Deck 1: Introduction to Accounting

Question 1

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The statement concerned with establishing the costs and benefits of accounting information that is true is:

A) Both the costs and the benefits are normally difficult to establish.
B) The costs and benefits should be ignored when deciding on what accounting information should be produced.
C) It is normally easy to establish both the costs and the benefits.
D) It is usually easier to establish the benefits than the costs.

Answer 1

A

Question 2

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The financial statement which shows all the changes in the owners' interest in the net assets of the business is:

A) cash flow statement.
B) statement of changes in owners' equity.
C) statement of comprehensive income.
D) none of the above.

Answer 2

B

Question 3

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Businesses tend to resist providing forecast data to those outside the organisation mainly because:

A) it is too difficult.
B) it is too costly.
C) the data is inaccurate.
D) of fear of the loss of competitive advantage.

Answer 3

D

Question 4

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Which statement is true?

A) The cash flow statement summarises the movements in the bank account over an accounting period.
B) The cash flow statement explains the changes between the income statement and the balance sheet.
C) The balance sheet links two income statements.
D) None of the statements is true.

Question 5

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Which of these are costs of providing accounting information?

A) the cost of management time spent on reading and interpreting accounting reports
B) wages of accounting staff
C) cost of computer hardware
D) all of the above

Question 6

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The statement concerning differences between financial and management accounting which is false is:

A) There is no overlap between management accounting and financial accounting.
B) The distinction between the two areas, to some extent, reflects differences in access to financial information.
C) Managers have much more control over the form and content of their reports.
D) Management accounting is less constrained than financial accounting.

Question 7

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
An objective of a business could be:

A) maximise profit.
B) maximise sales.
C) financial survival.
D) all of the above.

Question 8

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The primary goal of management accounting is to:

A) provide information that improves the quality of managers' decisions.
B) provide information to shareholders.
C) provide information that can be quantified in monetary terms.
D) provide information that conforms to the accounting regulations.

Question 9

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The accounting report that is specifically designed to answer the question 'What cash movements took place over a particular period?' is the:

A) balance sheet.
B) income statement.
C) cash flow statement.
D) all of the above.

Question 10

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The group of users that is most likely to require accounting information to assess the ability of a business to pay interest and repay a loan is:

A) lenders.
B) taxation department.
C) customers.
D) employees.

Question 11

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Management accounting reports tend to contain:

A) non-financial information only.
B) information that complies with the accounting standards.
C) both financial and non-financial information.
D) financial information only.

Question 12

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The change that will increase owners' equity is:

A) a company buying back its own shares.
B) a loss incurred for the year.
C) payment of a dividend by a company to its shareholders.
D) earning a profit for the year.

Question 13

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The planning role within a company is principally undertaken by:

A) consultants.
B) managers.
C) lenders.
D) shareholders.

Question 14

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The best explanation of relevance is:

A) ensuring that information is useful for decision-making.
B) ensuring that the benefit of the information is greater than the cost of providing it.
C) ensuring that information is expressed as clearly as possible.
D) ensuring that information is free from bias.

Question 15

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The most complete description of the planning process for a business is:

A) setting objectives, long-term plans and short-term plans.
B) setting objectives and short-term plans.
C) setting objectives and detailed budgets.
D) setting long-term objectives and long-term plans.

Question 16

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Knowledge of the objectives or mission of a business will be most useful in assisting users of financial reports in understanding:

A) why it is taking longer than it should to collect money from debtors.
B) what the business is trying to achieve.
C) the liquidity position of the business.
D) the financial reporting cycle.

Question 17

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The characteristic of accounting information that requires financial reports to be expressed as clearly as possible and to be capable of being understood by those they are addressed to, is known as:

A) relevance.
B) understandability.
C) reliability.
D) cost versus benefit test.

Question 18

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The goal of business in relation to profit is generally taken as:

A) profit planning.
B) profit maximisation.
C) profit stabilisation.
D) profit generation.

Question 19

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The test to determine whether an item of accounting information is worthwhile collecting is:

A) cost test.
B) validation test.
C) cost-benefit test.
D) worthwhile test.

Question 20

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Management reports, compared with financial reports, are:

A) prepared less frequently.
B) prepared with the same frequency.
C) prepared more frequently.
D) prepared infrequently.

Question 21

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Management reports, compared with financial reports, are:

A) summarised.
B) detailed.
C) standardised.
D) aggregated.

Question 22

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Another name for the income statement is:

A) balance sheet.
B) statement of change in owners' equity.
C) profit and loss statement.
D) statement of financial position.

Question 23

Which statement is correct?

A) Financial reports are produced at more frequent intervals than management reports.
B) Financial reports reflect past performance, whereas management reports are concerned with the future as well as the past.
C) Financial reports provide more forecast data than management reports.
D) Financial reports are prepared for internal users, whereas management reports are prepared for external users.

Question 24

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The qualitative characteristic of accounting information that requires items that are basically the same to be treated in the same manner is:

A) understandability.
B) relevance.
C) comparability.
D) timeliness.

Question 25

Long-term plans typically have a time horizon of:

A) one year.
B) two years.
C) eight years.
D) five years.

Question 26

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
A balance sheet shows:

A) the financial position at the end of the period.
B) the change in financial position over a particular period.
C) details of how much profit was earned in the period.
D) the cash movements that took place over a particular period.

Question 27

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Another name for the balance sheet is:

A) statement of change in owners' equity.
B) statement of financial position.
C) statement of financial performance.
D) profit and loss statement.

Question 28

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The statement of changes in owners' equity:

A) links the income statement and the balance sheet.
B) links the cash flow statement and the income statement.
C) links the balance sheet at the beginning of the period with the balance sheet at the end of the period.
D) A and C

Question 29

Which of these is a reason why achieving the maximum possible profit in a particular year may not be in the best interests of a business?

A) If it is achieved with high-risk strategies, such as excessive reliance on borrowings, it could lead to disaster in the longer term.
B) It may be achieved by causing environmental problems which give the business a bad reputation.
C) Concentrating on the short term may have detrimental effects in the long term.
D) All of the above.

Question 30

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Management accounting reports are principally used by managers to:

A) report to shareholders.
B) calculate the amount of taxation owed to the government.
C) control the operations of an entity on a regular basis.
D) reconcile with the financial accounting reports.

Question 31

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The statement concerning the key qualitative characteristics that is untrue is:

A) Relevant information often contains a degree of subjectivity.
B) Relevant information may help to predict future events or confirm past events.
C) The characteristics are frequently in conflict.
D) None of the statements is untrue, i.e. all are true statements.

Question 32

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Calculate the cash available at the beginning of the day if cash at the end is $540, receipts from customers are $630 and payments to suppliers are $250.

A) $340
B) $920
C) $160
D) $150

Question 33

Which of these groups is a user of financial information?

A) owners
B) lenders
C) managers
D) all of the above

Question 34

The most important function of an accounting system is to:

A) keep employees from embezzling funds.
B) communicate financial information to managers.
C) prepare accounting reports.
D) collect and record data.

Question 35

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The key qualitative characteristic that requires accounting information to be as objective as possible is:

A) faithful representation.
B) materiality.
C) consistency.
D) cost-benefit test.

Question 36

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Paul commenced business with $100 cash. He purchased goods for $50 that were later sold for $150. The balance sheet, after the sale, would show a total business wealth of:

A) $150
B) $100
C) $50
D) $200

Question 37

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
Control is best defined as:

A) making the directors perform according to plan.
B) giving orders.
C) making events conform to plan.
D) making the employees work harder.

Question 38

Use the information below to answer the following questions.
Jackson Bottle Yard, a recycling glass company, has supplied the following information in relation to their actual sales in 2015 and planned sales for the first quarter of 2016. Past records indicate that expected receipts collected from debtors will be: 60 per cent in the month of sale
40 per cent in the month following the sale
The recently failed company group that is not a New Zealand company is:

A) Enron.
B) Southland Finance.
C) Feltex.
D) Telecom.

Question 39

The best description of the primary purposes of providing accounting information is:

A) to calculate the bank account balance.
B) to enable the financial statements to be prepared.
C) to allow the preparation of a taxation return.
D) to assist users in making informed decisions.

Question 40

The accounting reports concerned with measuring flows over a period of time are:

A) statement of comprehensive income, cash flow statement and balance sheet.
B) statement of comprehensive income and balance sheet.
C) cash flow statement and balance sheet.
D) statement of comprehensive income and cash flow statement.

Question 41

Which of these is not a possible penalty for deliberately producing misleading financial statements?

A) a jail term
B) a fine
C) requiring the statements to be reissued
D) None of the above, i.e. all are possible penalties.

Question 42

The objective of business to maximise economic growth within the bounds of minimising impacts on the environment is known as:

A) wealth maximisation.
B) growth.
C) satisficing.
D) sustainable development.

Question 43

Calculate the cash available at the end of the day if cash at the beginning is $450, receipts from customers are $600 and payments to suppliers are $350.

A) $200
B) $750
C) $1,400
D) $700

Question 44

The term that describes differences between actual and budgeted results is:

A) mistake.
B) variance.
C) divergence.
D) discrepancy.

Question 45

The phases of an accounting system are:

A) setting objectives, planning, analysis.
B) evaluation, processing, output.
C) identification, recording, analysis, reporting.
D) none of the above.

Question 46

Financial accounting reports concentrate on:

A) future events.
B) current events.
C) past events.
D) current and future events.

Question 47

The set of financial reports made available for external publication by an entity is typically produced:

A) daily.
B) yearly.
C) fortnightly.
D) weekly.

Question 48

Which of these is not generally regarded as a reason for the recent spate of dubious accounting practices by large companies?

A) Lack of accounting standards.
B) Pressure on managers to meet investors' unrealistic expectations for continually rising profits.
C) Greed by executives.
D) Too rapid growth financed by borrowing which leads to a liquidity crisis.

Question 49

How many of these are differences between management and financial accounting? • Nature of reports produced
• Frequency of reports
• Level of detail in the reports
• Degree of regulation

A) three
B) four
C) one
D) two

Question 50

The incorrect statement is:

A) A budget is a short-term plan.
B) A budget defines precise targets, e.g. level of sales, levels of inventory.
C) A budget is expressed in monetary terms.
D) A budget summarises past information.

Question 51

Budgets are typically set for:

A) five years.
B) one year.
C) a decade.
D) one month.

Question 52

Financial accounting reports, compared with management reports, tend to be:

A) unstructured.
B) qualitative.
C) detailed.
D) general purpose.

Question 53

Four key qualitative characteristics of accounting information are:

A) control, planning, analysis, and comparability.
B) understandability, identification, analysis, and relevance.
C) relevance, faithful representation, comparability, and understandability.
D) identification, analysis, faithful representation, and timeliness.

Question 54

Which accounting report is specifically designed to answer the question 'What profit was earned in a particular period?'

A) cash flow statement
B) balance sheet
C) income statement
D) all of the above

Question 55

The financial reports comprising the 'final reports' are the:

A) cash flow statement, income statement.
B) income statement, balance sheet, cash flow statement, statement of change in owners' equity.
C) balance sheet, cash flow statement, income statement.
D) income statement and balance sheet.

Question 56

Tom owns an antique writing desk he paid $500 for 6 years ago that he is now considering selling. A local antique dealer gives Tom an estimated market valuation for the desk. In relation to the decision to sell the desk, the market value, in comparison to the original purchase value, is:

A) relevant.
B) relevant and reliable.
C) reliable.
D) none of the above.

Question 57

Which of these is not one of the key qualitative characteristics of accounting information?

A) control
B) comparability
C) relevance
D) cost versus benefit

Question 58

The planning and control process within an entity means that:

A) plans and actual performance do not diverge.
B) plans are followed rigidly at all times.
C) business is only concerned with actual performance.
D) business can respond to divergences between plans and actual performance.

Question 59

A common aspect of questionable figures in financial reports is:

A) understating figures for income and expenses.
B) overstating figures for expenses and liabilities.
C) overstating figures for income and assets.
D) overstating figures for income and understating figures for assets.