Test bank for accounting information for business decisions 1st

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Test Bank for Accounting Information for Business

Decisions 1st

Mutiple Choice Questions

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.

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

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’ obligations to its creditors are:

1 a.Liabilities.

2 b.Expenses.

3 c.Payments.

4 d.Owners' equity.

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 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

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 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 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

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.

The business’ economic resources are:

1 a.Revenues.

2 b.Liabilities.

3 c.Owners' equity.

4 d.Assets.

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 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 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.

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.

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.

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.

True-False Questions

An internal 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

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

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

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

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

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

1 True

2 False

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

1 True

2 False

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

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

Woolworths is an example of a retailing business

1 True

2 False

Accounting is an information tool which can help make good business

decisions

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 dental surgery is an example of a service business

1 True

2 False

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

1 True

2 False

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

A business financial statements 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

What are the primary differences between companies/corporations and

partnerships/sole proprietorships?

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

_ are the most common type of business

organisation.

Answer Given

Sole proprietorships or sole traders

are merchandising businesses that sell their products directly to the final customer or consumers.

Answer Given

Retailers

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

Answer Given

Private enterprise

Describe the planning function of management.

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

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

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

refers to the funds a business needs to operate or expand operations.

Answer Given

Capital

An _ is a means by which accounting information about a business’ activity is identified, measured, recorded and summarised

so it can be communicated in an accounting report.

Answer Given

accounting system

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

are businesses owned by two or more individuals.

Answer Given

Partnerships

An is an individual who is willing to risk the

uncertainty of not knowing if customers will buy what their business provides,

in exchange for the reward of a profit, along with the reward of seeing their business succeed.

Answer Given

entrepreneur

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-makers by providing them with financial statements containing economic information about the performance and state of the businesses

businesses purchase goods for resale to their

customers.

Answer Given

Merchandising

What are some of the issues addressed by accountants' codes of ethics?

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 self-discipline, 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

Briefly describe what information is contained in the balance sheet

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)

Information explosion, evolving forms of businesses, more complex business activities, increased regulations, globalisation and technological advances are all factors affecting the of the business environment.

Answer Given

complexity

_ are issued to the owners of a company as

evidence of their investment of capital in the business.

Answer Given

Company shares

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

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

Briefly describe what information is contained in an Income Statement

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

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

A is a business organisation that has a separate identity from its owners.

Answer Given

Company/Corporation

What sources of capital are available to an entrepreneur? How do these

sources of capital differ?

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

_ _ perform services or activities that benefit individuals

or business customers.

Answer Given