Question 1

Regarding accounting information and records,a proprietorship is an entity entirely separate from its:

Accepted Answer

A proprietorship is owned by one person, who is also responsible for all of the financial and operating decisions of the business. Therefore, the proprietorship and its owner are not separate entities for accounting purposes.

Question 2

Which of the following is TRUE for a proprietorship?

Accepted Answer

A proprietorship has a single owner, as opposed to partnerships or corporations which have multiple owners.

Question 3

From a legal perspective,a proprietorship is:

Accepted Answer

A proprietorship is not a distinct entity from its proprietor. This means that the proprietor is personally responsible for all the liabilities and debts of the business. It is not a separate legal entity, unlike a company or partnership. Hence, options A, B, and D are incorrect.

Question 4

By definition,which of the following represents the owners of a company?

Accepted Answer

Shareholders are the owners of a company as they own shares or stocks in the company. Employees work for the company, customers buy products or services from the company, and creditors lend money to the company, but none of them have ownership rights.

Question 5

A proprietor has unlimited liability for the debts and obligations of the proprietorship.

Accepted Answer

A proprietor is personally responsible for any debts, losses or liabilities incurred by the proprietorship. There is no legal separation between the business and the proprietor, making the proprietor fully liable for any and all obligations.

Question 6

Phillip and Reed have developed a new technology for home computer systems.However,they need to raise a large amount of capital to build the production and support facilities to market their product successfully.Which of the following business types would be best suited to help the business raise the necessary capital to begin production?

Accepted Answer

A company is the best choice because it allows for the sale of shares to raise capital, which can then be used to build production and support facilities. A proprietorship and partnership do not offer the same opportunities to raise capital, and a limited liability partnership is typically used for professional services firms, and may not be appropriate for a technology product.

Question 7

The concept of sustainability in terms of business operations means that:

Accepted Answer

The answer of The concept of sustainability in terms of...

Question 8

In a limited liability company the business,not the owners,is responsible for the company's debts.

Accepted Answer

This is one of the key features of a limited liability company (LLC) - the owners have limited liability for the company's debts and obligations. The business entity itself is responsible for the debts, not the individual owners. This protects the owners' personal assets from being seized to pay off the company's debts.

Question 9

If a proprietorship cannot pay its debts,the creditors may make claims against the:

Accepted Answer

As a proprietorship is not a separate legal entity from its owner, the owner's personal assets are also at risk if the business cannot pay its debts. Therefore, the creditors may make claims against the assets of the proprietor (which includes personal assets).

Question 10

An auditor has been offered a gift of golf clubs as a token of appreciation by a manager in the firm being audited.Which of the following principles in the APESB Code of Conduct would be most relevant in deciding whether to accept the gift?

Accepted Answer

The principle of objectivity requires auditors to remain unbiased and free from conflicts of interest. Accepting a significant gift from a manager in the firm being audited could compromise the auditor's objectivity and create a conflict of interest. Therefore, the auditor should carefully consider whether accepting the golf clubs would be in compliance with the principle of objectivity.

Question 11

Caleb Brown has been the sole owner of a bicycle sales and repair shop for many years.Which of the following business types would best protect Caleb's personal assets from product liability exposure?

Accepted Answer

A limited liability company (LLC) would best protect Caleb's personal assets from product liability exposure. An LLC separates the owner's personal assets from the business assets, therefore if the business were to face a product liability lawsuit, Caleb's personal assets would not be at risk. A sole proprietorship, like Caleb's current business, does not offer this protection. A partnership would also not protect Caleb's personal assets unless it was structured as a limited liability partnership (LLP).

Question 12

The International Accounting Standards Board is made up of members from the private sector and has no public sector involvement.

Accepted Answer

The International Accounting Standards Board (IASB) is an independent organization that consists of 14 members who come from various countries and backgrounds, including academia, accounting professions, and other areas of expertise. While the IASB works closely with regulatory and governmental bodies around the world, it is not directly affiliated with any public sector entities.

Question 13

Similar to partnerships,in a limited-liability company,the members are personally liable for the debts and obligations of the business.

Accepted Answer

Unlike in a partnership, in a limited-liability company (LLC) the members are typically not personally liable for the company's debts and obligations. Instead, their liability is limited to their investment in the company.

Question 14

Which of the following is NOT a characteristic of a traditional partnership?

Accepted Answer

A partnership is not owned by shareholders, but rather by the individual partners who co-own the business. This is a characteristic of a corporation. In a traditional partnership, personal assets may be seized to satisfy debts, each partner has binding authority, and there are two or more co-owners.

Question 15

In Australia,there is both private and public sector involvement in the standard-setting process.

Accepted Answer

In Australia, both private and public sector organizations are involved in the development of standards. The Standards Australia is the main standards development organization, which is a non-government, not-for-profit organization that develops and maintains national standards. However, in some cases, the Australian government and other public organizations are also involved in the standards development process.

Question 16

Which of the following is an example of an external sustainability issue?

Accepted Answer

Greenhouse gas emissions are an example of an external sustainability issue because they contribute to global environmental problems that affect society and the planet as a whole. Profitability, on the other hand, is an internal issue that is more closely tied to the success or failure of the business itself.

Question 17

A relatively low amount of government regulation is a key advantage of a:

Accepted Answer

Proprietorships are the simplest form of business organization, where there is only one owner. The government regulation on proprietorships is relatively low compared to other business forms, such as partnerships or corporations, making it an advantage.

Question 18

David has decided to open an auto-detailing business.He will pick up a car from the client,take it to his parents' garage,detail it,and return it to the client.If he does all of the work himself and takes no legal steps to form a special organisation,which type of business organisation,in effect,has he chosen?

Accepted Answer

Since David is doing all the work himself and has not taken any legal steps to form a special organisation, he has essentially created a proprietorship. This means that he is the sole owner and responsible for all aspects of the business, including any profits or losses.

Question 19

A proprietorship is created by:

Accepted Answer

A proprietorship is a business owned and operated by one individual. It is the simplest and most common form of business entity. No formal filing is required to start a proprietorship, and the individual owner has complete control and responsibility for the business. Choices A, C, and D refer to the creation of other types of business entities (partnerships, corporations) that require different steps and legal filings.

Question 20

A company possesses all but one of the following characteristics.Which of the following is NOT a characteristic of a company?

Accepted Answer

If a company cannot pay its debts, lenders cannot take the owners' personal assets to satisfy the obligations. This is one of the key benefits of forming a company, as it limits the personal liability of the owners.

Quiz 1: The Role of Accounting in Decision Making