Deck 1: Introduction to Accounting and Business Decision Making

Question 1

Which of the following is not a benefit of a business plan?

A) Provides a formal statement of direction and purpose for the business entity.
B) Provides management and employees with a set of clearly defined goals.
C) Allows management to set their own goals.
D) Assists in the evaluation process of the business entity.

Answer 1

C

Question 2

The information that would be of most interest to an organisation's production manager is:

A) the ability to pay off debts as they fall due.
B) annual dividends.
C) continuity of orders for the factory.
D) the company tax rate.

Answer 2

C

Question 3

Companies operating in Australia and overseas must follow which accounting standards?

A) Both IFRS and local GAAP.
B) Local generally accepted accounting principles only.
C) IFRS only.
D) FASB.

Answer 3

A

Question 4

Which of the following reports would not be prepared for financial accounting purposes?

A) Statement of Financial Position.
B) Statement of Cash Flows.
C) Statement of Management Performance.
D) Statement of Profit or Loss.

Question 5

The internal user of accounting information is the:

A) customer.
B) local council.
C) auditor from the Australian Tax Office.
D) office manager.

Question 6

Which statement is correct?
The use of one set of accounting standards by companies throughout the world:

A) makes it more difficult for comparability and transparency of financial information.
B) leads to inefficiency in lending markets.
C) reduces the cost of preparing financial reports.
D) reduces the quality of information provided to capital market participants.

Question 7

The content of management accounting reports is governed by:

A) the Australian Securities and Investment Commission.
B) the Corporations Act 2001.
C) CPA Australia and the Institute of Chartered Accountants of Australia.
D) there are no specific rules governing the content of management accounting reports.

Question 8

Which of the following is not a business transaction?

A) Incurring interest on a business loan.
B) A business owner purchasing a new home.
C) Purchasing inventory.
D) Receiving cash payment for services provided.

Question 9

A supplier,when considering offering credit to a new customer,is most interested in the customer's:

A) ability to pay off debts as they fall due.
B) annual dividends.
C) taxable income.
D) compliance with accounting standards.

Question 10

The Corporations Act 2001 is primarily enforced by the:

A) Financial Reporting Council.
B) Australian Securities Exchange.
C) Australian Accounting Standards Board.
D) Australian Securities and Investments Commission.

Question 11

Which of these would not be considered an internal user of accounting information?

A) The human resources manager.
B) The chairman of CPA Australia.
C) The chief financial officer.
D) The purchasing officer.

Question 12

Which of the following is not an accounting report?

A) Statement of employee job satisfaction .
B) Balance sheet.
C) Income statement.
D) Statement of cash flows.

Question 13

An external user of accounting information is the:

A) payroll officer.
B) supplier.
C) production manager.
D) inventory clerk.

Question 14

The evaluation process of a business plan allows:

A) more effective use of scarce resources.
B) improvement in internal communications.
C) detection of variances between actual and budgeted results.
D) all of the above.

Question 15

A bank requesting accounting information is looking for:

A) the amount of tax that should be paid.
B) cash flows from dividends paid.
C) the ability of the entity to repay a loan.
D) environmental aspects of the business.

Question 16

The steps in the process of accounting take place in the following order:

A) measuring, identifying, decision making, communicating.
B) identifying, measuring, communicating, decision making.
C) identifying, communicating, measuring, decision making.
D) identifying, decision making, measuring, communicating.

Question 17

The number of countries preparing financial reports using global accounting standards is:

A) less than 50.
B) between 50 and 75.
C) between 100 and 120.
D) more than 120.

Question 18

Which of the following are differences between management and financial accounting?
I)Types of reports produced.
II)The users of reports.
III)The format of reports.
IV)Frequency of reports.

A) I and III only.
B) II, III and IV only.
C) I and II only.
D) all of the above.

Question 19

Management accounting reports are prepared:

A) to provide up-to-date information to managers for decision making.
B) to provide information for the shareholders of the business entity.
C) based only on historical figures.
D) based on GAAP and IASB accounting standards.

Question 20

An SME (small to medium sized enterprise)is a business entity with:

A) annual revenue between $2 million and $250 million.
B) annual revenue less than $2 million.
C) annual revenue between $2 million and $500 million.
D) annual revenue greater than $250 million.

Question 21

'Decreases in economic benefits in the form of outflows or depletions of assets or incurrences of liabilities that result in a decrease in equity,other than those relating to distributions to equity participants' is the definition of:

A) liabilities.
B) assets.
C) expenses.
D) equity.

Question 22

Which of the following is not a role of the Australian Securities and Investments Commission?

A) To ensure financial institutions honour their commitments.
B) To uphold the law uniformly, effectively and quickly.
C) To promote confident and informed participation in the financial system by investors and consumers.
D) To make information about companies and other bodies available to the public.

Question 23

Under the Conceptual Framework the four enhancing qualitative characteristics for general purpose financial statements are:

A) reliability, timeliness, conservatism and understandability.
B) timeliness, comparability, uniqueness and reliability.
C) timeliness, understandability, verifiability and comparability.
D) comparability, verifiability, timeliness and competition.

Question 24

Special purpose financial reports provide information for which group(s)?
$\begin{array}{|l|l|l|}\hline & \text{Internal users} & \text{External users} \\\hline \text{I }& \text{Yes} &\text{ Yes} \\\hline \text{II }& \text{No }&\text{ No }\\\hline\text{ III }&\text{ No }& \text{Yes }\\\hline\text{ IV }&\text{ Yes }& \text{No }\\\hline\end{array}$

A) I
B) II
C) III
D) IV

Question 25

Preparing financial statements for external users costs large entities:

A) nothing, as all charges are reimbursed by the government.
B) very little, as the statements are quite simple to prepare.
C) a significant amount.
D) varying amounts depending on the year in question.

Question 26

Which of the following is an example of a liability?

A) Allowance for doubtful debts.
B) Revenue received in advance.
C) Prepayments.
D) Accumulated depreciation.

Question 27

The first step in issuing an accounting standard is the:

A) identification by interested parties of a relevant issue.
B) issue of an exposure draft inviting comment from interested parties.
C) consultation with stakeholders.
D) comprehensive research of the relevant issue.

Question 28

The regulatory body that oversees the operations of financial institutions such as banks and building societies in Australia is:

A) ASIC.
B) ASX.
C) ATO.
D) APRA.

Question 29

Which of the following is not a cost associated with providing financial information?

A) Collecting.
B) Processing.
C) Reviewing.
D) Disseminating.

Question 30

A disclosing entity is an entity that:

A) discloses the basis on which their financial reports are prepared.
B) is exempt under the Corporations Act 2001 from applying the AASB accounting standards.
C) is involved in the accounting standard-setting process.
D) issues securities that are quoted on a stock market or made available to the public via a prospectus.

Question 31

AASB accounting standards are legally enforceable in Australia under the:

A) Trade Practices Act 1974.
B) Income Tax Assessment Act 2007.
C) Corporations Act 2001.
D) Australian Securities and Investments Commission.

Question 32

Which of these is an asset?

A) Investments.
B) Employee benefits payable.
C) General reserve.
D) Interest earned on investments.

Question 33

Which of these entities is least likely to have users dependent on general purpose financial statements?

A) An international company operating in the Asia-Pacific region.
B) A company with a large number of shareholders.
C) A company listed on the stock exchange.
D) A small company whose shareholders also run the business.

Question 34

Legally enforceable accounting standards that apply to Australian companies are issued by the:

A) Financial Reporting Council.
B) Australian Accounting Standards Board.
C) Australian Professional Accounting bodies.
D) Australian Securities and Investments Commission.

Question 35

The ICAA and CPA Australia:

A) are responsible for developing company regulations.
B) play no role in setting company regulation and have nothing to do with enforcing company regulation.
C) have nothing to do with setting company regulations but have a role in enforcing the regulations.
D) are involved in the enforcement of company regulations through the regulation of their members.

Question 36

The Financial Reporting Council is responsible for:

A) overseeing the accounting and auditing standard-setting process for both the public and private sectors in Australia.
B) developing Australian accounting standards for both the public and private sectors in Australia.
C) issuing Australian accounting standards for both the public and private sectors in Australia.
D) reporting breeches of Australian accounting standards for both the public and private sectors in Australia.

Question 37

The ACCC is responsible for:

A) enforcement of the Corporations Act 2001.
B) the stability of the Australian financial system.
C) administration of the Competition and Consumer Act 2010.
D) the ASX Market and Listing Rules.

Question 38

Which statement about the AASB Conceptual Framework is not true?

A) It establishes the objectives of the financial statements.
B) It sets out the fundamental and enhancing qualitative characteristics of financial reports.
C) It applies to all entities producing special purpose financial statements.
D) It defines the elements of the financial statements.

Question 39

'A present obligation of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits' is the definition of:

A) an expense.
B) a liability.
C) equity.
D) an asset.

Question 40

'Resources controlled by the entity as a result of past transactions or events and from which future economic benefits are expected to flow to the entity' is the definition of:

A) expenses.
B) assets.
C) liabilities.
D) equity.

Question 41

The type and nature of work performed by accountants that will be most valued in the future will be:

A) functions that cannot be automated or outsourced.
B) transaction processing.
C) financial report preparation.
D) auditing.

Question 42

Accounting is the process of identifying,communicating,and _______________ economic information for the purposes of decision-making.

Question 43

The time delay in Australia in providing the annual report of large companies to external users after the end of the financial year is:

A) often only two weeks.
B) always one month.
C) often up to three months.
D) nil.

Question 44

Which of the following has not been a traditional area of employment for accountants?

A) Forensic accounting.
B) Audit and assurance.
C) Financial accounting.
D) Tax accounting.

Question 45

Which of the following is not likely to be a growth area for the accountants of the future?

A) Sustainability accounting.
B) Forensic accounting.
C) Transaction processing.
D) E-Commerce.

Question 46

The _________________ Act 2001 is the most important Act under the authority of the Australian Securities and Investments Commission.

Question 47

Subjectivity does not apply to the valuation of:

A) cash.
B) inventory.
C) property, plant and equipment.
D) net accounts receivable.

Question 48

When making informed investment decisions,investors are:

A) only interested in the company's financial situation.
B) mainly interested in the company's share price.
C) only interested in how long the company has been operating profitably.
D) interested in the company's financial situation and other relevant business factors.

Question 49

Under the Conceptual Framework,the qualitative characteristic of relevance is described as information that:

A) is of value to users in decision making.
B) is material.
C) can be recorded in accounting reports.
D) can be reliably measured.

Question 50

Which of the following is not a limitation of accounting information?

A) The use of historical data to predict future events.
B) The time delay from when events take place and their reporting.
C) Its subjective nature.
D) Its objective nature.

Question 51

Accounting information provides _______________________ with the tools necessary to evaluate the business plan.

Question 52

Firms of accountants who work for many different clients are known as:

A) financial accountants.
B) private accountants.
C) company accountants.
D) public accountants.

Question 53

The global accounting standards that are being followed by more than 120 countries worldwide to prepare their financial statements are known as ___________________.

Question 54

Accounting reports that do not cater to the general needs common to most users are known as ____________________ purpose financial reports.

Question 55

A company's financial statements include the Statement of _____________________ Income,the Statement of Financial Position and the Statement of Cash Flows.

Question 56

The major constraint on the preparation of financial information is ______________ .

Question 57

Entities that issue securities that are quoted on a stock market or made available to the public via a prospectus are known as _____________ entities.

Question 58

The work of recording financial transactions is normally carried out by a _______________ not an accountant.

Question 59

The Financial Reporting Council is responsible for overseeing the accounting and auditing _________________ process for all accounting sectors in Australia.

Question 60

The accounting process within an organisation which includes costing,budgeting and planning is known as ____________________ accounting.

Question 61

____________ is the accounting element defined as 'increases in economic benefits during the accounting period in the form of inflows or enhancements of assets,or decreases of liabilities that result in increases in equity,other than those relating to contributions from equity participants'.

Question 62

The information provided in financial statements is the result of past transactions and does not provide information.

Question 63

Corporate ______________ principles include appropriate auditing,board independence,corporate responsibility,financial transparency and information disclosure.

Question 64

The financial reports that meet the information needs of a range of users unable to demand accounting information are called ____________ purpose financial statements.