Financial accounting worksheet with answers

Which body issues International Financial Reporting Standards (IFRS)?

1. AThe European Central Bank (ECB)
2. BThe World Trade Organization (WTO)
3. CThe International Monetary Fund (IMF)
4. DThe International Accounting Standards Board (IASB)

Revenue minus all expenses equals:

1. ACash flow
2. BNet profit (or loss)
3. CGross profit, before operating expenses
4. DEquity

In double-entry bookkeeping, every transaction:

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

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

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

1. A4.5
2. B0.5
3. C1.5
4. D2.0

A firm buys 200 units at €5 and 300 units at €6, then sells 400 units. Using weighted average cost, what is closing inventory?

1. A€600
2. B€560
3. C€550
4. D€500

Over three years a company reports rising profits while operating cash flow keeps falling. What should an analyst suspect?

1. ADepreciation must have been too high
2. BThe company has very high earnings quality
3. CProfits may be driven by aggressive accruals, such as rising receivables or capitalised costs
4. DThe company must have repaid all its loans

Two firms have the same operating profit, but one is financed mostly by debt. When operating profit falls by 20%, the highly geared firm's net profit:

1. ARises because interest is fixed
2. BFalls by a larger percentage
3. CFalls by a smaller percentage
4. DFalls by exactly 20% as well