Financial accounting worksheet with answers

A variable cost is a cost that:

1. AIs never included in product costs
2. BChanges in total in proportion to the level of activity
3. CStays the same in total within the relevant range of output
4. DIs paid only once when a business starts

Accounts receivable are:

1. AAmounts customers owe the company for sales on credit
2. BShares owned by investors
3. CCash held in the bank
4. DAmounts the company owes its suppliers

Which of these is capital expenditure?

1. ABuying a new delivery van
2. BPaying staff wages
3. CPaying the monthly electricity bill
4. DPaying for the van's fuel

What is the key difference between absorption costing and marginal costing?

1. AAbsorption costing ignores variable costs
2. BAbsorption costing includes fixed production overheads in inventory; marginal costing treats them as period costs
3. CMarginal costing is required by IFRS for external reporting
4. DMarginal costing includes all overheads in inventory; absorption costing excludes them

A company is being sued. Its lawyers say losing is possible but not probable. How is this treated under IAS 37?

1. AIgnored completely
2. BRecognised as a provision on the balance sheet
3. CDisclosed as a contingent liability in the notes
4. DRecognised as an expense and paid into a reserve

Under IAS 16, which cost should be included in the cost of a new machine?

1. AInstallation costs needed to get it working
2. BStaff training costs after it starts operating
3. CRepairs carried out two years later
4. DGeneral office overheads for the year

Budgeted overhead is €200,000 for 40,000 machine hours. Actual hours are 42,000 and actual overhead is €205,000. What is the result?

1. AOverhead exactly absorbed
2. BOverhead under-absorbed by €5,000
3. COverhead under-absorbed by €10,000
4. DOverhead over-absorbed by €5,000

A parent sold goods to its subsidiary at a profit, and the subsidiary still holds them at year end. What must happen on consolidation?

1. ANothing, because each company is a separate entity
2. BThe sale is shown as external revenue of the group
3. CThe unrealised profit in inventory is eliminated
4. DThe profit is shown twice, once for each company