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. CRevenue − purchases − closing inventory
4. DOpening inventory − purchases + closing inventory

At the break-even point:

1. AProfit is at its maximum
2. BSales revenue is zero
3. CVariable costs equal fixed costs
4. DTotal revenue equals total costs

In double-entry bookkeeping, every transaction:

1. AMust involve cash
2. BIncreases both assets and expenses equally
3. CIs recorded with equal debits and credits
4. DIs recorded only once

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

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

A company finds that a machine will last 8 years instead of the 5 originally estimated. Under IAS 8, how is this change applied?

1. ABy changing the original cost of the machine
2. BProspectively, by spreading the remaining carrying amount over the new remaining life
3. CRetrospectively, by restating all prior years
4. DBy recognising a large gain in the current year

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. CCosts already paid for the project
4. DAllocated fixed overheads that do not change with the decision

Goodwill arises in a business combination when:

1. AThe acquired company makes a loss
2. BA company has a good reputation
3. CThe consideration paid exceeds the fair value of identifiable net assets acquired
4. DAssets are revalued upwards

In the indirect method of the cash flow statement, depreciation is:

1. AIgnored completely
2. BShown in financing activities
3. CSubtracted from net profit
4. DAdded back to net profit because it is a non-cash expense