Financial accounting worksheet with answers

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

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

Money or goods taken out of a sole trader's business for personal use are called:

1. ALiabilities
2. BDrawings
3. CExpenses
4. DDividends

At the break-even point:

1. ASales revenue is zero
2. BVariable costs equal fixed costs
3. CTotal revenue equals total costs
4. DProfit is at its maximum

An item cost €80. It can be sold for €90, but €20 must be spent to sell it. At what amount is it shown in inventory?

1. A€90
2. B€60
3. C€70
4. D€80

Fixed costs are €20,000, the selling price is €50 and the variable cost is €30 per unit. What is the break-even point?

1. A400 units
2. B667 units
3. C1,000 units
4. D2,000 units

At 31 December, electricity used in December (€800) has not yet been billed. Which year-end entry is correct?

1. ANo entry until the bill arrives
2. BDebit accruals, credit electricity expense
3. CDebit electricity expense, credit accruals
4. DDebit prepayments, credit cash

Making a part costs €10 materials, €6 labour and €4 variable overhead, plus €5 of fixed overhead that continues anyway. A supplier offers it at €22. What should the firm do on cost grounds?

1. AMake it, because the relevant cost of €20 is below €22
2. BBuy it, because the full cost of €25 per unit is above €22
3. CBuy it, because fixed costs are always relevant
4. DMake it, because the full cost of €25 is below €22

An investor holds 30% of a company's shares and has significant influence but not control. How is the investment usually accounted for in group accounts?

1. AAt cost with no changes ever
2. BAs a joint operation with line-by-line sharing
3. CUsing the equity method as an associate
4. DBy full consolidation as a subsidiary