Chapter 2 Multiple-choice questions

. Izzy sells chocolate cakes at £6 each and each one costs her £4 to produce. During June, Izzy made 200 cakes and sold 180 cakes. Her expenses amounted to £120 for the month. How much net profit did Izzy make in June?

£720

£160

£240

£360

. Which of the following statements regarding trade payables is not true?

Trade payables owe money to the business.

Trade payables have supplied goods to the business.

Trade payables are the amounts owed to suppliers of the business who have not yet been paid.

Trade payables are treated as current liabilities.

. John has made the following predictions for his business for the first six months of trading to 30 June:
Sales in Jan, Feb and March = £20,000 per month
Sales in Apr, May and June = £25,000 per month
Sales will be on one month's credit
The trade receivables figure as at 30 June will be:

£20,000.

£25,000.

£40,000.

£45,000.

. Which of the following payments is revenue expenditure?

Money put into the business by the owner.

Purchase of a motor van.

Cost of servicing the motor van.

Money taken out by the owner of the business.

. Which of the following is a capital expense?

Drawings.

Rent and rates.

Salaries.

Purchase of a motor van.

. Which of the following is a record of all the account balances at the year end, and is used to prepare the final accounts?

A trial balance.

A statement of financial position.

A statement of cash flows.

A statement of profit or loss.

. During the year ended 31 December, the business made sales of £45,000 and purchases of £25,000. The inventory at the beginning of the year was valued at £8,000 and, at 31 December, £4,500. The gross profit for the year was:

£23,500.

£20,000.

£16,500.

£32,500.

. Ben started trading on 1 January. His trial balance at 31 December is given below:

If the closing inventory at 31 December was £8,000 and depreciation is to be ignored, which one of the following statements is true?

Gross profit is £41,000.

Net profit is £16,000.

Expenses are £61,000.

Cost of sales is £64,000.

. If the sale of a motor van for £25,000 by a hotel company is included in its sales, which of the following statements is correct?

Gross profit only will be overstated by £25,000.

Gross profit only will be understated by £25,000.

Net profit only will be understated by £25,000.

Both gross profit and net profit will be overstated by £25,000.

. If drawings of £18,000 made by an owner were treated as a revenue expense, which of the following statements is correct?

Gross profit will be understated by £18,000.

Net profit will be understated by £18,000.

Both gross and net profit will be understated by £18,000.

Both gross profit and net profit will be unaffected.

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