Financial accounting worksheet with answers

Which of these is a current asset?

1. AMachinery
2. BA long-term bank loan
3. CInventory
4. DLand

What is the basic accounting equation?

1. AAssets = Revenue − Expenses
2. BEquity = Assets + Liabilities
3. CAssets = Liabilities + Equity
4. DProfit = Assets − Liabilities

In double-entry bookkeeping, every transaction:

1. AIs recorded only once
2. BIncreases both assets and expenses equally
3. CMust involve cash
4. DIs recorded with equal debits and credits

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

1. AEarnings per share
2. BReturn on equity
3. CThe gross margin
4. DThe current ratio

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

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

A project has a positive net present value (NPV) at the company's cost of capital. This means:

1. AIt has no risk at all
2. BIt earns more than the required return and should add value
3. CIt recovers its cost within one year
4. DIts reported accounting profit will be positive in every year

Over three years a company reports rising profits while operating cash flow keeps falling. What should an analyst suspect?

1. AProfits may be driven by aggressive accruals, such as rising receivables or capitalised costs
2. BThe company has very high earnings quality
3. CDepreciation must have been too high
4. DThe company must have repaid all its loans

Under IFRS 16, a lessee typically recognises a lease on the balance sheet as:

1. AA right-of-use asset and a lease liability
2. BEquity and a provision
3. CAn operating expense only, spread evenly over the lease term
4. DRevenue and inventory