Q: In Alex Chan's statement of financial position, which equation correctly calculates net current assets?

$$\text{Net current assets} = \text{Current assets} - \text{Current liabilities}$$

Q: What is the correct formula to calculate the capital at the end of the year for Alex Chan, given the opening capital and net profit?

$$\text{Closing capital} = \text{Opening capital} + \text{Net profit}$$

Q: Which equation best represents the relationship between gross profit, expenses, and net profit?

$$\text{Net profit} = \text{Gross profit} - \text{Expenses}$$

Question 1

Which formula correctly calculates the Cost of Goods Sold (COGS) for Leo Lam's business, given the purchases and closing inventory?

Accepted Answer

COGS = Purchases - Closing Inventory

Question 2

In preparing an income statement, which of the following is subtracted from sales to arrive at gross profit?

Accepted Answer

Cost of goods sold

Question 3

Given the following figures for Leo Lam: Sales $$268,550, Purchases 103$$,050, Closing Inventory $13,059, what is the gross profit for the year ended 31 December 2024?

Accepted Answer

$$268,550 - (103$$,050 - $$13,059) = 178$$,559

Question 4

Which of the following is NOT classified as an expense in Leo Lam's income statement?

Accepted Answer

Purchases

Question 5

In Alex Chan's statement of financial position, which equation correctly calculates net current assets?

Accepted Answer

$$	ext{Net current assets} = 	ext{Current assets} - 	ext{Current liabilities}$$

Question 6

If Alex Chan's current assets total $$51,185 and current liabilities are 7$$,460, what is the value of net current assets?

Accepted Answer

$$51,185 - 7,460 = 43$$,725

Question 7

Which of the following is considered a non-current asset in Alex Chan's statement of financial position?

Accepted Answer

Office equipment

Question 8

What is the correct formula to calculate the capital at the end of the year for Alex Chan, given the opening capital and net profit?

Accepted Answer

$$	ext{Closing capital} = 	ext{Opening capital} + 	ext{Net profit}$$

Question 9

Which of the following best describes the purpose of an income statement?

Accepted Answer

To report the revenues and expenses over a period, showing net profit or loss

Question 10

If Leo Lam's expenses total $$164,985 and gross profit is 178$$,559, what is the net profit for the year?

Accepted Answer

$$178,559 - 164,985 = 13$$,574

Question 11

Which of the following would increase the gross profit in an income statement, assuming all other factors remain constant?

Accepted Answer

Decreasing cost of goods sold

Question 12

In the context of financial statements, which item is NOT a current asset?

Accepted Answer

Motor vehicles

Question 13

Which of the following is a plausible reason for including closing inventory in the calculation of cost of goods sold?

Accepted Answer

To account for goods purchased but not yet sold

Question 14

If Alex Chan's office equipment is valued at $$62,430 and motor vehicles at 30$$,255, what is the total value of non-current assets?

Accepted Answer

$$62,430 + 30$$,255 = $92,685

Question 15

Which of the following best describes trade payables in the statement of financial position?

Accepted Answer

Amounts owed to suppliers

Question 16

A business has sales of $$300,000, purchases of 120$$,000, and closing inventory of $20,000. What is the gross profit?

Accepted Answer

$$300,000 - (120$$,000 - $$20,000) = 200$$,000

Question 17

Which of the following is the correct order of presentation for assets in a statement of financial position?

Accepted Answer

Non-current assets first, then current assets

Question 18

If a business wants to improve its net profit, which of the following actions would be most effective?

Accepted Answer

Increase sales while keeping expenses constant

Question 19

Which equation best represents the relationship between gross profit, expenses, and net profit?

Accepted Answer

$$	ext{Net profit} = 	ext{Gross profit} - 	ext{Expenses}$$

Question 20

Which of the following would be classified as a liability in the statement of financial position?

Accepted Answer

Trade payables

Financial Statements Practice: Income Statement & Statement of Financial Position

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