tarted on Saturday, 28 March 2020, 10:03 AM

State Finished
Completed on Saturday, 28 March 2020, 10:54 AM
Time taken 50 mins 59 secs
Grade 24.50 out of 25.00 (98%)
Question 1
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The best description of the primary purpose of providing accounting information is:

Select one:
a. to allow the preparation of a taxation return

b. to assist users in making informed decisions. 

c. to enable the financial statements to be prepared.

d. to calculate the bank account balance

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The correct answer is: to assist users in making informed decisions.

Question 2
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What are the four key qualities of accounting information?

Select one:

a. relevance, reliability, comparability, and understandability 

b. identification, analysis, reliability, and timeliness.
c. planning, control, comparability and analysis

d. understandability, identification, analysis, and relevance.

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The correct answer is: relevance, reliability, comparability, and understandability

Question 3
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The best explanation of relevance is:

Select one:
a. ensuring that information is free from bias.
b. ensuring that information is expressed as clearly as possible.
c. ensuring the benefit of the information is greater than the cost of providing it.

d. ensuring that information is useful for decision-making. 

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The correct answer is: ensuring that information is useful for decision-making.

Question 4
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 The quality of accounting information that requires items that are basically the same to be treated in
the same manner is:
Select one:
a. relevance

b. comparability. 
c. timeliness.

d. understandability.
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The correct answer is: comparability.

Question 5
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Which of these groups is a user of financial information?

Select one:
a. Owners
b. Lenders
c. Managers

d. All the options 

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The correct answer is: All the options

Question 6
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Question text

What is the primary goal of management accounting?

Select one:
a. provide information that conforms to the accounting regulations
b. provide information to shareholders.

c. provide information that improves the quality of managers' decisions. 

d. provide information that can be quantified in monetary terms.

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Your answer is correct.

The correct answer is: provide information that improves the quality of managers' decisions.

Question 7
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Which statement is correct?

Select one:
a. Financial reports reflect past performance whereas management reports are concerned with the

future as well as the past. 

b. Financial reports provide more forecast data than management reports.
c. Financial reports are prepared for internal users whereas management reports are prepared for
external users

d. Financial reports are produced at more frequent intervals than management reports.
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Your answer is correct.

The correct answer is: Financial reports reflect past performance whereas management reports are
concerned with the future as well as the past.

Question 8
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The accounting report that is specifically designed to answer the question, 'What cash movements
took place over a particular period?' is:

Select one:
a. the statement of comprehensive income.

b. the statement of cash flows. 

c. all the options

d. the statement of financial position.

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The correct answer is: the statement of cash flows.

Question 9
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Paul commenced business with $150 cash. He purchased goods for $75 that were later sold for
$125. The statement of financial position, after the sale, would show a total business wealth of:

Select one:

a. $200. 
b. $100.
c. $150.

d. $50.
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The correct answer is: $200.

Question 10
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Which statement is true?

Select one:
a. None of the statements is true.
b. The statement of cash flows summarises the movements in the bank account over an accounting

period. 
c. The statement of cash flows explains the changes between the statement of comprehensive
income and the statement of financial position.

d. The statement of financial position links two statements of comprehensive income.

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The correct answer is: The statement of cash flows summarises the movements in the bank account
over an accounting period.

Question 11
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The most complete description of the planning process for a business is:

Select one:

a. setting objectives, long-term plans, and short-term plans. 

b. setting objectives and short-term plans.
c. setting long-term objectives and long-term plans.

d. setting objectives and detailed budgets

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The correct answer is: setting objectives, long-term plans, and short-term plans.

Question 12
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The planning role within a company is principally undertaken by:

Select one:
a. consultants 
b. shareholders
c. lenders

d. managers 
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The correct answer is: managers

Question 13
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Advantages of operating as a sole proprietor are:

Select one:
a. total control by the owner over all decisions.
b. low start-up costs
c. limited liability.

d. Both A and B. 

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The correct answer is: Both A and B.

Question 14
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An advantage of a partnership compared to a sole proprietorship is:

Select one:
a. mutual agency
b. Both B and C.

c. greater access to funds 

d. sharing of profits
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The correct answer is: greater access to funds

Question 15
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In comparison to a company, a disadvantage of operating as a partnership is: 
Select one:

a. all the options   

b. limited life.
c. mutual agency.

d. unlimited liability.
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The correct answer is: all the options  

Question 16
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Sustainability reporting focuses on:

Select one:
a. financial aspects.

b. environmental and social factors. 

c. customer satisfaction.

d. Both B and C.
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The correct answer is: environmental and social factors.

Question 17
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Question text

As a result of increased globalisation

Select one:
a. there has been less harmonization of accounting rules across countries
b. users of accounting information are more likely to be based in the same county as the business
has its base

c. accounting rules have a more international reach 

d. accountants need less familiarity with accounting rules of other countries

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The correct answer is: accounting rules have a more international reach

Question 18
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Which of the following is not an aspect of accounting and finance potential managers need to
understand?

Select one:
a. Reading and interpreting financial reports
b. How businesses are financed.

c. The design of the accounting information system. 

d. How investment decisions are made.

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The correct answer is: The design of the accounting information system.

Question 19
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Business managers, even if not accountants, need familiarity with basic accounting information to
help with decisions about

Select one:
a. whether or not to invest in certain projects.
b. what products to sell.
c. whether to expand or cease operations

d. All the options are correct. 

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The correct answer is: All the options are correct.

Question 20
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Which of the following would appear in the income statement of a listed company?

Select one:

a. Sales revenue 
b. Retained earnings
c. Motor vehicle

d. Accumulated depreciation of computer

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The correct answer is: Sales revenue

Question 21
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Retained earnings in a company’s statement usually reflect:

Select one:
a. Profit earmarked for a future takeover by a multinational company
b. Profit after tax added on to previous loss
c. The after-tax profit retained in the company, perhaps accumulated after years of trading after

dividends have been deducted 

d. Profit before tax retained in the company

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The correct answer is: The after-tax profit retained in the company, perhaps accumulated after years
of trading after dividends have been deducted

Question 22
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Business transactions are recognized in accounting only when:

Select one:
a. Cash and credit transactions have occurred between two public companies
b. There has been an external exchange of resources between the entity and another entity or

individual 
c. Goods are sold on credit

d. A cheque is written for the owner’s personal spending

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The correct answer is: There has been an external exchange of resources between the entity and
another entity or individual

Question 23
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What will the effect be on the financial position for a business purchasing land by issue of equity
shares?

Select one:
a. An increase in equity
b. Absolutely no change
c. An increase in both asset and equity account by the same amount

d. Cash going down and computer going up by different amounts

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The correct answers are: Absolutely no change, An increase in both asset and equity account by the
same amount

Question 24
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Which of these is not a current asset?

Select one:
a. inventories
b. interest receivables 

c. investment in company B maturing after 3 years 

d. Trade receivables
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The correct answer is: investment in company B maturing after 3 years

Question 25
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The statement of changes in equity reflects the:

Select one:
a. Change in the amount of equity of shareholders from the beginning to the end of the

period  
b. Gross profit for an entity
c. Current and non-current assets of an entity over a period of time

d. Accounting return (profit) for an entity for a specified time period

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Your answer is correct.
The correct answer is: Change in the amount of equity of shareholders from the beginning to the end
of the period 

Question 26
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Which of the following statements is correct about cash basis of accounting:

Select one:

a. Recognizing an expense only when cash paid 

b. Paying cash but not recognizing an expense
c. Recognizing income without receiving cash

d. Receiving cash but not recognizing income

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The correct answer is: Recognizing an expense only when cash paid

Question 27
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The term which describes the overall direction, control and management of an entity is:

Select one:
a. triple bottom line
b. business entity
 
c. sustainable business

d. corporate governance 
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The correct answer is: corporate governance

Question 28
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Which of the following events is not recorded in the accounting records?

Select one:
a. Cash investment is made into the business
b. The owner withdraws cash for personal use
c. Equipment is purchased on account

d. An employee is terminated 

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The correct answer is: An employee is terminated

Question 29
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As of December 31, 2018, Stoneland Company has assets of $3,500 and owner’s equity of $2,000.
What are the liabilities for Stoneland Company as of December 31, 2018?
Select one:
a. $2,500
b. $2,000

c. $1,500. 

d. $1,000.
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The correct answer is: $1,500.

Question 30
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The qualitative characteristics of financial reports which imply that information should be without bias
and undue error is

Select one:
a. Relevance
b. Comparability 

c. Faithful representation 

d. Completeness 
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The correct answer is: Faithful representation

Question 31
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 Question text

Performing services on account will have the following effects on the components of the basic
accounting equation:
Select one:
a. increase assets and increase owner’s equity.
b. increase assets and increase liabilities

c. increase assets and decrease owner’s equity. 

d. increase liabilities and increase owner’s equity.

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The correct answer is: increase assets and increase owner’s equity.

Question 32
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The historical cost principle states that

Select one:
a.

Assets should be recorded at their cost. 

b.
Activities of an entity are to be kept separate and distinct from its owner.

c.
Assets should be initially recorded at cost and adjusted when the fair value changes.

d.
Only transaction data capable of being expressed in terms of money be included in the accounting
records.
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 The correct answer is:
Assets should be recorded at their cost.

Question 33
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Owner’s equity is equal to

Select one:

a. Assets minus liabilities. 

b. Assets minus revenues
c. Revenues minus expenses.

d. Assets plus liabilities.

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The correct answer is: Assets minus liabilities.

Question 34
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The financial statement that reports assets, liabilities, and owner’s equity is the:

Select one:
a.

Statement of financial position. 

b.
Statement of profit and loss and other comprehensive income.

c.
Statement of changes in equity.

d.
Statement of cash flow.
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The correct answer is:
Statement of financial position.

Question 35
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The revenue recognition principle dictates that companies recognize revenue in the accounting
period

Select one:
a. After services are performed.
b. In which it is collected.
c.

d. In which services are performed. 

e. Before services are performed.

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The correct answer is: In which services are performed.

Question 36
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Which of the following items is reported on a statement of cash flows prepared by the direct method?

Select one:
a. Increase in accounts receivable

b. Cash payments to suppliers 

c. Depreciation expense

d. Loss on sale of building

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The correct answer is: Cash payments to suppliers

Question 37
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In vertical analysis, the base amount for depreciation expense is generally:

Select one:
a. Fixed assets
b. Depreciation expense in a previous year
c. Gross profit

d. Net sales 
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The correct answer is: Net sales

Question 38
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Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased
$6,000 during the year, and accounts receivable increased $12,000 during the year. Under the
indirect method, what is net cash provided by operating activities?

Select one:
a. $112,000

b. $136,000 
c. $124,000

d. $102,000
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The correct answer is: $136,000

Question 39
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In horizontal analysis, each item is expressed as a percentage of the

Select one:
a. Net income amount.

b. Base year amount. 

c. Total assets amount.
d. Stockholders’ equity amount.
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The correct answer is: Base year amount.

Question 40
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Ratios that measure short-term ability of the company to pay its maturing obligations are

Select one:
a. Trend ratios.

b. Liquidity ratios. 
c. Profitability ratios.

d. Solvency ratios.
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The correct answer is: Liquidity ratios.

Question 41
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Free cash flow provides an indication of a company’s ability to

Select one:
a. Generate net income.
b. Generate cash to pay dividends.
c. Generate cash to invest in new capital expenditures.

d. Both (b) and (c). 

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The correct answer is: Both (b) and (c).

Question 42
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A measure useful in evaluating the efficiency in managing inventories is:

Select one:
a. Inventory turnover.
b. Average days to sell inventory.

c. Both (a) and (b). 

d. None of the above.

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The correct answer is: Both (a) and (b).

Question 43
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At the beginning of the year, Kimball Company had total assets of $700,000 and total liabilities of
$400,000. If the total assets increased by $100,000 and the total liabilities decreased by $80,000,
what is the amount of owner’s equity at the end of the year?

Select one:

a. $480,000 
b. $300,000

c. $20,000
cannot be determined from the data given
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The correct answer is: $480,000

Question 44
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A credit to a liability account indicates a (n)

Select one:
a. error.

b. increase in the liability. 

c. debit could only be made to an asset account.

d. decrease in the liability.

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The correct answer is: increase in the liability.

Question 45
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Silva Corporation reported net sales of $240,000, $420,000, and $540,000 in the years 2012, 2013,
and 2014 respectively. If 2012 is the base year, what is the trend percentage for 2014?

Select one:

a. 225% 
b. 129%
c. 135%

d. 164%
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The correct answer is: 225%

Question 46
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‘Increases in assets, or decreases in liabilities, that result in increases in equity, other than those
relating to contributions from holders of equity claims’ is the definition of income.

Select one:

True 

False
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The correct answer is 'True'.

Question 47
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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 a definition of
asset.

Select one:
True

False 
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The correct answer is 'False'.

Question 48
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Profit results of an entity can be used to evaluate past decisions but no useful in making future
predictions.

Select one:
True

False 
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The correct answer is 'False'.

Question 49
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Which of the following must be disclosed in the statement of profit or loss and other comprehensive
income?
I.    tax expense
II.   analysis of expenses
III.  net profit or loss for the period

Select one:
a. I, II and III

b. I and III only 

c. I and II only

d. II and III only

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The correct answer is: I and III only

Question 50
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Which of the following items could appear in a company's statement of cash flows?
I.       dividends received
II.      proposed dividend
III.     proceeds from issue of shares
IV.     irrecoverable debts written-off
V.      surplus on revaluation of non-current assets
Select one:
a. II and III only
b. I, II and III

c. I and III only 

d. I and III only

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Your answer is correct.

The correct answer is: I and III only