Financial accounting worksheet with answers

Dividends paid to shareholders are recorded as:

1. AAn expense in the income statement for the year
2. BA reduction of retained earnings in equity
3. CRevenue of the shareholders' company
4. DA non-current liability once paid

How does management accounting mainly differ from financial accounting?

1. AIt only reports on past events
2. BIt provides information for internal decision-making rather than external users
3. CIt is prepared only for tax authorities
4. DIt is regulated by IFRS and must be published

In double-entry bookkeeping, an increase in a liability is recorded as:

1. ANo entry until it is paid
2. BA credit
3. CA debit to cash only
4. DA debit

Which inventory valuation method assumes the oldest goods are sold first?

1. AWeighted average cost
2. BLIFO (last in, first out)
3. CSpecific identification of each item
4. DFIFO (first in, first out)

Why can a profitable company run out of cash?

1. AProfit always equals cash
2. BProfitable companies never pay taxes
3. CCash is not recorded in accounting
4. DProfit includes credit sales and non-cash items, while cash may be tied up in receivables and inventory

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

The standard price of material is €5 per kg. The company buys 1,000 kg for €5,400. What is the material price variance?

1. A€400 favourable
2. B€400 adverse
3. C€5,400 adverse
4. D€0.40 adverse

Inventory days are 60, receivable days 45 and payable days 30. What is the cash conversion (operating) cycle?

1. A75 days
2. B15 days
3. C105 days
4. D135 days