Deck 3: Business Structures

Question 1

If the partnership agreement does not contain profit sharing arrangements,then the Partnership Act states that profits must be shared:

A)according to the amount of time invested by each partner
B)in proportion to the capital contribution of each partner
C)equally between all partners
D)based on capital contributions and time invested

Answer 1

C

Question 2

A business that is not a legal entity,where there is one owner who is fully liable for all of its debts,is:

A)a trust.
B)a proprietary company.
C)a sole trader.
D)a public company.

Answer 2

C

Question 3

It is true that a partnership:

A)has limited liability.
B)has an unlimited life.
C)is a common structure for service type businesses.
D)must have a formal written partnership agreement

Answer 3

C

Question 4

Which of the following is not a type of business structure?

A)trust.
B)sole trader.
C)partnership
D)accounting entity

Question 5

Which of these is not true for a public company?

A)It must be listed on the stock exchange
B)It can issue shares to the public at large
C)It must prepare financial statements in accordance with the accounting standards
D)It must have an Australian Company Number

Question 6

A partnership has which of these sets of characteristics?

A)Harder to raise funds and gives the owner full control.
B)Shared control,increased skills and resources.
C)Simple to set up but substantial government regulation.
D)Easier to transfer ownership and raise funds,and no personal liability.

Question 7

Which of the following is an advantage of being a sole trader?

A)the owner has total autonomy over business decisions
B)the owner has unlimited liability
C)the business has limited life
D)the business is not a separate legal entity

Question 8

It is true that most companies:

A)have limited liability.
B)is one of the easiest types of business entities to set up.
C)is less risky to supply goods or services to than a partnership.
D)have mutual agency

Question 9

A company is a legal entity.Which of these is a feature of a legal entity?

A)Has shareholders
B)Must pay dividends
C)Can own assets
D)Must prepare reports

Question 10

A business which is a separate legal entity can be a:

A)sole trader.
B)partnership.
C)company.
D)all options are businesses which are separate legal entities

Question 11

Which of these is a disadvantage of a partnership compared to a sole trader?

A)More expensive to set up
B)Limited life
C)unlimited liability
D)Mutual agency

Question 12

Limited liability for a company applies to:

A)the managers
B)the board of directors collectively
C)the individual directors
D)the shareholders

Question 13

Compared to the sole trader,the advantage of the partnership form of business is:

A)mutual agency
B)limited life
C)easy to set up
D)greater access to skills and resources

Question 14

The sole trader form of business organisation:

A)is classified as a separate legal entity.
B)combines the records of the business with the personal records of the owner.
C)must apply for an Australian Business Number.
D)must have at least two owners.

Question 15

Which of the following does not apply to a partnership?

A)It must prepare an annual tax return
B)It must apply for an ABN
C)It must register the business name
D)It must prepare financial statements according to the AASB accounting standards

Question 16

The profit for a partnership must be split:

A)50/50
B)according to the contribution of each partner
C)according to the capital contributions of each partner
D)according to the partnership agreement

Question 17

The appropriate business structure that is popular among sporting clubs and not-for profit organisations such as charities and social groups is:

A)a public company whose capital is limited by shares
B)a public company whose share capital is limited by guarantee
C)a public company which are no-liability companies
D)a public company whose share capital is unlimited.

Question 18

A disadvantage of operating as a sole trader is:

A)being unincorporated
B)having a business that is inexpensive to start up and wind down
C)having very little government regulation
D)having total control of business decisions

Question 19

A small neighbourhood handyman service that is operated by its owner would most likely be organised as a:

A)company.
B)trust.
C)sole trader.
D)joint venture.

Question 20

A company has which of these sets of characteristics?

A)Harder to raise funds and gives the owner full control
B)Shared control,tax advantages for family members,limited life
C)Simple to set up and control will always remain with the founder
D)Easier to transfer ownership and raise funds,and limited liability

Question 21

Private companies in Australia must have

A)at least one shareholder
B)at least two shareholders
C)at least three shareholders
D)more than fifty shareholders

Question 22

ABC Restaurant Pty Ltd started the year with total assets of $90 000 and total liabilities of $40 000.During the year the business earned $100 000 in income and incurred $55 000 in expenses.Dividends paid were $10 000.
The profit for ABC for the period was:

A)$35 000.
B)$45 000.
C)$20 000.
D)$90 000.

Question 23

Which of the following is not an advantage of the company form of business?

A)It has a unlimited life.
B)It has limited liability.
C)It has the ability to raise large amounts of capital.
D)It must comply with the Corporations Act 2001 and other legislation.

Question 24

An advantage of the company form of business is that:

A)It has a limited life.
B)Its owner's personal resources are at stake.
C)Its ownership is transferable through the sale of shares.
D)It is simple to establish.

Question 25

An advantage of a trust is

A)ease of set up and administration.
B)tax minimisation.
C)a simple legal structure.
D)unlimited liability

Question 26

Which of these entities is not required,under the Corporations Act,to prepare a full set of financial statements in accordance with the accounting standards?

A)A large proprietary company
B)A public company
C)A disclosing entity
D)A partnership

Question 27

The form of business structure most likely to be used where assets are held for the benefit of other parties is:

A)a sole trader
B)a partnership
C)a company
D)a trust

Question 28

Which of these is the most numerous type of company registered in Australia?

A)A proprietary company limited by shares
B)A public company limited by shares
C)A public company limited by guarantee
D)A public No-liability company

Question 29

Retained earnings at the end of the period is equal to:

A)assets plus liabilities.
B)profit earned for the period plus retained earnings at the start of the period.
C)retained earnings at the beginning of the period plus profit earned for the period minus dividends.
D)retained earnings at the beginning of the period plus profit earned for the period minus liabilities.

Question 30

Which of the following would be a disadvantage of a private company going public?

A)increased disclosure requirements
B)costs associated with running IPOs
C)potential loss of control
D)all options are disadvantages

Question 31

Which of the following statements is true for a no liability company?

A)Shareholders have no liability for the outstanding debts of the company
B)In Australia,no liabilities companies are solely mining companies
C)Shareholders are attracted to no liability companies as there is the
Possibility of obtaining a good return on their investment
D)All the statements about no liability companies are true

Question 32

Which financial statement must be prepared before others can be completed?

A)Statement of cash flows
B)Income statement
C)Balance sheet
D)Statement of financial position

Question 33

Dividends paid:

A)increase assets.
B)increase expenses.
C)decrease income.
D)decrease retained earnings.

Question 34

A discretionary trust is

A)a trust which holds a collection of assets on behalf of various parties rather than family members.
B)a trust from which income is distributed to the parties according to their respective unit holdings in the trust.
C)a trust that usually concentrates on a particular investment such as equity,property or cash management.
D)a trust which provides the trustee with discretion,according to the trust deed,over who receives distributions from the trust.

Question 35

The difference between the financial statements of a sole trader and a partnership is

A)there is no difference
B)sole trader financial statements are more complex
C)partnership balance sheets have more than one capital account
D)partnership financial statements must be prepared according to the AASB accounting standards

Question 36

An advantage of a private company becoming a public company is:

A)Separation of ownership and control
B)Increased disclosure
C)The opportunity costs of underpricing a share offer
D)The potential to reduce the cost of equity

Question 37

Which of the following business entities is not required to prepare a tax return?

A)a partnership
B)a trust
C)a sole trader
D)a company

Question 38

Which of the following statements is not true for a company limited by guarantee?

A)The owners guarantee to contribute an agreed amount of cash or other assets to the company in the event of the company winding up
B)This form of business structure is popular among sporting clubs
C)Companies limited by guarantee are separate legal entity
D)Companies limited by guarantee are not separate legal entity

Question 39

ABC Restaurant Pty Ltd started the year with total assets of $90 000 and total liabilities of $40 000.During the year the business earned $100 000 in income and incurred $55 000 in expenses.Dividends paid were $10 000.
Equity at the end of the period was:

A)$50 000.
B)$85 000.
C)$35 000.
D)$45 000.

Question 40

Which of these is true for a public company?

A)It must have at least three directors and at least one shareholder
B)It may be a no-liability company
C)It may have unlimited share capital
D)All the statements are true

Question 41

The ________________ of a discretionary trust must pay tax on the amount of income distributed to them from the trust.

Question 42

A major (advantage/disadvantage)_________________ of a company is that its shareholders have limited liability.

Question 43

The accounting report that shows income less expenses is the _____________ statement.

Question 44

Of the two broad types of trust,a family trust is known as a _____________ trust.

Question 45

A major (advantage/disadvantage)____________________ of a sole trader is unlimited liability.

Question 46

An expense in a company's income statement that would not appear in a partnership income statement is:

A)Income tax expense
B)Interest expense
C)Depreciation expense
D)Insurance expense

Question 47

A business that is owned by shareholders and is a separate legal entity is a _______________.

Question 48

The full implementation of differential reporting will come into effect on

A)1 January 2012
B)1 July 2012
C)1 January 2013
D)1 July 2013

Question 49

A single form used by entities registered for GST to report their business tax obligations to the Australian Tax Office is the ______________ _____________ statement.

Question 50

The accounting report that lists assets,liabilities and equity is the _______________ _____________.

Question 51

If total liabilities increased by $25 000 and equity increased by $5 000 over a period,then total assets must have changed by?

A)$30 000 increase
B)$25 000 increase
C)$20 000 increase
D)$20 000 decrease

Question 52

If total liabilities decreased by $14 000 and equity increased by $6000 over a period,then total assets must have changed by?

A)$14 000 increase
B)$20 000 increase
C)$8000 decrease
D)$8000 increase

Question 53

Under the new differential reporting regime,Tier 2 entities will be able to apply a reduced disclosure version of the AASB standards,known as the Reduced Disclosure Requirements.The reduction in requirements for disclosing entities that are not publicly accountable would include which of the following?

A)disclosures relating to the usage of financial instruments
B)disclosures relating to income tax
C)disclosures relating to financial statement presentation
D)all of the options would apply to entities that are not publically accountable

Question 54

When a partnership is established,it is good business practice for a written partnership ____________ to be drawn up.

Question 55

_____________ __________ is that part of a company's equity representing profits that have been retained in the business and not paid out as dividends.

Question 56

Income is distributed to the parties in a __________ trust according to their respective unit holdings in that trust.

Question 57

In which of the following financial statements would a retained earnings account be found?

A)Partnership
B)Company
C)Sole trader
D)None of the options shown would contain a retained earnings account

Question 58

Which financial statement is concerned with the enterprise at a point in time?

A)Statement of cash flows
B)Income statement
C)Retained earnings statement
D)Balance sheet

Question 59

A major (advantage/disadvantage)____________________ of a partnership is mutual agency.

Question 60

The purpose of the reduced disclosure regime due for implementation in 2013 is to:

A)ensure that all entities reduce the volume of disclosure notes to the financial statements
B)enable Tier 1 entities to reduce the volume of disclosure notes to the financial statements
C)enable Tier 2 entities to reduce the volume of disclosure notes to the financial statements
D)ensure that all entities reduce the number of financial statements produced

Question 61

Bill owns a proprietary company called Bill's Bakehouse Pty Ltd that runs a busy pie shop.At the end of the 2013 financial year,Bill asked his son,Ben,who is a first year accounting student to help him prepare the balance sheet and income statement for Bill's Bakehouse Pty Ltd.Due to lack of knowledge and experience,Ben has incorrectly prepared the balance sheet and income statement as follows:

Required
Help Ben to prepare the correct balance sheet and income statement for Bill's Bakehouse Pty Ltd for the year ended 30^th June 2013.

Question 62

Certain entities will be allowed to reduce the level of disclosure in their GPFR under the _____________ _____________regime.

Question 63

Full implementation of differential reporting will be required from ____________.

Question 64

______________ _____________