IGCSE BUSINESS STUDIES

TEST ON FINAL ACCOUNTS

Section 1 – definitions (10 marks)

Place the correct number corresponding to each definition in the spaces provided.

Stock 1 Trading account 2 Depreciation 3 Fixed assets 4

Balance sheet 5 Net profit 6 Working capital 7 Creditor 8
Gross profit 9 Retained profit 10

Description No.

One of the final accounts. It shows the assets and liabilities of the business at
a particular date. It is often called a ‘snap shot’ of the financial state of the
business.

This represents the amount of short-term capital that a business has available
to meet day-to-day cash requirement. It is calculated by subtracting current
liabilities from current assets.

Materials or products kept by business. There are three types: raw materials,
work in progress and finished goods. It is found on the trading account and
the balance sheet and is the least liquid of all the current assets.

Items that a business owns which make a long-term contribution to its activity.
Examples are machinery and vehicles.

Someone to whom an individual or business owes money. Found in the

current liabilities section of the balance sheet.

The amount of profit after tax that directors of a business decide not to
distribute to shareholders but to keep within the business. It is held as an
increase in capital and is used to expand operations through the purchase of
fixed assets.

The first part of the final accounts that shows the sales revenue less the cost of
goods sold. This gives the gross profit for the time period concerned.

A term given to the reduction in the value of fixed assets like machinery due
to age, wear and tear or obsolescence as new technology is introduced. Can
be calculated using the straight line or reducing balance method.

The final figure obtained on the trading account when the cost of goods sold
has been deducted form the sales revenue of a business. This does not take
into account any expenses of running the business such as wages or
administration costs.

This is the amount of sales revenue a business earns less all of the costs
involved in achieving that revenue including both direct and indirect costs.

Created by Gail Sharratt 1 Kuwait English School

IGCSE BUSINESS STUDIES

Section 2 – calculations (24 marks)

a) Identify which of the following accounts each of the items below would be
placed into using the following key:

Trading account = T Profit and loss account = P Balance sheet = B

Item Account Amount (£) Item Account Amount (£)

Sales 150,000 Capital 100,900
Heat and light 1,000 Creditors 5,000
Opening stock 40,000 Rent 16,000
Wages 15,000 Closing stock 90,000
Electricity 4,000 Debtors 3,500
Purchases 160,000 Cash 400

Construct a Trading, Profit and Loss account from the figures above. Clearly state
the GROSS and NET PROFIT.

Created by Gail Sharratt 2 Kuwait English School