Q: Which formula correctly calculates 'net current assets' (working capital)?

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

Q: A sole proprietor introduces £20,000 cash into the business, earns a net profit of £8,000, and withdraws £7,000 for personal use. What is the closing capital?

$$\text{Closing capital} = £20,000 + £8,000 - £7,000 = £21,000$$

Q: A business has total assets of £100,000, current liabilities of £20,000, and non-current liabilities of £30,000. What is the value of net assets?

$$\text{Net assets} = £100,000 - (£20,000 + £30,000) = £50,000$$

Question 1

Which of the following best describes the purpose of a balance sheet?

Accepted Answer

To present the financial position of a business as at a specific date, showing assets, liabilities, and capital.

Question 2

Which of the following items would be classified as a non-current asset on a balance sheet?

Accepted Answer

Fixtures and fittings

Question 3

A business has total assets of £50,000 and total liabilities of £18,000. What is the value of net assets?

Accepted Answer

£32,000

Question 4

Which of the following statements about the balance sheet is TRUE?

Accepted Answer

It is a position statement prepared 'as at' a specific date.

Question 5

In preparing a balance sheet, how should current assets be listed?

Accepted Answer

In increasing order of liquidity, with cash at the bottom.

Question 6

Which formula correctly calculates 'net current assets' (working capital)?

Accepted Answer

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

Question 7

A business has the following balances: Inventory £10,000, Trade receivables £5,000, Cash at bank £2,000, Trade payables £4,000. What is the value of net current assets?

Accepted Answer

£13,000 - £4,000 = £9,000

Question 8

Which of the following is NOT a current liability?

Accepted Answer

Loan repayable in 5 years

Question 9

Why is the balance sheet NOT considered part of the double entry system?

Accepted Answer

Because it lists balances rather than making entries in accounts.

Question 10

A sole proprietor introduces £20,000 cash into the business, earns a net profit of £8,000, and withdraws £7,000 for personal use. What is the closing capital?

Accepted Answer

$$	ext{Closing capital} = £20,000 + £8,000 - £7,000 = £21,000$$

Question 11

Which of the following best explains the order of listing non-current assets in a balance sheet?

Accepted Answer

In descending order, starting with assets kept the longest.

Question 12

A business has total assets of £100,000, current liabilities of £20,000, and non-current liabilities of £30,000. What is the value of net assets?

Accepted Answer

$$	ext{Net assets} = £100,000 - (£20,000 + £30,000) = £50,000$$

Question 13

Which of the following would be considered a non-current liability?

Accepted Answer

Bank loan repayable in 3 years

Question 14

If a business owner pays £5,000 from the sale of a private car into the business bank account, how should this be reflected in the balance sheet?

Accepted Answer

As an increase in capital and an increase in cash at bank.

Question 15

Which of the following statements about the layout of a balance sheet is correct?

Accepted Answer

Non-current liabilities are listed after current liabilities.

Question 16

A business has the following balances: Fixtures and fittings £10,000, Inventory £5,000, Trade receivables £3,000, Bank £2,000, Trade payables £4,000, Loan £6,000. What is the value of total assets?

Accepted Answer

$$£10,000 + £5,000 + £3,000 + £2,000 = £20,000$$

Question 17

Which of the following is the correct way to calculate capital at the end of the period?

Accepted Answer

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

Question 18

Which of the following best describes the difference between the balance sheet and the income statement?

Accepted Answer

The balance sheet shows the financial position at a point in time, while the income statement shows performance over a period.

Question 19

A business has current assets of £12,000 and current liabilities of £5,000. Why is the figure for net current assets important?

Accepted Answer

It indicates the resources readily convertible into cash, reflecting liquidity.

Balance Sheets: Structure, Preparation, and Analysis

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