Financial accounting worksheet with answers

A sunk cost is:

1. AA cost already incurred that cannot be recovered
2. BA cost saved by a decision
3. CA cost that will be paid next year
4. DA cost that changes in total with the level of output

The systematic allocation of the cost of an intangible asset over its useful life is called:

1. AAmortisation
2. BDepreciation of land
3. CRevaluation
4. DAccrual

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

1. ARevenue − purchases − closing inventory
2. BOpening inventory + purchases − closing inventory
3. CPurchases + closing inventory
4. DOpening inventory − purchases + closing inventory

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

Under the accrual basis of accounting, revenue is recognised when:

1. AIt is earned, whether or not cash has been received
2. BCash is received
3. CThe tax return is filed
4. DThe customer pays the invoice, even if goods were delivered earlier

Which costs are relevant when making a business decision?

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

Operating profit is €200,000 and capital employed (equity plus non-current liabilities) is €1,000,000. What is ROCE?

1. A20%
2. B50%
3. C5%
4. D2%

When does activity-based costing (ABC) give the biggest improvement over traditional absorption costing?

1. AWhen overheads are very small compared with direct costs
2. BWhen all costs are variable with labour hours
3. CWhen overheads are large and driven by activities like set-ups rather than volume
4. DWhen a firm makes only one standard product