Financial accounting worksheet with answers

Which is a liability?

1. AInventory
2. BShare capital paid in by owners
3. CA loan from a bank
4. DCash in hand

Dividends paid to shareholders are recorded as:

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

The systematic allocation of the cost of an intangible asset over its useful life is called:

1. ADepreciation of land
2. BAccrual
3. CAmortisation
4. DRevaluation

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 prepayments, credit cash
3. CNo entry until the bill arrives
4. DDebit electricity expense, credit accruals

Which ratio measures a company's ability to pay its short-term obligations?

1. AThe current ratio
2. BThe gross margin
3. CEarnings per share
4. DReturn on equity

An asset costs €50,000, has a residual value of €5,000 and a useful life of 5 years. What is the annual straight-line depreciation?

1. A€5,000
2. B€10,000
3. C€9,000
4. D€11,000

An investor holds 30% of a company's shares and has significant influence but not control. How is the investment usually accounted for in group accounts?

1. AAt cost with no changes ever
2. BAs a joint operation with line-by-line sharing
3. CUsing the equity method as an associate
4. DBy full consolidation as a subsidiary

A firm has spent €50,000 on market research for a new product and must decide whether to launch it. How should the €50,000 be treated in the decision?

1. ADeducted from expected sales
2. BIgnored, because it is a sunk cost
3. CSpread over the product's expected life
4. DAdded to the launch cost