Financial accounting worksheet with answers

In double-entry bookkeeping, an increase in an asset account is recorded as:

1. AA credit to revenue only
2. BA credit
3. CA debit
4. DA debit to equity

Depreciation is:

1. ASpreading the cost of a non-current asset over its useful life
2. BA fall in the market value of shares
3. CThe interest paid on debts
4. DPaying off a loan in instalments

A sunk cost is:

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

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

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

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€2,000
4. D€1,600

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)

An asset is impaired when its carrying amount is higher than its:

1. ARecoverable amount (the higher of fair value less costs of disposal and value in use)
2. BOriginal purchase price
3. CDepreciation charge
4. DResidual value only

Tax rules allow faster depreciation of a machine than the company uses in its accounts. What arises under IAS 12?

1. ANo tax effect at all
2. BA refund of current tax paid
3. CA deferred tax liability
4. DA deferred tax asset