Chapter 1 Answers-2

Question 1- Which of these is a decision relevant to the accounting function of an entity? a. Whether debts can be repaid b. Finding the most cost effective way to produce goods c. The investment prospects of the entity d. None of the above e. All of the above

Question 2- Under the Framework describes the qualitative characteristic of relevance as: a. information that is of value to users in decision making. b. information that can be classified. c. information that can be recorded in accounting reports. d. information that can be reliably measured. e. information that is understandable

Question 3- Which of these is not likely to be the responsibility of a bookkeeper? a. Preparation of a bank reconciliation b. Calculation and payment of wages c. Selection of an accounting package to be used by the firm d. Checking on a customer's credit rating e. All are likely to be the responsibility of a bookkeeper

Question 4- The information about a customer that would be of most interest to a supplier is: a. profit. b. ability to pay off debts as they fall due. c. annual dividends. d. taxable income. e. compliance with accounting standards.

Question 5- The information that would be of most interest to an organisation's production manager is: a. continuity of orders for the factory. b. ability to pay off debts as they fall due. c. annual dividends. d. taxable income. e. compliance with accounting standards.

Question 6= The internal user of accounting information is: a. Building maintenance manager. b. Supplier. c. Environmental lobby group. d. Auditor from the Australian Tax Office. e. A and B.

Question 7- The information in accounting reports is governed by: a. SPFR. b. GPFR. c. GAAP. d. GARP. e. None of the above.

Question 8- The term 'general-purpose financial statements refers to the fact that the information conveyed is: a. generally reliable but not perfect. b. useful for general purposes but not for making specific decisions. c. potentially valuable for a number of users. d. average information from several accounting periods. e. none of the above.

Question 9- Providing accounting reports to external users costs large organisations: a. nothing, as all charges are reimbursed by the government. b. very little, as the reports are quite simple to produce. c. varying amounts depending on the year in question. d. a significant amount. e. None of the above

Question 10= Limitations of accounting information include: a. the fact that not all information relevant to decision-making is contained in accounting reports. b. its subjective nature. c. the use of historical data to predict future events. d. the time delay from when events take place and their reporting. e. All of the above

Question 11- The most senior accounting position in a corporation is generally referred to as the: a. Managing Director b. Chief Financial Officer c. Managing Accountant d. Head Accountant e. Auditor

Question 12- The fundamental purpose of accounting standards is to improve a. Accountants ethics. b. Social accountability. c. Company profits. d. Resource allocation. e. None of the above

Question 13- The Financial Reporting Council is made up of representatives of a. stakeholders from the business community. b. professional accounting bodies. c. governments. d. regulatory agencies. e. All of the above

Question 14- bResources 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. assets. b. liabilities. c. income. d. expenses. e. equity.

Question 15- Which of these is an asset? a. Income tax payable b. Asset revaluation reserve c. Interest earned on investments d. Income received in advance e. None is an asset

Question 16- 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. assets. b. liabilities. c. income. d. expenses. e. equity.

Question 17- Under the Framework the four desirable qualitative characteristics for General Purpose Financial Statements are a. relevance, reliability, materiality, conservatism b. relevance, reliability, comparability, understandability c. uniformity, consistency, prudence, readability d. assets, liabilities, equity, expenses e. balance sheet, income statement, cash flow statement, statement of changes in equity

Question 18- Transactions, to be recorded by accountants, must be capable of being measured in monetary terms. a. True b. False

Question 19- Investors who provide their money to establish a business are regarded as internal users of accounting information a. True b. False

Question 20- The primary objective of accounting is to provide economic information that is useful to decision makers. a. True b. False

Question 21- The public at large and special interest groups such as environmental groups are not regarded as having an interest in the accounting reports of large companies because the groups have not provided any resources to assist in a company's operations. a. True b. False

Question 22- Many professionals who are not accountants find it an advantage to have a grasp of accounting concepts. a. True b. False

Question 23- A main source of company regulation in Australia is the Corporations Act. a. True b. False

Question 24- The process and actions undertaken to develop and put in place accounting standards is known as due process. a. True b. False

Question 25- The terms stakeholders and shareholders are interchangeable and refer to the same group of users of accounting reports. a. True b. False

Question 26- The qualitative characteristic of reliability is enhanced when financial reports are subject to audit. a. True b. False

Question 27- If transactions are supported by adequate evidence the qualitative characteristic of relevance is more likely to be satisfied. a. True b. False

Question 28- The qualitative characteristic of relevance is primarily concerned with providing information that is useful in making decisions. a. True b. False

Question 29- Accounting is the process of identifying, _____________ and communicating economic information for the purposes of decision-making. Answer: measuring

Question 30- Accounting is an information system designed to communicate financial data to interested parties for _____________-making. Answer: decision

Question 31- Entities who have users who are dependent on general purpose financial reports for decision- making are known as _______________ entities. Answer: disclosing

Question 32- Accounting reports prepared for users who have the authority to obtain the information they need are known as ____________________ purpose financial statements. Answer: special

Question 33- The events from which business documents such as invoices are prepared and which provide the input into the accounting system are known as __________________. [Blank1] Answer: transactions

Question 34- The _________________ Reporting Council was established to oversee the AASB. [Blank1] Answer: Financial

Question 35- Part of the role of the ASX Listing Rules is to ensure that listed companies provide continuous _______________ of information to the various stakeholders. [Blank1] Answer: disclosure

Question 36- CPA Australia and the _______________ are the two main professional accounting bodies in Australia for which an undergraduate degree is required for initial entry. [Blank1] Answer: ICAA

Question 37- ____________ purpose financial statements meet the information needs of a range of users unable to demand accounting information. [Blank1] Answer: General

Question 38- The two constraints imposed on the preparation of financial information are ____________________ and costs versus benefits. [Blank1] Answer: timeliness

Question 39- The objective of financial reporting is to provide information useful for making economic ________________. Answer: decisions

Question 40- The accounting element ____________ is defined as involving an inflow or other enhancement of assets, or decrease of liabilities, that results in an increase in equity other than any relating to contributions by equity participants. Answer: income