Final Accounts of Sole Traders - Exam Prep Insights

Final Accounts of Sole Traders - Real World Applications

Q. What is the effect of closing stock on the profit of a sole trader?

Solution

Closing stock increases profit as it reduces the cost of goods sold.

Correct Answer: A — Increases profit

Q. What is the effect of not recording accrued expenses in the final accounts?

Solution

Not recording accrued expenses leads to overstated profits, as expenses are not recognized in the period they are incurred.

Correct Answer: A — Overstated profits

Q. What is the impact of an error in the trial balance on the final accounts?

Solution

An error in the trial balance may lead to incorrect profit calculation and incorrect asset valuation in the final accounts.

Correct Answer: D — Both B and C

Q. What is the significance of the trial balance in the preparation of final accounts?

Solution

The trial balance is significant as it ensures that all debits and credits are balanced before preparing final accounts.

Correct Answer: A — It ensures all transactions are recorded

Q. What is the typical accounting period for final accounts of a sole trader?

Solution

The typical accounting period for final accounts of a sole trader is annually.

Correct Answer: C — Annually

Q. When preparing final accounts, which document summarizes all income and expenses?

Solution

The Income Statement summarizes all income and expenses for the period.

Correct Answer: B — Income Statement

Q. Which of the following is a common adjustment made in the final accounts?

Solution

All of these adjustments are common in final accounts to ensure accurate financial reporting.

Correct Answer: D — All of the above

Q. Which of the following is a common method for calculating depreciation?

Solution

All of the above methods are common for calculating depreciation.

Correct Answer: D — All of the above

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