SWINBURNE UNIVERSITY OF TECHNOLOGY

SARAWAK CAMPUS

FACULTY OF BUSINESS, DESIGN AND ARTS

ACC10007 FINANCIAL INFORMATION FOR

DECISION MAKING

Semester 1, 2022

Practice MCQs (Multiple Choice Questions)

Topic 1: Introduction to financial reports and their

use in decision making

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Chapter 1 (Textbook):
Introduction to accounting and business decision making

1. 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.

2. Which one of the following cannot considered as property, plant and equipment?

a. Land
b. Vehicles
c. Inventory
d. Machinery

3. At what stage of the accounting process are business transactions analysed, recorded and
classified?

a. Measuring
b. Communicating
c. Decision making
d. Identifying

4. 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.

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5. 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.

6. 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

7. 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

8. The term ‘general purpose financial statements’ refers to the fact that the information
conveyed is:

a. generally reliable.
b. useful for general purposes but not for making specific decisions.
c. potentially valuable for a number of users.
d. comparable over several accounting periods.

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Chapter 2 (Textbook): Accounting in society

1. Which statement about the Conceptual Framework is not true?

a. The Conceptual Framework establishes the objectives of the financial statements.

b. The Conceptual Framework sets out the fundamental and enhancing qualitative
characteristics of financial reports.
c. The Conceptual Framework applies to all entities producing special purpose
financial statements.
d. The Conceptual Framework defines the elements of the financial statements.

2. What are the four enhancing qualitative characteristics for general purpose financial
statements under the Conceptual Framework?

a. Comparability, verifiability, timeliness and competition

b. Reliability, timeliness, conservatism and understandability
c. Timeliness, comparability, uniqueness and reliability
d. Timeliness, understandability, verifiability and comparability

3. Which of the following 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

4. ‘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.

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5. ‘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.

6. ‘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.

7. 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

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Chapter 3 (Textbook): Business structures

1. Which of the following statements about the sole trader form of business organisation is
true?

a. It must have at least two owners.

b. It consists of one individual who controls and manages the business.
c. It combines the records of the business with the personal records of the owner.
d. It is classified as a separate legal entity.

2. A sole trader business owner:

a. is personally liable for all debts incurred by the business.

b. is not bound by the formal requirements of accounting standards.
c. is taxed as an individual on the business income.
d. all of the above.

3. Which of the following are characteristics of a partnership?

a. Easy transfer of ownership and no personal liability.

b. Shared control and increased skills and resources.
c. Harder to raise funds and gives the owner full control.
d. Separate taxation requirements and substantial government regulation.

4. If the partnership agreement does not contain profit sharing arrangements, then the profits
and losses must be shared:

a. according to the amount of work performed by each partner.

b. in proportion to the capital contribution of each partner.
c. based on the capital, skills and workload contributed by each partner.
d. equally between all partners.

5. The profit for a partnership must be distributed:

a. according to the partnership agreement.

b. equally among the partners.
c. according to the workload contribution of each partner.
d. according to the capital contributions of each partner.

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6. A disadvantage of a partnership is that of ‘mutual agency’ which means:

a. each partner has limited liability for the debts incurred on a contract entered into
by any other partner.
b. each partner must contribute the same capital and skills to the partnership.
c. each partner has the right to enter into contracts on behalf of the partnership.
d. only the partner with the highest cash contribution has the right to enter into
contracts on behalf of the partnership.

7. Which of the following is an advantage of a partnership over a sole trader business?

a. greater access to skills and resources.

b. limited liability.
c. not required to prepare financial statements in accordance with accounting
standards.
d. mutual agency.

8. Which of the following options is a characteristic of a company business structure?

a. Not a separate legal entity

b. Owners pay individual tax on company profits
c. Owners have limited liability
d. Easy to set up

9. Limited liability for a company applies to the:

a. shareholders.
b. executive directors.
c. all members of the board of directors.
d. managers.

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10. What is the difference between a sole trader’s and a partnership’s financial statements?

a. Sole trader financial statements must be prepared according to the accounting

standards.
b. Partnership capital has more than one account.
c. Partnership financial statements are simpler to prepare.
d. There is no difference.

11. What is the name of the financial statement that is concerned with an entity at a point in
time?

a. Statement of changes in equity

b. Statement of comprehensive income
c. Statement of financial position
d. Statement of cash flows