Financial accounting worksheet with answers

How is cost of goods sold calculated for a trading business?

1. APurchases + closing inventory
2. BOpening inventory − purchases + closing inventory
3. COpening inventory + purchases − closing inventory
4. DRevenue − purchases − closing inventory

Which of these is normally a fixed cost for a factory?

1. ASales commission per unit sold
2. BRaw materials for each unit
3. CRent of the factory building
4. DPackaging for each unit

Which of these increases a sole trader's capital (equity)?

1. AA profit for the year
2. BRepaying a bank loan
3. CBuying inventory for cash
4. DDrawings by the owner

A provision is recognised when a company has:

1. AA present obligation from a past event, a probable outflow and a reliable estimate
2. BA profit to distribute
3. CA possible future loss with no obligation
4. DCash set aside in a separate account

Which inventory valuation method assumes the oldest goods are sold first?

1. ALIFO (last in, first out)
2. BSpecific identification of each item
3. CWeighted average cost
4. DFIFO (first in, first out)

Which ratio measures a company's ability to pay its short-term obligations?

1. AThe gross margin
2. BThe current ratio
3. CReturn on equity
4. DEarnings per share

A company borrows at 5% interest to invest in assets that earn 12%. What is the likely effect on return on equity?

1. AROE rises and financial risk falls
2. BROE falls, because interest is an expense
3. CROE rises, but financial risk also increases
4. DROE stays the same, because debt is not equity

Company P buys 70% of the voting shares of S and gains control. How does P report S in its group accounts?

1. AKeep the investment at cost and report only the dividends received from S
2. BConsolidate 100% of S line by line and show a non-controlling interest
3. CAdd only 70% of each of S's assets, liabilities, income and expenses
4. DShow one equity-method investment line for its 70% share of S