Ncea Accounting Level 1 [income Statement + Balance Day Adjustments]

8 Questions | Total Attempts: 119

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Kia Ora WhānauAnother awesome quiz from Brosir. Com - making learning awesome, easy and FREE!Income Statement + Balance Day AdjustmentsOnce you have stared at the photo of Jacob long enough, feel free to continue the quiz :)


Questions and Answers
  • 1. 
    The purpose of an Income Statement is to show:
    • A. 

      How awesome Jerry is at Table Tennis.

    • B. 

      E=mc squared.

    • C. 

      Income, expenses, and net profit.

    • D. 

      Life is like a box of chocolates, you never know which one you gonna get.

  • 2. 
    Balance Day Adjustment Invoices on hand for purchases of  $2,185 including GST means:
    • A. 

      That a supplier has given us an invoice, which requires our business to pay them. Real World Scenario = we usually pay our suppliers on the 20th of the next month in which the inventory was purchased. For example if we purchased inventory on the 25th of January on credit, then we would likely have to pay our supplier on the 20th of February. Accounts that would be affected are: Accounts Payable [this is on the right hand side of the trial balance, a liability, and a credit entry.] If we purchase more inventory on credit, this account will increase. The full amount of $2,185 is put into this account. GST [this is on the right hand side of the trial balance, a liability, and a debit entry.] If we purchase more inventory, this account will decrease]. The GST exclusive amount of $285 is put into this account. We decrease the GST in this situation because our business can claim back GST from the Inland Revenue Department [www.ird.govt.nz] Purchases [this is on the left side of the trial balance, an expense / part of Cost of Goods Sold calcuation, and a debit entry]. If we purchase more inventory, this account will increase. The GST exclusive amount of $1,900 is put into this account. 

    • B. 

      Wow the above answer seems really detailed, and well constructed, and so therefore it must be correct.

    • C. 

      Yeah, what that answer said.

    • D. 

      Purchases = $1393. GST = $989....yeah I really have no idea...

  • 3. 
    Balance Day Adjustment Invoices sent out to customers of  $3,220 including GST means:
    • A. 

      The world is flat.

    • B. 

      7,000 years ago was a very long time for the introduction of Accounting.

    • C. 

      That our business has sent out an invoice, which requires our customers to pay us. KACHING! moneyyyy!!! mmmm. Real World Scenario = we usually receive payments from our customers on the 20th of the next month in which the sale took place. For example if we sold inventory on the 1st of December on credit, then we would likely receive payment from our customer on the 20th of January. Accounts that would be affected are: Accounts Receivable [this is on the left hand side of the trial balance, a asset, and a debit entry.] If we sell more inventory on credit, this account will increase. The full amount of $3,220 is put into this account. GST [this is on the right hand side of the trial balance, a liability, and a credit entry.] If we sell more inventory, this account will increase]. The GST exclusive amount of $420 is put into this account. We increase the GST in this situation because our business has to pay GST to the Inland Revenue Department [www.ird.govt.nz]. Sales [this is on the right side of the trial balance, an income, and a credit entry]. If we sell more inventory, this account will increase. The GST exclusive amount of $2,800 is put into this account.

    • D. 

      Accounts payable will increase because I know Accounts Payable is the wrong answer.

  • 4. 
    Balance Day Adjustment Insurance of $600 has been paid in advance.
    • A. 

      I don't believe in insurance, so any answer is correct.

    • B. 

      I should really get third party insurance for my car, because I have a higher chance of crashing than anyone else, except those oldies!!

    • C. 

      Insurance. Pfft. Who needs that.

    • D. 

      Our business has paid insurance to our insurance provider [State Insurance, Tower Insurance etc] in advance. Essentially, we have paid too much money. Real World Scenario - most businesses and people have insurance to protect them from unforseen accidents / deliberate acts.  Accounts that would be affected are: Insurance [this is on the left hand side of the trial balance, it is an expense, and a credit entry]. If we have paid Insurance in advance, we decrease it. Prepayment [this is on the left hand side of the trial balance, it is an asset, and a debit entry]. If we have paid an amount in advance, we increase it.

  • 5. 
    Balance Day Adjustment Interest of $145 on the Loan due 2020 at 10% p.a. is still owing.
    • A. 

      Interest is as interesting as Accounting with Mr P

    • B. 

      Hakuna Matata!!!!

    • C. 

      Our business has taken a loan from the bank, the loan is due in 2020 [making it a non-current liability] and an interest percentage is attached to it. Essentially, in this balance day adjustment, the business still owes the bank interest. Real World Scenario - businesses take out loans from the bank so that they can buy assets to generate future economic benefit / inflow into their business. Accounts that would be affected are: Accrued Expense [this is on the right hand side of the trial balance, it is a liability, and a credit entry]. If we owe wages or interest on balance day [31/03/20XX], we increase it. Interest on Loan [this is on the left hand side of the trial balance, it is an expense, and a debit entry]. If we owe interest on loan, we increase it.

    • D. 

      I wish I could fly like a kiwi

  • 6. 
    Depreciation on the $50,000 vehicle is based on it lasting 5 years [estimated useful life] and a salvage/residual value of $10,000.
    • A. 

      Vehicles don't depreciation so it must be $0.

    • B. 

      I know that straight-line depreciation is calculated as follows: (Original Cost - Residual Value or Salvage Value) / Estimated Useful Life ($50,000 - $10,000) / 5 = $40,000 / 5 = $8,000 Real World Scenario - non-current assets depreciate because they decline in value [wear and tear]. For example at Mc Donald's the machines used to make frozen cokes, french fries and burgers will depreciatie over time as they are likely to get worn out, and damaged etc. Accounts that would be affected are: Depreciation on Vehicle [this is on the left hand side of the trial balance, it is an expense, and a debit entry]. We will most likely depreciate a non-current asset such as vehicle each year, until the asset is sold, replaced, or written off [no longer in our accounting books]. Accumulated Depreciation on Vehicle [this is on the right hand side of the trial balance, it is a negative asset, and a credit entry]. Each year we depreciate the vehicle, we will increase this amount by the depreciation for that year, until the asset is sold, replaced, or written off [no longer in our accounting books]    

    • C. 

      If the vehicle is a Ford, it does not depreciate.

    • D. 

      If the vehicle is a Holden, it does not depreciate.

  • 7. 
    Balance Day Adjustment Rent of $250 has been received in advance.
    • A. 

      My caregiver pays the rent - doesn't affect me.

    • B. 

      I live in a cardboard box.

    • C. 

      Our business has received rent in advance. Accounts that would be affected are: Rent Received [this is on the right hand side of the trial balance, it is 'negative other income', and a debit entry]. Our business has not earnt this income, therefore it is not allowed to report it as income on the Income Statement. Income Received in Advance [this is on the right hand side of the trial balance, it is a current liability, and a credit entry]. Because this is a current liability - it will be reported on the Balance Sheet.  

    • D. 

      I wish I received $1,000,000 in advance everyday.

  • 8. 
    Inventory of $15 000 is on hand as at 31 March 2010.
    • A. 

      One day the sun will blow up.

    • B. 

      This is the amount of inventory at the end of the year that the business has on hand. It is part of our cost of goods sold calculation for Trading firms. It is not usually on the trial balance, but instead in the additional information. They key aspect to look out for is the date. Closing inventory usually states 31 March 2010. Opening inventory usually states 1 April 2009. Go back to the 'Trading Firm' link on the BroSir.com website for further clarrification by clicking here.

    • C. 

      Fantastic - this is the last question in the quiz!

    • D. 

      "Mr P, can you please buy me pie?"

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