Financial accounting worksheet with answers

Which is a liability?

1. AInventory
2. BCash in hand
3. CA loan from a bank
4. DShare capital paid in by owners

An accrued expense (accrual) is:

1. AAn expense paid in advance that relates to next year
2. BA cost that will never be paid
3. CAn expense incurred in the period but not yet paid
4. DIncome received before it is earned

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

Profit for ordinary shareholders is €500,000 and there are 1,000,000 ordinary shares. What are basic earnings per share?

1. A€0.50
2. B€2.00
3. C€5.00
4. D€0.05

A product sells for €40 and has a variable cost of €30. What is its contribution-to-sales (C/S) ratio?

1. A10%
2. B33%
3. C75%
4. D25%

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

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

Budgeted overhead is €200,000 for 40,000 machine hours. Actual hours are 42,000 and actual overhead is €205,000. What is the result?

1. AOverhead exactly absorbed
2. BOverhead over-absorbed by €5,000
3. COverhead under-absorbed by €10,000
4. DOverhead under-absorbed by €5,000

A company borrows at 5% interest to invest in assets that earn 12%. What is the likely effect on return on equity?

1. AROE rises, but financial risk also increases
2. BROE stays the same, because debt is not equity
3. CROE rises and financial risk falls
4. DROE falls, because interest is an expense