77 test bank for accounting information for business decisions 2nd edition

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77 Test Bank for Accounting Information for Business Decisions 2nd Edition

Multiple Choice Questions

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.

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

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.

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.

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.

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

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.

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.

The business’ obligations to its creditors are:

1 a Liabilities.

2 b Expenses.

3 c Payments.

4 d Owners’ equity.

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 is the first stage in solving a business

problem?

1 a Knowing the possible outcomes.

2 b The recognition and definition of the problem.

3 c Understanding the available resources to solve the problem.

4 d Assessing the total cost and benefits of solving the problem.

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.

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.

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.

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.

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

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.

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.

The business’ economic resources are:

1 a Revenues.

2 b Liabilities.

3 c Owners’ equity.

4 d Assets.

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.

True - False Questions

The modern day accountant generally works alone and

therefore does not require teamwork skills

1 True

2 False

Accounting is an information tool which can help make good

business decisions

1 True

2 False

An internal user would receive “tailor-made” information from

the accounting system.

1 True

2 False

An external user would receive ‘tailor-made’ information from

the accounting system.

1 True

2 False

Feedback from operations can be effectively used in the

planning, operating or evaluating stages of a business

1 True

2 False

Many businesses have no need for accounting information and

can actually exist without an accounting system

1 True

2 False

The term ‘private enterprise’ means that businesses keep their

accounting information private

1 True

2 False

Woolworths is an example of a retailing business

1 True

2 False

A balance sheet lists the business’ assets, liabilities and

owners’ equity at a given date

1 True

2 False

Sources of capital for a business include owner investments,

and borrowing or seeking investments from outsiders

1 True

2 False

External users possess skills to extract the information they

need for decisions from the accounting information of a business

1 True

2 False

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

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

business decisions

1 True

2 False

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

Evaluating is the process of establishing the business’ goals

and objectives

1 True

2 False

Operating refers to the set of activities that the business

engages in to conduct its business according to its plan

1 True

2 False

A business’ accounting system would provide information for

both external and internal users

1 True

2 False

Cost analysis tells a business owner the selling price of a

product or service

1 True

2 False

A dental surgery is an example of a service business

1 True

2 False

Having a code of ethics will always provide you with the correct

solution to an ethical dilemma

1 True

2 False

Text Questions - Page 1

is the difference between the cash and

credit sales of a business (revenues) and its total costs (expenses).

Answer Given

Profit

An shows a business’ revenues,

expenses and net income (or net loss) for a time period, usually one year.

Answer Given

income statement

businesses purchase goods for resale

to their customers.

Answer Given

Merchandising

Information explosion, evolving forms of businesses, more

complex business activities, increased regulations,

globalisat ion and technological advances are all factors affecting the of the business

environment.

Answer Given

complexity

A is a business organisation that has a

separate identity from its owners.

Answer Given

Company Corporation

The International Federation of Accountants (IFAC) is an

independent, worldwide organisation It has developed a

for accountants in each country

to use as a basis for producing their own vers ions.

Answer Given

code of ethics

are businesses owned by one person

who is the sole investor of capital into the business.

Answer Given

Sole proprietorships sole traders

An is a means

by which accounting information about a business’

activity is id entified,measured, recorded and summarised

so it can be communicated in an accounting report.

Answer Given

accounting system

are the most common type of business

organisation.

Answer Given

Sole proprietorships sole traders

refers to the funds a business needs to

operate or expand operations.

Answer Given

Capital

are merchandising businesses that sell

their products directly to the final customer or

consumers.

Answer Given

Retailers

are merchandising businesses that sell

their goods to retailers or other commercial users.

Answer Given

Wholesalers

perform

services or activities that benefit individuals or business customers.

Answer Given

Service businesses

An is an individual who is willing to risk

the uncertainty of not knowing if customers will buy wha t their business provides, in exchange for the reward of a profit, along with the reward of seeing their business

succeed.

Answer Given

entrepreneur

A business financial statement is meant to convey information

about the business to and

_ _ users in order to help them make decisions about the business.

Answer Given

internal; external

is a system in

which individuals own businesses that produce and sell services and/or goods for a profit.

Answer Given

Private enterprise

are businesses owned by two or more

individuals.

Answer Given

Partnerships

businesses make their products and

then sell these products to their customers.

Answer Given

Manufacturing

are issued to the owners of a company

as evidence of their investment of capital in the business.

Answer Given

Company shares

are the currently accepted principle s, practices and standards that businesses use for financial accounting and

reporting in Australia, New Zealand and all over the world.

Answer Given

Generally accepted accounting principles

37 Free Test Bank for Accounting Information for

Business Decisions 2nd Edition by Cunningham Free Text Questions - Page 2

Describe the evaluating function of management.

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

Suppose that you are the manager of a business that

manufactures various types of athletic shoes for sale

primarily in Australia Discuss the pros and cons of

locating your manufacturing plants abroad versus in

Australia.

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 b asis

What is the purpose of a code of ethics?

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

What activities contribute to the operations of a business?

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

Describe the operating function of management.

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

Describe the planning function of management.

Answer Given

This is the start of management The plan lays out the organisation 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

Define entrepreneurship.

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

What is the role of cost analysis in management?

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

What is private enterprise?

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

What is the role of manufacturing cost reports in management?

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

What is the role of the budget in management?

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

Define generally accepted accounting principles.

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

What is the role of accounting information in business?

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