Financial accounting worksheet with answers

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

What is the main purpose of a trial balance?

1. ATo prove that no errors of any kind exist in the ledger accounts
2. BTo list all customers who owe money
3. CTo check that total debits equal total credits in the ledger
4. DTo show the company's profit for the year

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

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

A company increases its allowance for doubtful receivables. What is the effect?

1. ARevenue increases and gross receivables rise by the same amount
2. BCash decreases immediately
3. CAn expense is recognised and net receivables fall
4. DOnly the notes change; no figures move

Operating profit is €120,000 and interest expense is €30,000. What is interest cover?

1. A3 times
2. B4 times
3. C90,000 times
4. D0.25 times

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

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

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

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

Production exceeds sales this period, so inventory rises. How does absorption costing profit compare with marginal costing profit?

1. AThey are always equal
2. BAbsorption costing shows a loss
3. CAbsorption costing profit is higher
4. DMarginal costing profit is higher this period