Activity 9: Reading the Balance Sheet

Following the Balance Sheet below you will find 8 questions. By clicking on the "Grade Me" button at the bottom of the activity, your answers will be scored. You will also find a link to the solution.

Fixed Assets    
Motor Vehicle 30,000.00  
less Accumulated Depreciation 15,000.00 15,000.00
Plant and Equipment 8,000.00  
less Accumulated Depreciation 3,000.00 5,000.00
     
Total Fixed Assets   20,000.00
     
Current Assets    
Bank 750.00  
Accounts Receivable 2,250.00  
Inventory 6,000.00  
Total Current Assets   9,000.00
     
Total Assets   29,000.00
     
Current Liabilities    
Accounts Payable   15,000.00
     
Equity    
Accumulated Members Funds as at 01 Jan 20,000.00  
Less Loss for Period 6,000.00  
Accumulated Members Funds as at 31 Dec   14,000.00
     
Total Liabilities   29,000.00

 

Questions

For each of the questions below, choose whether the account is an asset. liability, expense, revenue or ownership equity. There is only one correct answer for each.

1) The main purpose of the Balance Sheet is to provide the reader
with the <missing word> of the business.
a) Performance
b) Profit Forecast
c) Cashflow
d) Value

2) What is the correct calculation of the "Current Ratio"?
a) 0.05
b) 0.20
c) 0.60
d) 1.67

3) What is the correct calculation of the "Acid Test Ratio"?
a) 0.05
b) 0.20
c) 0.60
d) 1.67

4) Which of the following explains "Accounts Payable"?
a) The total debt owed to trade creditors of the organisation
b) The total debt owed to members of the organisation
c) The total debt owed by members of the organisation
d) The total debt owed by customers of the organisation

5) Which of the following explains "Accumulated Depreciation"?
a) The total reduction in value of a fixed asset since purchased
b) The total money set aside for the replacement of a fixed asset
c) The total amount of money borrowed to purchase a fixed asset
d) The total amount of money paid off on the purchase of a fixed asset

6) What is the value of "Net Assets" on the above Balance Sheet?
a) 0
b) 14,000
c) 20,000
d) 29,000

7) Which of the following explains "Inventory"?
a) The total money owed to the organisation by customers
b) The total of equipment owned by the organisation that is not intended for resale
c) The total borrowings of the organisation
d) The total value of goods held in stock for sale but not sold yet

8) Which of the following explains "Accumulated Members Funds"?
a) The amount of money held in the bank for the members of the organisation
b) The total money owed by members of the organisation
c) The value of the organisation's capital
d) The value of the organisation's borrowings


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