Financial accounting worksheet with answers

The gross profit margin is calculated as:

1. AGross profit ÷ revenue × 100
2. BGross profit ÷ total assets × 100
3. CNet profit ÷ revenue × 100
4. DRevenue ÷ cost of sales × 100

In double-entry bookkeeping, every transaction:

1. AIs recorded only once
2. BIncreases both assets and expenses equally
3. CIs recorded with equal debits and credits
4. DMust involve cash

Which of these is an intangible asset?

1. AInventory of finished goods
2. BA delivery van
3. CA patent
4. DCash in the bank

A company pays its insurance for next year in advance. How is the payment recorded at the year end?

1. AAs a liability
2. BAs revenue
3. CAs an expense of the current year in full
4. DAs a prepaid expense (asset)

A machine with a carrying amount of €3,000 is sold for €4,000. What is recorded in the income statement?

1. ARevenue of €4,000
2. BA gain on disposal of €1,000
3. CA gain on disposal of €4,000
4. DA loss on disposal of €1,000

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

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

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