Accounting Chapter 21 - Past Year MCQ

Which organisation is the most difficult to establish and has to comply with many legal formalities?

• partnership
• sole trader
• limited liability company
• club or society

Z Limited has the following types of equity and liabilities. 1 debentures 2 general reserves 3 long-term bank loan 4 ordinary share capital 5 preference share capital (non-redeemable) 6 retained earnings What is included in the company’s shareholders’ equity?

• 1, 2, 4 and 5
• 1, 3, 4 and 5
• 2, 3, 4 and 6
• 2, 4, 5 and 6

What is an advantage of operating as a sole trader?

• being entitled to all profits
• being responsible for all losses
• having limited liability
• having unlimited liability

Which item is directly affected by the dividend policy of a limited company?

• general reserve
• ordinary share capital
• preference share capital
• retained earnings

What are the features of a debenture?

• Return - dividend | Rate of return - based on profit | Voting rights - yes
• Return - dividend | Rate of return - fixed rate | Voting rights - no
• Return - interest | Rate of return - based on profit | Voting rights - yes
• Return - interest | Rate of return - fixed rate | Voting rights - no

What is meant by the term equity?

• dividend paid to ordinary shareholders
• funds raised through borrowing
• interest paid to debenture holders
• total funds provided by shareholders

During the financial year, AB Limited paid debenture interest of $1400 relating to that financial year. At the end of the year, debenture interest of $700 was accrued. How was debenture interest shown in the financial statements for the year?

• Income Statement - $1 400
• Income Statement - $2 100
• Statement of Changes in Equity - $1 400
• Statement of Changes in Equity - $2 100

What is an advantage of being a member of a limited company?

• Loan capital is easy to obtain.
• Dividends must be paid to the member.
• Financial statements are prepared quickly.
• The company is a separate legal entity.

A limited company provided the following information. On 31 December 2022, it was decided to use the remaining profit to pay a final ordinary share dividend. Which percentage final dividend would the ordinary shareholders receive?

• 8%
• 14%
• 20%
• 26%

A limited liability company is formed. Who has limited liability?

• directors
• employees
• lenders
• shareholders