Financial accounting worksheet with answers

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

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

A variable cost is a cost that:

1. AChanges in total in proportion to the level of activity
2. BStays the same in total within the relevant range of output
3. CIs never included in product costs
4. DIs paid only once when a business starts

Which statement shows cash coming in and going out in operating, investing and financing activities?

1. AThe notes to the accounts only
2. BThe balance sheet
3. CThe cash flow statement
4. DThe income statement

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

1. A0.25 times
2. B90,000 times
3. C4 times
4. D3 times

Why can a profitable company run out of cash?

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

Which inventory valuation method assumes the oldest goods are sold first?

1. AWeighted average cost
2. BLIFO (last in, first out)
3. CSpecific identification of each item
4. DFIFO (first in, first out)

Under IFRS 16, which lease may a lessee choose to expense on a straight-line basis instead of recognising a right-of-use asset?

1. AA ten-year lease of a large production machine
2. BAny lease with monthly payments
3. CAny lease of land and buildings
4. DA lease with a term of 12 months or less

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