Question 1

Which of the following is used to calculate average assets for the return on assets calculation?

Accepted Answer

Average assets are calculated by adding the beginning and ending assets and dividing the sum by 2. This is because we want to take into account the average level of assets over the entire period, rather than just the value at the beginning or end of the period. Therefore, the correct choice is C.

Question 2

The income statement shows whether or not a business can generate enough cash to pay its liabilities.

Accepted Answer

The income statement shows a business's revenue and expenses over a specified period. It does not directly show whether the business can generate enough cash to pay its liabilities. The cash flow statement is used for this purpose.

Question 3

If an analyst wants to know how likely it is that a company would be able to earn a profit,which of the following statements would be MOST useful?

Accepted Answer

The income statement provides information on a company's revenue, expenses, and profits, making it the most useful statement in determining the likelihood of a company earning a profit.

Question 4

You can evaluate the economic resources,debt and overall financial position of a company in which of the following financial statements?

Accepted Answer

The balance sheet provides information on a company's economic resources, debts, and overall financial position at a specific point in time. It includes assets, liabilities, and equity, which are important metrics for evaluating a company's financial health. The cash flow statement provides information on a company's cash inflows and outflows during a specific period, while the income statement shows a company's revenue, expenses, and profit or loss over a period of time. The statement of changes in equity shows the changes in a company's equity accounts over a period of time, but it does not provide as comprehensive information on a company's financial position as the balance sheet.

Question 5

Which of the following concepts (or principles)require an assumption that the entity will remain in operation for the foreseeable future?

Accepted Answer

The going concern assumption assumes that the entity will remain in operation for the foreseeable future, which is necessary for the financial statements to be prepared on this basis. The Entity concept, Accounting period concept, and Accrual basis of accounting do not necessarily require this assumption.

Question 6

The financial examination of a company's financial records is called a(n):

Accepted Answer

An audit is a structured and systematic review of a company's financial statements and records to evaluate the accuracy and reliability of the reported information. It aims to verify whether the financial statements follow the accounting principles and rules and comply with the applicable laws and regulations. Therefore, a financial examination of a company's financial records is called an audit.

Question 7

Assume MetAmbit Ltd had profit of $2500 for the year ended 31 December 2016.Its beginning and ending assets were $35,500 and $18,500,respectively.Calculate MetAmbit's return on assets (ROA).(Round your percentage answer to two decimal places. )

Accepted Answer

ROA = Net Income / Average Total Assets= 2500 / ((35500 + 18500) / 2)= 2500 / 27000= 0.0926 or 9.26%

Question 8

Accounting firms in public practice are all large,multinational partnerships.

Accepted Answer

Although there are large multinational accounting firms in public practice, there are also small and medium-sized accounting firms in public practice. These can be local, regional, or national firms. Not all accounting firms in public practice are large multinational partnerships.

Question 9

The explanation of why the profit differs from change in cash balance for the period is explained in which of the following statements?

Accepted Answer

The cash flow statement explains the changes in cash balance over a period and breaks down the sources and uses of cash. The income statement shows the profit or loss for the period, which may not be the same as the change in cash balance due to non-cash expenses or revenues included in the profit calculation. The balance sheet shows the financial position of the company at a specific point in time, while the statement of changes in equity shows the changes in equity during a period.

Question 10

An accountant working in public practice may provide management consulting services.

Accepted Answer

An accountant working in public practice may offer various services, including accounting, tax, auditing, and management consulting services. Management consulting services may include areas such as financial planning, strategic planning, operational efficiency, and business restructuring, among others. However, it is important to note that an accountant in public practice must adhere to professional standards and ethical considerations when offering these services.

Question 11

The return on assets is calculated by:

Accepted Answer

The return on assets is calculated by dividing profit by average assets to determine how much profit a company generates per dollar of assets.

Question 12

Australian Accounting Standards are exactly the same as the International Financial Reporting Standards (IFRS).

Accepted Answer

While Australian Accounting Standards are largely based on the IFRS, they do have some minor differences and additional requirements specific to the Australian context. These differences are outlined in the Australian Accounting Standards Board's Reduced Disclosure Requirements, which allows certain entities to prepare financial statements using reduced disclosures in order to reduce the burden of compliance.

Question 13

Which of the following is NOT one of the main professional accounting bodies in Australia?

Accepted Answer

While there is a professional accounting organization called CPA Australia, there is no organization called Certified Public Accountants of Australia. Therefore, option C is not one of the main professional accounting bodies in Australia. Options A, B, and D all exist as professional organizations in Australia.

Question 14

If an analyst wants to know how likely it is that a business would be able to pay off all its debts,which of the following statements would be MOST useful?

Accepted Answer

The balance sheet provides information about a company's assets, liabilities, and equity at a specific point in time. An analyst can use this information to calculate the company's debt-to-equity ratio, which gives an indication of how well the company is able to meet its debt obligations.

Question 15

The Australian conceptual framework encompasses non-profit organisations as well as for-profit ones.

Accepted Answer

This statement is true. The Australian conceptual framework for financial reporting applies to all entities, including both for-profit and non-profit organizations.

Question 16

Which of the following activities would NOT be included in the role of an accountant in public practice?

Accepted Answer

Internal auditing is typically associated with the role of an internal auditor within a company, not the role of an accountant in public practice. The other activities listed (liquidation, tax planning, and external auditing) are all within the scope of an accountant in public practice.

Question 17

Which of the following concepts (or principles)would dictate that a person with three different businesses keeps three different bank accounts?

Accepted Answer

The entity concept dictates that a business is treated as a separate entity from its owner(s), and therefore each business should have its own separate bank account to track its transactions and finances distinctly.

Question 18

Bill Rogers has three different businesses.He has only one bank account for transactions relating to all of his various businesses.Which of the following concepts or principles of accounting is Bill violating?

Accepted Answer

Bill Rogers is violating the entity concept, which states that a business owner should keep separate records and accounts for his personal transactions and different businesses. Mixing transactions of different businesses in a single account can blur the financial position and performance of each business, resulting in inaccurate financial reporting.

Question 19

You can evaluate business performance in terms of profitability by analysing which financial statement?

Accepted Answer

The income statement provides information about a company's revenue, expenses, and net income or loss. It shows how much profit a company is making or if it is incurring losses. This makes it the appropriate financial statement to evaluate business performance in terms of profitability. The balance sheet provides information about a company's assets, liabilities, and equity at a particular point in time, while the cash flow statement shows how cash is coming in and going out of the business. While both these statements are important in evaluating a company's financial health, they do not directly indicate profitability.

Question 20

In Australia,Accounting standards are formulated by the:

Accepted Answer

Accounting standards in Australia are formulated by the Australian Accounting Standards Board (AASB), which is an independent statutory body under the Australian Securities and Investments Commission (ASIC). The Financial Reporting Council (FRC) provides oversight and approves the AASB's standard-setting activities, but it does not directly formulate the accounting standards. The International Accounting Standards Board (IASB) sets global accounting standards, but it does not have direct authority in Australia. ASIC is responsible for enforcing compliance with accounting standards, but it does not formulate the standards themselves. Therefore, the correct answer is A) AASB.

Quiz 1: The Role of Accounting in Decision Making