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.

Accepted Answer

Relevance is a fundamental qualitative characteristic of financial information, meaning it must be capable of making a difference in the decisions made by users.

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

Accepted Answer

Relevant information can be predictive, assist in making future predictions, and confirm past evaluations.

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.

Accepted Answer

Verifiability is not a component of relevance; it is a component of the fundamental qualitative characteristic of faithful representation. Relevance is about the capacity of information to influence decisions.

Question 4

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

Accepted Answer

Understandability in financial information means that it should be clear and comprehensible to users with reasonable knowledge, not necessarily simple.

Question 5

Information is material by size only.

Accepted Answer

Information is not material by size only; it is considered material based on its significance and impact on decision-making, not just its size.

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.

Accepted Answer

Verifiability is an enhancing qualitative characteristic, not a fundamental characteristic of 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.

Accepted Answer

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.

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.

Accepted Answer

The answer of Which one of the following statements does...

Question 9

Old information is not useful in making decisions.

Accepted Answer

Old information can provide context, identify patterns, and help predict future trends, making it valuable for decision-making.

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.

Accepted Answer

The statement in choice A is not true because information should be presented if the benefits of providing it exceed the costs, not the other way around.

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

Accepted Answer

Materiality refers to the significance of financial information that could influence the decision-making of users if omitted or misstated.

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

Accepted Answer

A perfectly faithful representation of economic phenomena requires that the information is free from error, neutral, and complete to ensure accuracy and reliability. Timeliness, while important, is not a component of faithful representation.

Question 13

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

Accepted Answer

Materiality is entity-specific, as it depends on the size and nature of the item relative to the entity's financial statements. Comparability, however, is not entity-specific; it refers to the ability to compare financial statements across different entities.

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.

Accepted Answer

Cost and management accounting is primarily focused on providing information for internal users to aid in decision-making, planning, and control, rather than reporting past events to external users.

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.

Accepted Answer

Financial accounting involves the preparation of financial statements that report past financial performance and position to external users such as investors, creditors, and regulatory agencies.

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.

Accepted Answer

Financial accounting reports on past events and is primarily intended for external users such as investors, creditors, and regulatory agencies.

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

Accepted Answer

Cost and management accounting focuses on internal decision-making, emphasizing present and future planning (A), aids managers in product-related decisions (C), and uses past performance reports to enhance future operations (D). It is not primarily for external users (B).

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.

Accepted Answer

Lenders are primarily concerned with the entity's ability to generate cash to pay interest on borrowed funds, as this directly affects their return on investment and the risk of default.

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

Accepted Answer

Employees are most interested in information relating to retirement benefit schemes as it directly affects their future financial security.

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

Accepted Answer

Suppliers are most interested in the payment terms as it directly affects their cash flow and financial planning.

Quiz 1: Introduction to Accounting

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

Relevant information: Please select all that apply.

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

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

Information is material by size only.

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

Comparability requires that: Please select all that apply.

Which one of the following statements does not describe verifiability?

Old information is not useful in making decisions.

Which one of the following statements is not true?

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?

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

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

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

Financial accounting is:

Financial accounting: please select all that apply.

Cost and management accounting: please select all that apply.

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

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

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?