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

Accounts payable (trade payables) are:

1. AProfits paid out to shareholders
2. BCash held in the bank account
3. CAmounts the business owes suppliers for purchases on credit
4. DAmounts customers owe the business

Dividends paid to shareholders are recorded as:

1. AA reduction of retained earnings in equity
2. BRevenue of the shareholders' company
3. CA non-current liability once paid
4. DAn expense in the income statement for the year

Return on equity (ROE) is calculated as:

1. ANet profit / shareholders' equity
2. BTotal assets / equity
3. CCurrent assets / current liabilities
4. DNet profit / total revenue

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

1. ABoth are always capitalised as intangible assets
2. BResearch is capitalised; development is expensed
3. CResearch is expensed; development is capitalised only when strict criteria are met
4. DBoth are always expensed immediately

Current assets are €300,000 and current liabilities are €150,000. What is the current ratio?

1. A1.5
2. B4.5
3. C2.0
4. D0.5

A company sells a software licence together with two years of support for one price. Under IFRS 15, how is revenue recognised?

1. ADefer the whole price and recognise it when the two years of support end
2. BAllocate the price using standalone selling prices; recognise the licence at delivery and support over two years
3. CRecognise the whole price at once when the customer signs the contract
4. DRecognise half the price in each year without splitting it by obligation

A company switches to a depreciation method that gives higher charges. Ignoring tax, what happens to cash flow?

1. ACash flow and profit both rise
2. BCash flow rises by the extra depreciation
3. CCash flow is unchanged, although profit falls
4. DCash flow falls by the amount of the extra depreciation