Financial accounting worksheet with answers

Depreciation is:

1. AA fall in the market value of shares
2. BThe interest paid on debts
3. CPaying off a loan in instalments
4. DSpreading the cost of a non-current asset over its useful life

Opportunity cost is:

1. AThe cash cost of buying into a new opportunity
2. BThe total of all past costs
3. CThe value of the best alternative given up
4. DThe interest paid on a loan

What is the main purpose of an external audit?

1. ATo prepare the company's financial statements
2. BTo decide the company's dividend policy
3. CTo guarantee that no fraud has happened
4. DTo give an independent opinion on whether the financial statements give a true and fair view

A machine costs €10,000 and is depreciated at 20% a year on the reducing balance. What is the depreciation charge in year 2?

1. A€1,800
2. B€4,000
3. C€1,600
4. D€2,000

Current assets are €300,000, including inventory of €100,000. Current liabilities are €200,000. What is the quick (acid-test) ratio?

1. A1.0
2. B0.5
3. C2.0
4. D1.5

At 31 December, electricity used in December (€800) has not yet been billed. Which year-end entry is correct?

1. ADebit accruals, credit electricity expense
2. BDebit electricity expense, credit accruals
3. CDebit prepayments, credit cash
4. DNo entry until the bill arrives

After the year end, but before the accounts are approved, a customer who owed money at year end goes bankrupt. Under IAS 10 this is:

1. AIgnored, because it happened after the year end
2. BAn adjusting event, so receivables are reduced
3. CA non-adjusting event, disclosed only
4. DA change in accounting policy

A company "sells" inventory to a bank and must buy it back later at a higher price, keeping the risks and rewards. How should it be accounted for?

1. AAs a secured loan, not a sale
2. BAs a contingent asset in the notes
3. CAs a gain on disposal of inventory
4. DAs revenue on the date of transfer