Financial accounting worksheet with answers

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

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

A budget is:

1. AA record of last year's transactions
2. BA report written by the external auditor
3. CA financial plan for a future period
4. DA list of the company's shareholders

The gross profit margin is calculated as:

1. ARevenue ÷ cost of sales × 100
2. BGross profit ÷ total assets × 100
3. CNet profit ÷ revenue × 100
4. DGross profit ÷ revenue × 100

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

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

Current assets are €300,000, including inventory of €100,000. Current liabilities are €200,000. What is the quick (acid-test) ratio?

1. A1.0
2. B0.5
3. C1.5
4. D2.0

A shop buys 100 units at €10, then 100 units at €12, and then sells 150 units. What is cost of sales using FIFO?

1. A€1,700
2. B€1,500
3. C€1,600
4. D€1,650

A company changes its inventory method from weighted average to FIFO because it gives more relevant information. Under IAS 8, how is this applied?

1. ABy recognising the whole effect as income this year
2. BRetrospectively, restating comparative figures as if FIFO had always been used
3. CIt is not allowed to change inventory methods
4. DProspectively, from the date of the change only

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