Financial accounting worksheet with answers

A budget is:

1. AA report written by the external auditor
2. BA record of last year's transactions
3. CA list of the company's shareholders
4. DA financial plan for a future period

At the break-even point:

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

Under the cash basis of accounting, income and expenses are recorded when:

1. ACash is received or paid
2. BThe invoice is approved by the board
3. CThe goods are ordered
4. DThe financial year ends

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

1. A0.5
2. B1.5
3. C4.5
4. D2.0

A project has a positive net present value (NPV) at the company's cost of capital. This means:

1. AIt earns more than the required return and should add value
2. BIts reported accounting profit will be positive in every year
3. CIt has no risk at all
4. DIt recovers its cost within one year

Current assets are €300,000, including inventory of €100,000. Current liabilities are €200,000. What is the quick (acid-test) ratio?

1. A2.0
2. B1.0
3. C1.5
4. D0.5

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 falls, because interest is an expense
4. DROE rises and financial risk falls

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

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