Financial accounting worksheet with answers

In double-entry bookkeeping, an increase in a liability is recorded as:

1. AA debit
2. BNo entry until it is paid
3. CA credit
4. DA debit to cash only

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

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

Money or goods taken out of a sole trader's business for personal use are called:

1. AExpenses
2. BDividends
3. CDrawings
4. DLiabilities

A shop buys 100 units at €10, then 100 units at €12, and then sells 150 units. What is cost of sales using FIFO?

1. A€1,650
2. B€1,700
3. C€1,600
4. D€1,500

A provision is recognised when a company has:

1. ACash set aside in a separate account
2. BA possible future loss with no obligation
3. CA profit to distribute
4. DA present obligation from a past event, a probable outflow and a reliable estimate

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

1. AAbsorption costing ignores variable costs
2. BMarginal costing includes all overheads in inventory; absorption costing excludes them
3. CAbsorption costing includes fixed production overheads in inventory; marginal costing treats them as period costs
4. DMarginal costing is required by IFRS for external reporting

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

A company's debt-to-equity ratio rises sharply. What does this usually indicate?

1. AHigher financial risk because the company relies more on borrowed money
2. BThat shareholders invested more money
3. CHigher profitability
4. DBetter liquidity in the short term