Deck 1: Introduction to Accounting

Question 1

Which one of the following statements most accurately describes the fundamental qualitative characteristic of relevance?

A) Information that not only represents relevant economic phenomena but also faithfully represents the phenomena that it purports to represent.
B) Information that is comparable over time.
C) Information that is capable of making a difference in the decisions made by users.
D) Information that is available to users in time for it to be capable of influencing their decisions.

Answer 1

C

Question 2

Relevant information:
Please select all that apply.

A) May be predictive
B) Must be complete, neutral, and free from error
C) Can assist users in making predictions about the future
D) May be confirmatory

Answer 2

A,C,D

Question 3

Which one of the following is not a description of the fundamental qualitative characteristic of relevance?

A) Information that may assist users to assess the accuracy of past predictions.
B) Information that is capable of making a difference in the decisions made by users.
C) Information that may be predictive.
D) Information that must be verifiable.

Answer 3

D

Question 4

Financial information that is understandable must possess the characteristic of simplicity.

Question 5

Information is material by size only.

Question 6

Which one of the following statements is not a description of the fundamental qualitative characteristic of faithful representation?

A) Information presented must not only represent relevant economic phenomena (transactions and events), but it must also faithfully represent the phenomena that it purports to represent.
B) Information presented should be verifiable.
C) Information presented should be complete, neutral and free from error.
D) Information presented does not have to be perfectly accurate in order to provide a faithful representation.

Question 7

Comparability requires that:
Please select all that apply.

A) Information should be comparable over time.
B) Information should be comparable with similar information about other entities for the same reporting period and with similar information about the same entity for other reporting periods in order to enhance its usefulness.
C) Information should be presented consistently.
D) Information about economic phenomena should be presented in a uniform way.

Question 8

Which one of the following statements does not describe verifiability?

A) Verifiability provides users with assurance that information is faithfully presented and reports the economic phenomena it purports to represent.
B) Verifiable iinformation is complete, neutral and free from error.
C) The accuracy of information can be verified by observation or re-calculation.
D) External auditors will undertake testing to prove to themselves that the information presented is accurate in all major respects.

Question 9

Old information is not useful in making decisions.

Question 10

Which one of the following statements is not true?

A) Information should only be presented if the costs of obtaining that information exceed the benefits of providing it.
B) Information is material if omitting it or misstating it could influence decisions that…users…make on the basis of…financial information about a specific reporting entity.
C) To help users understand information presented, that information should be classified, characterized and presented clearly.
D) Where information is not comparable, similarities and differences will not be readily apparent.

Question 11

Information whose omission or misstatement could influence decisions that users make on the basis of financial information about a specific reporting entity defines which characteristic of accounting information?

A) Comparability
B) Verifiability
C) Cost-benefit
D) Materiality

Question 12

Perfectly faithful representation of economic phenomena in words and numbers requires that the information presented must be:
Please select all that apply.

A) Free from error
B) Neutral
C) Timely
D) Complete

Question 13

The characteristics of materiality and comparability are both entity-specific.

Question 14

Which one of the following statements does not describe cost and management accounting?

A) Cost and management accounting information is concerned with reporting outcomes of past events to users external to the organisation.
B) Cost and management accounting is concerned with reporting accounting and cost information to users within an organisation.
C) Cost and management accounting information is used to plan levels of production and activity in the future.
D) Cost and management accounting information is mostly concerned with the present and the future.

Question 15

Financial accounting is:

A) The reporting of past information to users within the organisation.
B) The reporting of present and future information to users within the organisation.
C) The reporting of present and future information to users outside the organisation.
D) The reporting of past information to users outside the organisation.

Question 16

Financial accounting: please select all that apply.

A) Reports on past events.
B) Focuses on the costs of products and services.
C) Is used to plan levels of production and activity.
D) Reports to users outside the organisation.

Question 17

Cost and management accounting: please select all that apply.

A) Focuses on the present and future.
B) Presents information to users outside the organisation.
C) Helps managers to decide which products to produce and sell.
D) Uses reports on the results of past plans to improve operations in the future.
Topic: Users of financial statements

Question 18

A lender using a set of published financial statements would be most interested in:

A) The entity's ability to generate cash from which to pay interest.
B) The entity's ability to generate cash from which to pay dividends.
C) The entity's ability to generate cash from which to pay bonuses.
D) The entity's ability to generate cash from which to pay taxation due on profits.

Question 19

Which user group of financial statements would be most interested in information relating to retirement benefit schemes?

A) Shareholders
B) Lenders
C) Employees
D) Customers

Question 20

Details of the length of time it takes an organisation to pay for goods purchased on credit terms would be of most interest to which user group?

A) Customers
B) Employees
C) Shareholders
D) Suppliers

Question 21

Which one of the following is not a limitation of accounting information?

A) Accounting information does not value the external effects of operations on the environment.
B) Accounting information does not value the skills and knowledge base of an entity.
C) Accounting information does not consider the quality of performance.
D) Accounting information does not include information whose costs outweigh the benefit of providing it.

Question 22

Accounting information fails to: Please select all that apply.

A) Present information on social damage caused by an entity.
B) Measure the skills and knowledge base of organisations.
C) Exclude subjective valuations from financial statements.
D) Provide measures of the quality of organisational performance.

Question 23

Which one of the following statements does not describe accountability?

A) Accounting information reporting on past actions is a stewardship report.
B) Accounting information reporting on the current cost and selling prices of products.
C) Representatives reporting on their actions to those people who have placed them in positions of power.
D) Accounting information provided so that individuals and organisations can render an account of what they have done with resources entrusted to them.

Question 24

Which one of the following statements is not correct?

A) The objective of general financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.
B) While financial accounting presents information about what has happened in the past, cost and management accounting is very much concerned with both the present and the future and how accounting information can be used for short-term decision making and longer-term planning.
C) Understandability assumes that readers of financial reports have a reasonable knowledge of business and economic activities in order to make sense of what they are presented with.
D) Accounting summarizes narrative data relating to past events and presents this data as information to managers and other interested parties as a basis for both decision making and control purposes.

Question 25

Which one of the following statements is correct?

A) The IASB states in its Conceptual Framework for Financial Reporting that the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders, other creditors, regulators and members of the public in making decisions about providing resources to the entity.
B) Information should only be presented if the benefits of providing this information outweigh the costs of obtaining it.
C) Comparability means consistency.
D) Items in financial statements are material only by nature.

Question 26

Which one of the following statements is not correct?

A) The more accurate past predictions of profits have been, the less likely it is that users will be able to rely on current predictions of future profits.
B) All users of accounting information will be interested in the cash generating capabilities of an entity
C) Financial information must not only represent relevant economic phenomena (transactions and events), but it must also faithfully represent the phenomena that it purports to represent.
D) Accounting information provides a mechanism through which to control outcomes and activities.

Question 27

Which of the following statements are true? Please select all that apply.

A) Accounting data is presented in the form of numbers.
B) To be relevant, financial information must be capable of making a difference in the decisions made by users.
C) Accounting provides measures with which to assess the quality of an organization's performance.
D) Stewards are entrusted with and look after resources for the benefit of other parties.