Financial accounting worksheet with answers

Gross profit is:

1. ACash in minus cash out
2. BRevenue minus all expenses
3. CTotal assets minus total liabilities
4. DRevenue minus cost of goods sold

Which statement shows cash coming in and going out in operating, investing and financing activities?

1. AThe balance sheet
2. BThe income statement
3. CThe cash flow statement
4. DThe notes to the accounts only

Under IAS 2, inventory is measured at:

1. AIts expected selling price
2. BIts original cost, whatever happens
3. CThe higher of cost and current replacement cost
4. DThe lower of cost and net realisable value

Which depreciation method charges the same amount every year?

1. AUnits of production
2. BSum-of-the-years'-digits
3. CStraight-line
4. DReducing balance

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€1,600
2. B€1,800
3. C€4,000
4. D€2,000

Which costs are relevant when making a business decision?

1. AFuture cash flows that differ between the alternatives
2. BCosts already paid for the project
3. CAllocated fixed overheads that do not change with the decision
4. DAll costs in last year's income statement

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

Production exceeds sales this period, so inventory rises. How does absorption costing profit compare with marginal costing profit?

1. AThey are always equal
2. BMarginal costing profit is higher this period
3. CAbsorption costing shows a loss
4. DAbsorption costing profit is higher