Financial accounting worksheet with answers

A bad debt is:

1. AA debt owed to a supplier that is overdue
2. BA receivable that the company does not expect to collect
3. CAny loan taken out by a company that is currently making losses
4. DA loan with a high interest rate

Which of these is a non-current liability?

1. ATax due within three months
2. BA bank overdraft
3. CA bank loan repayable in five years
4. DTrade payables due to suppliers next month

Depreciation is:

1. AA fall in the market value of shares
2. BPaying off a loan in instalments
3. CThe interest paid on debts
4. DSpreading the cost of a non-current asset over its useful life

What is the key difference between absorption costing and marginal costing?

1. AMarginal costing is required by IFRS for external reporting
2. BAbsorption costing includes fixed production overheads in inventory; marginal costing treats them as period costs
3. CMarginal costing includes all overheads in inventory; absorption costing excludes them
4. DAbsorption costing ignores variable costs

A company is being sued. Its lawyers say losing is possible but not probable. How is this treated under IAS 37?

1. ARecognised as an expense and paid into a reserve
2. BDisclosed as a contingent liability in the notes
3. CRecognised as a provision on the balance sheet
4. DIgnored completely

Why can a profitable company run out of cash?

1. AProfit always equals cash
2. BProfit includes credit sales and non-cash items, while cash may be tied up in receivables and inventory
3. CProfitable companies never pay taxes
4. DCash is not recorded in accounting

Goodwill arises in a business combination when:

1. AAssets are revalued upwards
2. BThe acquired company makes a loss
3. CA company has a good reputation
4. DThe consideration paid exceeds the fair value of identifiable net assets acquired

Inventory days are 60, receivable days 45 and payable days 30. What is the cash conversion (operating) cycle?

1. A75 days
2. B135 days
3. C15 days
4. D105 days