A-LevelAccountingFinancial Statements Analysis (Ratios)May/June 2011Paper 1 Q201 Mark

A business has $10 000 in the bank and buys inventory for $6000 paying by cheque. What is the effect of this on its current ratio and quick (acid test) ratio?

Q: What is the correct answer to this A-Level Accounting question?

The correct answer is C: no effect decreases.

Q: What topic does this question test?

This question tests Financial Statements Analysis (Ratios) in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Adecreases increases

Bdecreases no effect

Cno effect decreases

Dno effect no effect

✓ Correct Answer

The correct answer is C: no effect decreases

📋 Examiner Report & Trap Analysis

Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...

🎯 Mark Scheme Breakdown

Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.

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About This A-Level Accounting Question

Topic

This multiple-choice question tests Financial Statements Analysis (Ratios) in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Source

This question appeared in the Cambridge A-Level Accounting May/June 2011 examination, Paper 1 Variant 2.

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