Final Accounts Of A Sole Trader! Trivia Quiz

Creditors are individuals or entities to whom a company owes money or has a debt. They are considered liabilities because the company has an obligation to repay the debt or fulfill its financial obligations to them. Machinery, motor vehicle, and bank are not liabilities but rather assets or financial institutions.

Loan from K Harris is not an asset because it represents a liability or a debt owed by the individual or entity to K Harris. Assets are resources or items of value that are owned or controlled by an individual or entity, such as buildings, cash, and debtors (people who owe money to the individual or entity). However, a loan from K Harris represents an obligation to repay the borrowed funds, making it a liability rather than an asset.

Net profit is calculated in the Profit and loss account. The Profit and loss account is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time. It shows the net profit or loss generated by the business by deducting all expenses from the revenues. The Profit and loss account helps in determining the profitability of the business and is an essential component of the financial statements. It is usually prepared at the end of the accounting period and provides valuable insights into the financial performance of the company.

Depreciation is the allocation of the cost of a fixed asset over its useful life. It represents the decrease in value of the asset due to wear and tear, obsolescence, or other factors. By recognizing depreciation expense, a company can accurately reflect the reduction in value of its assets over time. This helps in determining the true profitability and financial position of the company. Therefore, the correct answer is "The part of the cost of the fixed assets that is used up over its period of use."

Profit increases capital because profit is the amount of money left over after deducting expenses from revenue. This surplus can be reinvested into the business, which in turn increases the capital of the company. By generating profit, a company can allocate more resources towards expanding operations, investing in new projects, or paying off debts. This ultimately leads to an increase in the overall capital of the business.

The correct answer is £21,600. This is calculated by adding up the premises (£20,000), closing stock (£8,500), cash (£100), and loan (£4,000). Then, subtracting the creditors (£3,000) from the total, we get £29,600.

Fixed assets are long-term tangible assets that are not intended for resale. They are purchased by a business to be used in its operations and are expected to have a useful life of more than one year. Examples of fixed assets include land, buildings, machinery, vehicles, and equipment. These assets are not easily converted into cash and are essential for the business to generate revenue and operate effectively.

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The best meaning of "purchases" is goods bought for resale. This implies that the items are being acquired with the intention of selling them to customers. This definition distinguishes purchases from goods bought for personal use or consumption.

The cost of goods sold can be calculated by adding the opening stock, purchases, and carriage inwards, and then subtracting the closing stock. In this case, the calculation would be: £1,300 + £6,400 + £200 - £900 = £7,000. Therefore, the cost of goods sold figure is £7,000.

The correct order in which current assets should be shown in the balance sheet is stock, debtors, bank, cash. This order is based on the liquidity of the assets, with stock being the least liquid and cash being the most liquid. By following this order, it provides a clear representation of the availability and value of the assets to the company.