Test bank for accounting information for business decisions 1st edition

Test Bank for Accounting Information for Business Decisions
1st Edition

Which of the following is false?

1. a. Accounting keeps track of a business’ economic resources and activities,
then reports the results and financial position to users who have an interest.
2. b. Accounting is a mere numbers game. The information is only useful to a
limited few. The reality is that few managers need accounting information to
make quality operating decisions.
3. c. Accounting focuses on the resources and activities of individual businesses.
4. d. Products and services affect almost every minute of our lives.


Which of the following is an example of a manufacturer?

1. a. Dell Calculator
2. b. Bob’s lawnmower services
3. c. Air NZ
4. d. Qantas
What is the primary difference between a manufacturer and a
merchandiser?

1. a. Merchandisers purchase finished goods ready to sell, whereas a
manufacturer must create the goods.
2. b. Manufacturers purchase finished goods ready to sell, whereas a
merchandiser must create the goods.
3. c. Merchandisers do not sell directly to the public, but rather only to
manufacturers.
4. d. Manufacturers buy the finished goods from a merchandiser then resell it,
basically acting as a middle man.

Which type of business organisation generates the greatest volume of
business?

1. a. Proprietorships.
2. b. Partnerships.
3. c. Company/corporation.
4. d. Each generates roughly the same amount of business.


Managerial accounting information:

1. a. is a one size fits all approach to reporting business results.
2. b. can be tailored to the needs of the internal user.
3. c. follows GAAP in the reporting process.
4. d. helps shareholders make decisions.
Financial accounting information:

1. a. is a one size fits all approach to reporting business results.
2. b. can be tailored to the needs of the internal user.
3. c. follows statements on management accounting in the reporting process.
4. d. helps only external users make decisions.
Which of the following would a manager do as a part of planning
activities?

1. a. Compare estimates to benchmarks.
2. b. Purchase inventory.
3. c. Hire employees.
4. d. Prepare cost estimates.
Operating activities consist of:

1. a. how products get made and sold.
2. b. measuring actual operations and progress against a standard or
benchmark.


3. c. establishing business goals.
4. d. establishing means of achieving business goals.
Evaluating activities consist of:

1. a. establishing business goals.
2. b. establishing a means of achieving business goals.
3. c. providing feedback to managers to correct deviations from standards.
4. d. setting benchmarks or standards.
Statements on management accounting:

1. a. are binding and contractual in nature.
2. b. are general guidelines management accountants may turn to when faced
with new situations to resolve.
3. c. are developed primarily to guide the structure of reporting to external
users.
4. d. are issued by CPA Australia.
A budget:

1. a. quantifies management’s plans.
2. b. determines and evaluates the cost of specific products or activities in a
business.
3. c. compiles actual costs for a given period.
4. d. is used to determine if a product should be continued or discontinued.

Which of the following summarises the results of a business’ operating
activities for a specific time period?

1. a. Income statement
2. b. Cash flow statement
3. c. Balance sheet
4. d. Payables ledger
Which of the following summarises a business’ financial position on a given
date?

1. a. Income statement
2. b. Cash flow statement
3. c. Balance sheet
4. d. Budget
The business’ economic resources are:

1. a. Revenues.
2. b. Liabilities.
3. c. Owners' equity.
4. d. Assets.
The business’ obligations to its creditors are:

1. a. Liabilities.
2. b. Expenses.


3. c. Payments.
4. d. Owners' equity.
Which of the following do not cover a period of time?

1. a. Income statement.
2. b. Cash flow statement.
3. c. Balance sheet.
4. d. Accounts receivable ledger .
A lack of solvency is demonstrated when:

1. a. assets are greater than liabilities.
2. b. liabilities are greater than assets.
3. c. revenues are greater than expenses.
4. d. expenses are greater than revenues.
Financial position of a business can best be evaluated with which of the
following?

1. a. Net income.
2. b. Assets, liabilities and owner’s equity.
3. c. Cash received and paid.
4. d. Owner investments.
Which of the following summarises a business’ receipts and payments?

1. a. Budget.


2. b. Income statement.
3. c. Balance sheet.
4. d. Cash flow statement.
Answer Given

Private enterprise is a system in which individuals own businesses that
produce and sell services and/or goods for a profit. These businesses include
service businesses, merchandising businesses, and manufacturing

businesses.
Answer Given

Service businesses and merchandising/manufacturing businesses are trying
to earn a profit from selling to a customer. The difference is in what is sold.
Service businesses provide a service to their customers, while merchandising
and manufacturing businesses provide goods to their customers.
Answer Given

Accounting information helps decision-makers. It aids managers by providing
quantitative information about the business to help them in planning,
operating, and evaluating the business’ activities. Accounting information
helps external decision-makers by providing them with financial statements
containing economic information about the performance and state of the
businesses.
Answer Given

Entrepreneurship is a combination of three factors: the entrepreneur's ideas,
the willingness of the entrepreneur to take risks, and the abilities of all of the
business’ personnel to use capital to produce and sell goods or services.
Answer Given

The two primary sources of capital are the owner's investment and
borrowing. The owner hopes to get a return on his/her investment greater
than the amount that would be obtained from a different investment.
Borrowings require repayments, along with interest payments. If the
borrowed money cannot be repaid, then the business may become insolvent
and cease operations.
Answer Given

Company/corporations are legally established as entities separate from their
owners. The company/corporation issues capital stock to its owners as
evidence of their ownership. The stock is readily transferable to other
owners. Sole proprietorships and partnerships are not legally organised
separately from their owners.
Answer Given

The regulatory environments might be very different between Australia and
the international location. The tax structures might differ considerably. This
might lead to substantial tax saving. Minimum wage laws and working
condition standards are present in Australia and might be non-existent
abroad. This could lead to substantial labour savings abroad. If the plant
were located abroad, restrictions on the flow of cash might make it difficult to
bring your profits home. Some countries restrict foreign ownership of assets.
The supply lines might be much longer, and burdened by import/export
regulations. This might cause difficulties in delivering the product on a timely
basis.
Answer Given

This is the start of management. The plan lays out the organization of and
provides direction to the operating and evaluating activities. Planning
establishes the business’ goals and the means of achieving those goals.
Planning identifies the resources and employees necessary to achieve the
business’ goals. It also sets standards against which to measure
achievement. This allows management to adjust future strategy.
Answer Given

Managers set goals, make decisions, and commit the business’ resources in
an attempt to achieve those goals. Planning provides organisation and

direction for the business. Operating involves gathering the necessary
resources and employees and implementing the plans. Evaluating measures
the actual progress against standards or benchmarks so problems can be
corrected.
Answer Given

Evaluation measures the actual operations and progress against standards
and then acts to correct deviations from the standards. It is a continuous
process that attempts to prevent problems from occurring and to minimise
their effect if they do occur.
Answer Given


This set of activities allows the business to conduct its business according to
plan. They include gathering the necessary resources and employees to
achieve the business’ goals. Day-to-day decisions are made about how to
best achieve the goals.
Answer Given

The budget is the result of quantifying management plans and showing the
impact of these plans on the business’ operations. Once the planned
activities have occurred, managers can evaluate the results against the
budget to make sure that the actual operations have achieved the desired
results.
Answer Given

Cost analysis is the process of determining and evaluating the costs of
specific products or activities within a business. Cost analysis is used when
making decisions about these products or activities. Such a decision might
include whether to continue a particular product line.

Answer Given

Manufacturing cost reports are used to monitor and evaluate a business’
operations. The manufacturing cost report can highlight variances of actual
costs from budgeted costs. This might allow the manager to take corrective
action.
Answer Given

Accounting principles are the set of currently accepted principles,
procedures, and practices that are used for financial reporting in Australia
and New Zealand. The principles must be followed in the external reports of
all businesses that sell stock to the public in Australia and New Zealand, as
well as many other businesses.
Answer Given

A business’ income statement summarises the results of its operating
activities for a specific time period and shows the business’ profit for that
period. This is what the business charged its customers for services or goods
provided to them. It also summarises the business’ expenses. This is the cost
to the business of providing those goods and services. Net income is the
difference between revenues and expenses.
Answer Given


The assets section lists the business’ economic resources, such as cash,
inventories, and equipment. The liabilities section lists the business’
obligations to its creditors, such as banks, suppliers, and employees. The
owners' equity section shows the owner's current investment in the assets of
the business (the contributions of the owner plus the cumulative retained
earnings of the business).

Answer Given

The International Federation of Accountants (IFAC) and AICA (Australian
Institute of Chartered Accountants) and, NZICA (New Zealand Institute of
Chartered Accountants) code of ethics considers issues such as selfdiscipline, honourable behaviour, moral judgments, the public interest,
professionalism, integrity, and technical and ethical standards. The different
code of ethics addresses competence, confidentiality, integrity, objectivity,
and resolution of ethical conduct. The code of ethics also addresses
objectivity, resolution of conflicts, professional competence, confidentiality,
tax practice, cross-border activities and publicity. It also addresses
independence, fees, and activities incompatible with the practice of
accounting, advertising and soliciting.
Answer Given

Many situations and decisions are conducted in an environment in which
there is not a clear right or wrong. Many situations fall between the two
extremes. A code of ethics is designed to provide guidance to various people
in maintaining high ethical standards when faced with difficult decisions.

Accounting is an information tool which can help make good business
decisions.

1. True
2. False

Company shares


Unless you are a business owner, you will not be making business
decisions.

1. True
2. False

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Many businesses have no need for accounting information and can actually
exist without an accounting system.

1. True
2. False

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Accounting keeps track of a business’ economic resources and activities, then
reports the results and financial position to users who have an interest.

1. True
2. False

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The term ‘Private Enterprise’ means that businesses keep their accounting
information private.

1. True
2. False

Company shares


A dental surgery is an example of a service business.

1. True
2. False

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Woolworths is an example of a retailing business.

1. True
2. False

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Sources of capital for a business include owner investments, borrowing or
seeking investments from outsiders.

1. True
2. False

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Sole proprietorships are the most common form of business and as such,
conduct more volume of business than partnerships and corporations put
together.

1. True
2. False

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A business’ accounting system would provide information for both external
and internal users.

1. True
2. False

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An internal user would receive “tailor-made” information from the accounting
system.

1. True
2. False

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An external user would receive “tailor-made” information from the
accounting system.

1. True
2. False

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External users possess skills to extract the information they need for
decisions from the accounting information of a business.

1. True
2. False

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Feedback from operations can be effectively used in the planning, operating
or evaluating stages of a business.

1. True
2. False

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Operating refers to the set of activities that the business engages in to
conduct its business according to its plan.

1. True
2. False

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Evaluating is the process of establishing the business’ goals and
objectives.

1. True
2. False

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