Question 1

Which of these groups is a user of financial information?

Accepted Answer

A)  Managers.
B)  Lenders.
C)  Owners.
D)  All of the above.

Question 2

An advantage of a partnership compared to a sole proprietorship is:

Accepted Answer

A)  mutual agency.
B)  sharing of profits.
C)  greater access to funds.
D)  Both B and C.

Question 3

Which of the following is the most important function of an accounting system?

Accepted Answer

A)  provide information for decision-making, planning and control.
B)  keep employees from embezzling funds.
C)  prepare accounting reports
D)  collect and record data.

Question 4

The characteristic of accounting information that requires financial reports to be expressed as clearly as possible and to be capable of being understood by those they are addressed to, is known as:

Accepted Answer

A)  understandability.
B)  reliability.
C)  cost versus benefit test.
D)  relevance.

Question 5

Which statement concerned with establishing the costs and benefits of accounting information is true?

Accepted Answer

A)  It is usually easier to establish the benefits than the costs.
B)  It is normally easy to establish both the costs and the benefits.
C)  Both the costs and benefits are normally difficult to assess.
D)  The costs and benefits should be ignored when deciding on what accounting information should be produced.

Question 6

Which accounting report is prepared at a particular point of time rather than over a period of time?

Accepted Answer

A)  Statement of comprehensive income.
B)  Statement of change in owners' equity.
C)  Statement of financial position.
D)  Both B and C.

Question 7

Which statement is incorrect?

Accepted Answer

A)  A budget defines precise targets, e.g., level of sales, levels of inventory.
B)  A budget is expressed in monetary terms.
C)  A budget is a short-term plan.
D)  A budget summarises past information.

Question 8

Which of these is a reason why achieving the maximum possible profit in a particular year may not be in the best interests of a business?

Accepted Answer

A)  Concentrating on the short-term may have detrimental effects in the long-term.
B)  It may be achieved by causing environmental problems, which give the business a bad reputation.
C)  If it is achieved with high-risk strategies, such as excessive reliance on borrowings, it could lead to disaster in the longer term.
D)  All of the above.

Question 9

Standardised formats are most relevant to:

Accepted Answer

A)  departmental reports.
B)  management reports.
C)  external financial reports.
D)  internal reports.

Question 10

In comparison to a company, a disadvantage of operating as a partnership is:

Accepted Answer

A)  unlimited liability.
B)  limited life.
C)  mutual agency.
D)  all of the above.

Question 11

The quality of accounting information that requires items that are basically the same to be treated in the same manner is:

Accepted Answer

A)  relevance.
B)  timeliness.
C)  understandability.
D)  comparability.

Question 12

Financial accounting reports, compared to management reports, tend to be:

Accepted Answer

A)  general purpose.
B)  qualitative.
C)  unstructured.
D)  detailed.

Question 13

When accounting information has the potential to change decision-making it is said to be:

Accepted Answer

A)  consistent.
B)  understandable.
C)  material.
D)  comparable.

Question 14

Which test determines if an item of accounting information is worthwhile collecting?

Accepted Answer

A)  cost test.
B)  cost/benefit test.
C)  worthwhile test.
D)  validation test.

Question 15

Management accounting reports are principally used by managers to:

Accepted Answer

A)  report to shareholders.
B)  reconcile with the financial accounting reports.
C)  calculate the amount of taxation owed to the government.
D)  control the operations of an entity on a regular basis.

Question 16

The best explanation of relevance is:

Accepted Answer

A)  ensuring the benefit of the information is greater than the cost of providing it.
B)  ensuring that information is expressed as clearly as possible.
C)  ensuring that information is useful for decision-making.
D)  ensuring that information is free from bias.

Question 17

The three most common types of structures used by businesses in Australia are:

Accepted Answer

A)  partnership, limited company, association.
B)  sole proprietor, partnership, limited company.
C)  partnership, private company, trust.
D)  sole proprietor, limited company, co-operative.

Question 18

Set out the main purpose of each of the three main financial reports - the statement of comprehensive income, the statement of financial position and the statement of cash flows - and briefly explain how each achieves its purpose.

Accepted Answer

The purpose of the statement of comprehe...

Question 19

Which of the following is not an aspect of accounting and finance potential managers need to understand?

Accepted Answer

A)  Reading and interpreting financial reports.
B)  The design of the accounting information system.
C)  How investment decisions are made.
D)  How businesses are financed.

Question 20

The main source of information for shareholders is:

Accepted Answer

A)  departmental reports.
B)  management reports.
C)  external reports.
D)  internal reports.

Exam 1: Introduction to Accounting

Standardised formats are most relevant to:

Correct AnswerverifiedShow Answer

The three most common types of structures used by businesses in Australia are:

Correct AnswerverifiedShow Answer

The best explanation of relevance is:

Correct AnswerverifiedShow Answer

An advantage of a partnership compared to a sole proprietorship is:

Correct AnswerverifiedShow Answer

Set out the main purpose of each of the three main financial reports - the statement of comprehensive income, the statement of financial position and the statement of cash flows - and briefly explain how each achieves its purpose.

Correct AnswerverifiedThe purpose of the statement of comprehe...View AnswerShow Answer

The quality of accounting information that requires items that are basically the same to be treated in the same manner is:

Correct AnswerverifiedShow Answer

Management accounting reports are principally used by managers to:

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Which statement is incorrect?

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Which of the following is not an aspect of accounting and finance potential managers need to understand?

Correct AnswerverifiedShow Answer

The main source of information for shareholders is:

Correct AnswerverifiedShow Answer

The characteristic of accounting information that requires financial reports to be expressed as clearly as possible and to be capable of being understood by those they are addressed to, is known as:

Correct AnswerverifiedShow Answer

Which test determines if an item of accounting information is worthwhile collecting?

Correct AnswerverifiedShow Answer

Which statement concerned with establishing the costs and benefits of accounting information is true?

Correct AnswerverifiedShow Answer

Which of these groups is a user of financial information?

Correct AnswerverifiedShow Answer

In comparison to a company, a disadvantage of operating as a partnership is:

Correct AnswerverifiedShow Answer

Which of these is a reason why achieving the maximum possible profit in a particular year may not be in the best interests of a business?

Correct AnswerverifiedShow Answer

Financial accounting reports, compared to management reports, tend to be:

Correct AnswerverifiedShow Answer

When accounting information has the potential to change decision-making it is said to be:

Correct AnswerverifiedShow Answer

Which of the following is the most important function of an accounting system?

Correct AnswerverifiedShow Answer

Which accounting report is prepared at a particular point of time rather than over a period of time?

Correct AnswerverifiedShow Answer

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The purpose of the statement of comprehe...
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