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O Level Principles of Accounts Financial Statements Quiz

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O Level Principles of Accounts AI Generated Generated by Qwen3.6 Plus Updated 2026-06-03
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Questions

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O-Level Principles of Accounts Quiz - Financial Statements

Name: __________________________
Class: __________________________
Date: ___________________________
Score: ________ / 40

Duration: 45 minutes
Total Marks: 40
Instructions:

  1. Answer all questions.
  2. Show all workings clearly. Marks are awarded for method.
  3. Use blue or black ink.
  4. Financial statements should be presented in vertical format unless otherwise stated.

Section A: Knowledge and Comprehension (10 Marks)

1. State the accounting concept that requires inventory to be valued at the lower of cost and net realisable value. [1]

2. Define 'Net Realisable Value' in the context of inventory valuation. [2]

3. In a Statement of Financial Position, distinguish between a 'Current Asset' and a 'Non-Current Asset'. [2]

4. State the formula for calculating 'Cost of Sales' (Cost of Goods Sold). [2]

5. Explain why 'Drawings' are not treated as an expense in the Statement of Profit or Loss. [3]

Section B: Application and Calculation (10 Marks)

6. The following information relates to a sole trader for the year ended 31 December 2024:

  • Opening Inventory: $12,000
  • Purchases: $45,000
  • Carriage Inwards: $1,500
  • Closing Inventory: $8,500

Calculate the Cost of Sales for the year. [3]

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7. A business has the following balances at 31 December 2024:

  • Trade Receivables: $15,000
  • Allowance for Doubtful Debts (1 Jan 2024): $500
  • The owner decides to adjust the allowance to 5% of Trade Receivables.

Calculate the new allowance for doubtful debts. [1]

8. A non-current asset was purchased for $20,000 on 1 January 2022. Depreciation is charged at 20% per annum using the Straight-Line method. Calculate the Net Book Value of the asset as at 31 December 2024. [3]

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9. The Trial Balance of a business showed a debit balance of 2,000forInsurance.Additionalinformation:Prepaidinsuranceatyear−endis2,000 for Insurance. Additional information: Prepaid insurance at year-end is 400.

State the amount of insurance expense to be shown in the Statement of Profit or Loss. [1]

10. Calculate the Gross Profit Margin given the following:

  • Revenue: $100,000
  • Cost of Sales: $60,000

Show your answer as a percentage. [2]

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Section C: Analysis and Classification (10 Marks)

11. A business sold a motor vehicle for 5,000cash.ThevehiclehadaNetBookValueof5,000 cash. The vehicle had a Net Book Value of 7,000 at the date of sale. State the profit or loss on disposal. [1]

12. A business sold a motor vehicle for 5,000cash.ThevehiclehadaNetBookValueof5,000 cash. The vehicle had a Net Book Value of 7,000 at the date of sale. Indicate whether the profit or loss on disposal is added to or deducted from Gross Profit in the Statement of Profit or Loss. [1]

13. Identify whether 'Accrued Wages' appears in the Statement of Profit or Loss (SOPL) or the Statement of Financial Position (SOFP). [1]

14. Identify whether 'Carriage Outwards' appears in the Statement of Profit or Loss (SOPL) or the Statement of Financial Position (SOFP). [1]

15. Identify whether 'Capital' appears in the Statement of Profit or Loss (SOPL) or the Statement of Financial Position (SOFP). [1]

16. State the classification (Current Asset or Current Liability) of 'Accrued Wages' in the Statement of Financial Position. [1]

17. State the classification (Current Asset or Current Liability) of 'Prepaid Insurance' in the Statement of Financial Position. [1]

18. State the classification (Current Asset or Current Liability) of 'Inventory' in the Statement of Financial Position. [1]

19. State the classification (Current Asset or Current Liability) of 'Trade Payables' in the Statement of Financial Position. [1]

20. State the classification (Current Asset or Current Liability) of 'Bank Overdraft' in the Statement of Financial Position. [1]

Answers

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O-Level Principles of Accounts Quiz - Financial Statements (Answer Key)

1. Prudence Concept. [1]

2. Net Realisable Value is the estimated selling price of inventory less the estimated costs of completion and the estimated costs necessary to make the sale (e.g., marketing, distribution). [2] (1 mark for selling price, 1 mark for less costs to sell)

3.

  • Current Asset: An asset held for resale, consumption, or conversion into cash within one year (or the operating cycle). [1]
  • Non-Current Asset: An asset held for long-term use in the business to generate income, not for resale. [1]

4. Cost of Sales = Opening Inventory + Purchases + Carriage Inwards - Closing Inventory. [2] (Accept: Opening Inventory + Net Purchases - Closing Inventory)

5. Drawings represent a withdrawal of capital by the owner for personal use, not a cost incurred in generating revenue. Therefore, it is a reduction of equity, not a business expense. [3] (1 mark for withdrawal of capital/personal use, 1 mark for not generating revenue, 1 mark for reduction of equity)

6. Opening Inventory: 12,000Add:Purchases:12,000 Add: Purchases: 45,000 Add: Carriage Inwards: 1,500Less:ClosingInventory:(1,500 Less: Closing Inventory: (8,500) Cost of Sales: $50,000 [3] (1 mark for correct format/additions, 1 mark for subtraction, 1 mark for final answer)

7. 15,000x515,000 x 5% = **750** [1]

8. Annual Depreciation = 20,000x2020,000 x 20% = 4,000 Period: 1 Jan 2022 to 31 Dec 2024 = 3 years Total Accumulated Depreciation = 4,000x3=4,000 x 3 = 12,000 Net Book Value = Cost (20,000)−AccumDep(20,000) - Accum Dep (12,000) = $8,000 [3] (1 mark for annual dep, 1 mark for total accum dep, 1 mark for NBV)

9. 2,000−2,000 - 400 = $1,600 [1]

10. Gross Profit = 100,000−100,000 - 60,000 = 40,000GrossProfitMargin=(40,000 Gross Profit Margin = (40,000 / $100,000) x 100 = 40% [2] (1 mark for GP calc, 1 mark for percentage)

11. Loss on Disposal = 7,000(NBV)−7,000 (NBV) - 5,000 (Proceeds) = $2,000 Loss. [1]

12. It is deducted from Gross Profit (or shown as an expense/other loss) in the Statement of Profit or Loss. [1]

13. Statement of Financial Position (SOFP) (as a Current Liability). [1]

14. Statement of Profit or Loss (SOPL) (as an Expense). [1]

15. Statement of Financial Position (SOFP) (as Equity). [1]

16. Current Liability. [1]

17. Current Asset. [1]

18. Current Asset. [1]

19. Current Liability. [1]

20. Current Liability. [1]