Financial accounting worksheet with answers

What is the main purpose of an external audit?

1. ATo decide the company's dividend policy
2. BTo prepare the company's financial statements
3. CTo give an independent opinion on whether the financial statements give a true and fair view
4. DTo guarantee that no fraud has happened

What is the main purpose of a trial balance?

1. ATo list all customers who owe money
2. BTo prove that no errors of any kind exist in the ledger accounts
3. CTo check that total debits equal total credits in the ledger
4. DTo show the company's profit for the year

Under the cash basis of accounting, income and expenses are recorded when:

1. AThe financial year ends
2. BCash is received or paid
3. CThe invoice is approved by the board
4. DThe goods are ordered

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€1,600
3. C€4,000
4. D€2,000

Under IAS 38, how are research and development costs treated?

1. ABoth are always expensed immediately
2. BBoth are always capitalised as intangible assets
3. CResearch is expensed; development is capitalised only when strict criteria are met
4. DResearch is capitalised; development is expensed

Budgeted sales are 1,500 units and the break-even point is 1,000 units. What is the margin of safety?

1. A1,000 units
2. B1,500 units
3. C2,500 units
4. D500 units

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

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

Machine hours are scarce. Product X earns €20 contribution and needs 4 hours; product Y earns €15 and needs 2 hours. Which should be made first?

1. AX, because it earns more contribution per unit
2. BEither, because the total contribution is the same
3. CX, because it uses more machine time
4. DY, because it earns €7.50 per hour versus €5 for X