Q: Which of the following is the correct formula for calculating the rate of inventory turnover?

$$\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$$

Question 1

Which of the following best describes the main purpose of preparing a trial balance in accounting?

Accepted Answer

To ensure that total debits equal total credits in the ledger accounts

Question 2

A business purchased equipment for $10,000. The equipment is expected to last for 5 years with no residual value. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$2,000

Question 3

Which accounting concept requires that expenses are matched with the revenues they help to generate in the same period?

Accepted Answer

Accruals

Question 4

A company has the following balances: Sales $$50,000, Purchases 30$$,000, Opening Inventory $$5,000, Closing Inventory 7$$,000. What is the Gross Profit?

Accepted Answer

$18,000

Question 5

Which of the following is NOT a book of original entry?

Accepted Answer

Ledger

Question 6

If a business writes off an irrecoverable debt, which accounts are affected?

Accepted Answer

Debit Irrecoverable Debts Expense, Credit Receivables

Question 7

Which of the following best describes the prudence concept in accounting?

Accepted Answer

Assets and income should not be overstated, and liabilities and expenses should not be understated

Question 8

A business has current assets of $$15,000 and current liabilities of 10$$,000. What is the current ratio?

Accepted Answer

$$1.5:1$$

Question 9

Which of the following is an example of capital expenditure?

Accepted Answer

Purchase of a delivery van

Question 10

A business receives a bank statement showing a balance of $$2,000, but the cash book shows 1$$,800. The difference is due to a cheque for $200 not yet presented. What is the adjusted bank balance?

Accepted Answer

$1,800

Question 11

Which of the following is a professional ethical principle in accounting?

Accepted Answer

Confidentiality

Question 12

Which of the following is the correct formula for calculating the rate of inventory turnover?

Accepted Answer

$$	ext{Inventory Turnover} = \frac{	ext{Cost of Goods Sold}}{	ext{Average Inventory}}$$

Question 13

Which of the following is a current liability?

Accepted Answer

Trade payables

Question 14

A business has total assets of $$50,000 and total liabilities of 20$$,000. What is the owner’s equity?

Accepted Answer

$30,000

Question 15

Which of the following is NOT a purpose of control accounts?

Accepted Answer

To prepare the trial balance

Question 16

Which of the following is the correct double entry for recording depreciation of equipment?

Accepted Answer

Debit Depreciation Expense, Credit Accumulated Depreciation

Question 17

Which of the following is an example of a book of original entry used to record goods returned to suppliers?

Accepted Answer

Purchases returns journal

Question 18

Which accounting concept requires that the same accounting methods are used from one period to the next?

Accepted Answer

Consistency

Question 19

A business has sales of $$100,000, cost of goods sold of 60$$,000, and operating expenses of $25,000. What is the net profit?

Accepted Answer

$15,000

Question 20

Which of the following best describes the accruals concept?

Accepted Answer

Transactions are recorded when they occur, regardless of cash movement

Pearson Edexcel International GCSE Accounting: Specification & Core Concepts

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