Q. How is net profit calculated in the final accounts?
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A.
Total Revenue - Total Expenses
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B.
Total Assets - Total Liabilities
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C.
Total Income - Total Drawings
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D.
Total Sales - Cost of Goods Sold
Solution
Net profit is calculated as Total Revenue - Total Expenses.
Correct Answer:
A
— Total Revenue - Total Expenses
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Q. How is the closing capital calculated in the final accounts of a sole trader?
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A.
Opening Capital + Net Profit - Drawings
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B.
Opening Capital - Net Profit + Drawings
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C.
Net Profit - Drawings
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D.
Opening Capital + Drawings
Solution
Closing capital is calculated as Opening Capital plus Net Profit minus Drawings.
Correct Answer:
A
— Opening Capital + Net Profit - Drawings
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Q. In the final accounts, where is the net profit transferred?
-
A.
To the Capital Account
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B.
To the Drawings Account
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C.
To the Income Statement
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D.
To the Liability Section
Solution
The net profit is transferred to the Capital Account in the final accounts of a sole trader.
Correct Answer:
A
— To the Capital Account
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Q. What is the accounting treatment for depreciation in the final accounts?
-
A.
It is added to the asset value
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B.
It is deducted from the asset value
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C.
It is recorded as a liability
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D.
It is ignored in the final accounts
Solution
Depreciation is deducted from the asset value in the final accounts.
Correct Answer:
B
— It is deducted from the asset value
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Q. What is the effect of an increase in inventory on the profit of a sole trader?
-
A.
Increases profit
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B.
Decreases profit
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C.
No effect
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D.
Depends on the accounting method
Solution
An increase in inventory typically decreases profit as it indicates that more resources are tied up in unsold goods.
Correct Answer:
B
— Decreases profit
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Q. What is the effect of drawings on the final accounts of a sole trader?
-
A.
Increase net profit
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B.
Decrease net profit
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C.
No effect on net profit
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D.
Increase total assets
Solution
Drawings decrease the net profit as they are considered a distribution of profits.
Correct Answer:
B
— Decrease net profit
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Q. What is the significance of the trial balance in the final accounts preparation?
-
A.
It ensures that all transactions are recorded
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B.
It helps in calculating depreciation
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C.
It is used to prepare the cash flow statement
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D.
It is not significant
Solution
The trial balance ensures that all transactions are recorded accurately and helps in the preparation of final accounts.
Correct Answer:
A
— It ensures that all transactions are recorded
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Q. What is the typical format of the Profit and Loss Account for a sole trader?
-
A.
Assets = Liabilities + Equity
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B.
Revenue - Expenses = Profit
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C.
Sales - Cost of Goods Sold = Gross Profit
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D.
All of the above
Solution
The Profit and Loss Account can be represented in various formats, including all the options listed.
Correct Answer:
D
— All of the above
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Q. Which accounting standard is primarily applicable to the preparation of final accounts?
-
A.
IFRS
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B.
GAAP
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C.
IAS
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D.
All of the above
Solution
All of the mentioned standards (IFRS, GAAP, IAS) can be applicable depending on the jurisdiction.
Correct Answer:
D
— All of the above
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Q. Which accounting standard is primarily applicable to the preparation of final accounts for sole traders?
-
A.
IFRS
-
B.
GAAP
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C.
IAS
-
D.
None of the above
Solution
Sole traders often follow simplified accounting principles and may not be strictly bound by IFRS or GAAP.
Correct Answer:
D
— None of the above
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Q. Which of the following is a current liability in the final accounts?
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A.
Bank Loan
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B.
Accounts Payable
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C.
Capital Account
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D.
Drawings
Solution
Accounts Payable is considered a current liability in the final accounts.
Correct Answer:
B
— Accounts Payable
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