1.Which of the following would be the correct adjustment if there was an increase in an accrual? Select one: a. The amount of the increase is deducted (credited) from the expense on the income statement and the increase is added (debited) to the existing accrual in the balance sheet b. The amount of the increase is added (credited) to the expense on the income statement and the increase is deducted (debited) to the existing accrual in the balance sheet c. The amount of the increase is included as an expense (a debit) on the income statement and the increase is added (credited) to the existing accrual in the balance sheet d. None of the above statements are correct 2. If it is known that a debtor cannot pay because of bankruptcy, the amount to be written off is shown as: Select one: a. A credit on the income statement and as a debit on the balance sheet by increasing the amount shown for receivables b. A debit on the income statement and as a credit on the balance sheet by reducing the amount shown for receivables c. None of the above statements are correct 3. Company bought a laptop computer for its business that cost £2,000 and it has a net book value of £1,200 after one year. If Company sells the laptop for £700 at that time, the profit / (loss) on disposal would be: Select one: a. The loss on disposal would be £500 b. The profit on disposal would be £50 c. The loss on disposal would be £1,300 d. The profit on disposal would be £1,300 4. The budget of company shows total production overheads of £78m. They plan to work 6m hours and total labour costs for the year are £26m. Which of the following can be a suitable absorption rate for the production overhead? i. £4 per hour ii. £13 per hour iii. £3 per labour cost iv. £13 per labour cost
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
1.Which of the following would be the correct adjustment if there was an increase in an accrual?
If it is known that a debtor cannot pay because of bankruptcy, the amount to be written off is shown as:
Which of the following can be a suitable absorption rate for the production overhead?
i. £4 per hour
ii. £13 per hour
iii. £3 per labour cost
iv. £13 per labour cost
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