Question 1

Calculate the cash available at the beginning of the day if cash at the end is $540, receipts from customers are $630 and payments to suppliers are $250.

Accepted Answer

A)   $340
B)   $920
C)   $160
D)   $150 C

Question 2

Paul commenced business with $100 cash. He purchased goods for $50 that were later sold for $150. The balance sheet, after the sale, would show a total business wealth of:

Accepted Answer

A)   $150
B)   $100
C)   $50
D)   $200 D

Question 3

Budgets are typically set for:

Accepted Answer

A)   five years.
B)   one year.
C)   a decade.
D)   one month. B

Question 4

The accounting reports concerned with measuring flows over a period of time are:

Accepted Answer

A)   statement of comprehensive income, cash flow statement and balance sheet.
B)   statement of comprehensive income and balance sheet.
C)   cash flow statement and balance sheet.
D)   statement of comprehensive income and cash flow statement.

Question 5

The incorrect statement is:

Accepted Answer

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

Question 6

The statement concerning differences between financial and management accounting which is false is:

Accepted Answer

A)   There is no overlap between management accounting and financial accounting.
B)   The distinction between the two areas, to some extent, reflects differences in access to financial information.
C)   Managers have much more control over the form and content of their reports.
D)   Management accounting is less constrained than financial accounting.

Question 7

Long-term plans typically have a time horizon of:

Accepted Answer

A)   one year.
B)   two years.
C)   eight years.
D)   five years.

Question 8

Which of these groups is a user of financial information?

Accepted Answer

A)   owners
B)   lenders
C)   managers
D)   all of the above

Question 9

The recently failed company group that is not a New Zealand company is:

Accepted Answer

A)   Enron.
B)   Southland Finance.
C)   Feltex.
D)   Telecom.

Question 10

The phases of an accounting system are:

Accepted Answer

A)   setting objectives, planning, analysis.
B)   evaluation, processing, output.
C)   identification, recording, analysis, reporting.
D)   none of the above.

Question 11

Which of these is not a possible penalty for deliberately producing misleading financial statements?

Accepted Answer

A)   a jail term
B)   a fine
C)   requiring the statements to be reissued
D)   None of the above, i.e. all are possible penalties.

Question 12

The goal of business in relation to profit is generally taken as:

Accepted Answer

A)   profit planning.
B)   profit maximisation.
C)   profit stabilisation.
D)   profit generation.

Question 13

Which of these are costs of providing accounting information?

Accepted Answer

A)   the cost of management time spent on reading and interpreting accounting reports
B)   wages of accounting staff
C)   cost of computer hardware
D)   all of the above

Question 14

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

Accepted Answer

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

Question 15

Management accounting reports are principally used by managers to:

Accepted Answer

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

Question 16

Management reports, compared with financial reports, are:

Accepted Answer

A)   prepared less frequently.
B)   prepared with the same frequency.
C)   prepared more frequently.
D)   prepared infrequently.

Question 17

The key qualitative characteristic that requires accounting information to be as objective as possible is:

Accepted Answer

A)   faithful representation.
B)   materiality.
C)   consistency.
D)   cost-benefit test.

Question 18

Which statement is correct?

Accepted Answer

A)   Financial reports are produced at more frequent intervals than management reports.
B)   Financial reports reflect past performance, whereas management reports are concerned with the future as well as the past.
C)   Financial reports provide more forecast data than management reports.
D)   Financial reports are prepared for internal users, whereas management reports are prepared for external users.

Question 19

The accounting report that is specifically designed to answer the question 'What cash movements took place over a particular period?' is the:

Accepted Answer

A)   balance sheet.
B)   income statement.
C)   cash flow statement.
D)   all of the above.

Question 20

An objective of a business could be:

Accepted Answer

A)   maximise profit.
B)   maximise sales.
C)   financial survival.
D)   all of the above.

Exam 1: Introduction to Accounting