
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C.
Expenses
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D.
Equity
Solution
Expenses are subtracted from revenue to determine the net profit or loss.
Correct Answer:
C
— Expenses
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Q. Which of the following is a common adjustment made in final accounts?
-
A.
Accruals
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B.
Prepayments
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C.
Depreciation
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D.
All of the above
Solution
All of these adjustments are commonly made to ensure accurate financial reporting.
Correct Answer:
D
— All of the above
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