Financial accounting worksheet with answers

Which of these is normally a fixed cost for a factory?

1. ARaw materials for each unit
2. BRent of the factory building
3. CPackaging for each unit
4. DSales commission per unit sold

Under the cash basis of accounting, income and expenses are recorded when:

1. AThe invoice is approved by the board
2. BThe goods are ordered
3. CThe financial year ends
4. DCash is received or paid

A budget is:

1. AA report written by the external auditor
2. BA record of last year's transactions
3. CA financial plan for a future period
4. DA list of the company's shareholders

A provision is recognised when a company has:

1. AA present obligation from a past event, a probable outflow and a reliable estimate
2. BCash set aside in a separate account
3. CA profit to distribute
4. DA possible future loss with no obligation

A company increases its allowance for doubtful receivables. What is the effect?

1. AOnly the notes change; no figures move
2. BRevenue increases and gross receivables rise by the same amount
3. CAn expense is recognised and net receivables fall
4. DCash decreases immediately

A machine with a carrying amount of €3,000 is sold for €4,000. What is recorded in the income statement?

1. AA loss on disposal of €1,000
2. BA gain on disposal of €4,000
3. CRevenue of €4,000
4. DA gain on disposal of €1,000

Production exceeds sales this period, so inventory rises. How does absorption costing profit compare with marginal costing profit?

1. AAbsorption costing shows a loss
2. BMarginal costing profit is higher this period
3. CThey are always equal
4. DAbsorption costing profit is higher

A company's debt-to-equity ratio rises sharply. What does this usually indicate?

1. AHigher financial risk because the company relies more on borrowed money
2. BBetter liquidity in the short term
3. CHigher profitability
4. DThat shareholders invested more money