Financial accounting worksheet with answers

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

1. ASales commission per unit sold
2. BPackaging for each unit
3. CRent of the factory building
4. DRaw materials for each unit

Which of these increases a sole trader's capital (equity)?

1. ADrawings by the owner
2. BRepaying a bank loan
3. CBuying inventory for cash
4. DA profit for the year

A sunk cost is:

1. AA cost that will be paid next year
2. BA cost already incurred that cannot be recovered
3. CA cost that changes in total with the level of output
4. DA cost saved by a decision

Why can a profitable company run out of cash?

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

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

1. AFIFO (first in, first out)
2. BWeighted average cost
3. CSpecific identification of each item
4. DLIFO (last in, first out)

Under the accrual basis of accounting, revenue is recognised when:

1. AThe tax return is filed
2. BCash is received
3. CThe customer pays the invoice, even if goods were delivered earlier
4. DIt is earned, whether or not cash has been received

A firm with spare capacity gets a one-off order at €35 per unit. Variable cost is €30 and full cost including fixed overhead is €42. Assuming no other effects, should it accept?

1. ANo, the order makes a €7 loss per unit
2. BYes, but only if the price exceeds €42
3. CYes, each unit adds €5 contribution
4. DNo, the price is below full cost

Operating profit is €200,000 and capital employed (equity plus non-current liabilities) is €1,000,000. What is ROCE?

1. A20%
2. B5%
3. C2%
4. D50%