Cambridge International A Level · Business (9609)

Financial statements (A Level): Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Financial statements (A Level).

10 questions27 marksFree, no account

Question 1

1 mark

In a Statement of Profit or Loss, what is the correct formula to determine the profit for the year?

Question 2

1 mark

A business discovers that its closing inventory for the financial year was understated by $\$10,000$. What is the immediate effect of this error on the financial statements for that specific year?

Question 3

1 mark

How does the recording of annual depreciation using the straight-line method affect the Statement of Financial Position?

Question 4

1 mark

Under the net realisable value method of inventory valuation, how should inventory be recorded if its cost is higher than its expected selling price minus selling costs?

Question 5

1 mark

Which of the following items is classified as a non-current liability in the Statement of Financial Position?

Question 6

2 marks

Explain why a business might be required to value its inventory at net realisable value rather than its historical cost.

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Question 7

3 marks

Explain the primary purpose of a Statement of Profit or Loss for a business.

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Question 8

2 marks

Identify two key components found in a statement of financial position.

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Question 9

5 marks

Explain the meaning and purpose of a Statement of Profit or Loss and a Statement of Financial Position. Discuss how these two financial statements are interconnected for a business.

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Question 10

10 marks

The annual report of 'Global Textiles Plc.' includes a Statement of Profit or Loss and a Statement of Financial Position. A financial analyst is using these statements to understand the company's performance.

(a) Explain the purpose of both the Statement of Profit or Loss and the Statement of Financial Position for Global Textiles Plc. (4 marks)

(b) Describe the key relationship between the retained earnings shown in the Statement of Profit or Loss and the equity section of the Statement of Financial Position. (3 marks)

(c) Explain how the depreciation of a non-current asset affects the Statement of Profit or Loss and the Statement of Financial Position. (3 marks)

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