Question 1

Which of the following is not a benefit of a business plan?

Accepted Answer

A business plan is meant to provide a clear direction for the business entity and help set defined goals for management and employees. It is not meant to allow management to set their own goals, as these goals should be aligned with the overall direction of the business as outlined in the plan.

Question 2

The information that would be of most interest to an organisation's production manager is:

Accepted Answer

Continuity of orders is crucial for production as it allows the manager to plan resources, allocate labor, and keep the production line running efficiently. Without a steady stream of orders, a production manager may have to deal with costly disruptions and delays which could affect the production line's output and, ultimately, profitability. The other options, such as paying off debts or annual dividends, are more related to financial management and do not directly impact production. The company tax rate may also be important but is more relevant to overall financial planning rather than production specifically.

Question 3

Companies operating in Australia and overseas must follow which accounting standards?

Accepted Answer

As companies operating in Australia and overseas have to comply with different regulatory and accounting requirements, they must follow both IFRS (International Financial Reporting Standards) and local GAAP (Generally Accepted Accounting Principles), depending on the jurisdiction in which they operate. This ensures that companies provide accurate and relevant financial statements that can be compared across different regions and countries.

Question 4

Which of the following reports would not be prepared for financial accounting purposes?

Accepted Answer

The statement of management performance is not a report prepared for financial accounting purposes. The other options, statement of financial position, statement of cash flows, and statement of profit or loss, are all financial accounting reports.

Question 5

The internal user of accounting information is the:

Accepted Answer

The office manager is an internal user of accounting information as they are responsible for managing the office and ensuring that financial records are accurate and up-to-date. Customers, local councils, and auditors from the Australian Tax Office are external users of accounting information who may use it for their own purposes, but are not directly involved in managing the business or its finances.

Question 6

Which statement is correct?
The use of one set of accounting standards by companies throughout the world:

Accepted Answer

If companies worldwide use the same set of accounting standards, they can reduce the cost of preparing financial reports. This is because they no longer need to spend resources to comply with different accounting standards in different jurisdictions. This can also streamline processes and make it easier for companies to expand globally.

Question 7

The content of management accounting reports is governed by:

Accepted Answer

Management accounting reports are designed to meet the internal needs of an organization, and there are no specific external rules or regulations governing their content. These reports are tailored to the specific requirements of management for planning, decision-making, and control purposes, unlike financial accounting reports which are governed by standards and regulations.

Question 8

Which of the following is not a business transaction?

Accepted Answer

Purchasing a new home is a personal transaction and not a business transaction. The other options involve financial dealings directly related to the business.

Question 9

A supplier,when considering offering credit to a new customer,is most interested in the customer's:

Accepted Answer

A supplier's main concern when offering credit is the customer's ability to pay off debts as they fall due. This ensures that the supplier will be paid on time and not have to deal with bad debt. Annual dividends, taxable income, and compliance with accounting standards are not as relevant to a supplier's credit decision.

Question 10

The Corporations Act 2001 is primarily enforced by the:

Accepted Answer

The Corporations Act 2001 is primarily enforced by the Australian Securities and Investments Commission (ASIC), which is responsible for ensuring compliance with the Act and regulating corporations, financial markets, and other businesses in Australia. The other options listed (Financial Reporting Council, Australian Securities Exchange, and Australian Accounting Standards Board) do not have primary responsibility for enforcement of the Corporations Act 2001.

Question 11

Which of these would not be considered an internal user of accounting information?

Accepted Answer

The chairman of CPA Australia is an external user of accounting information, as they are not an employee or member of the organization for which the accounting information is being prepared. The other options listed are all internal users who would have direct access and use of the accounting information within their organization.

Question 12

Which of the following is not an accounting report?

Accepted Answer

A statement of employee job satisfaction is not an accounting report. It is a report related to human resources or organizational behavior. The balance sheet, income statement, and statement of cash flows are all important financial reports that are commonly used in accounting.

Question 13

An external user of accounting information is the:

Accepted Answer

An external user is someone who is outside the organization, and suppliers are considered external users because they rely on accounting information, such as invoices and payment histories, to maintain their own financial records. The other options are internal users as they work within the organization.

Question 14

The evaluation process of a business plan allows:

Accepted Answer

The evaluation process of a business plan allows for more effective use of scarce resources, improvement in internal communications, and detection of variances between actual and budgeted results. Therefore, all of the above choices are correct.

Question 15

A bank requesting accounting information is looking for:

Accepted Answer

When a bank requests accounting information, its main concern is to assess the financial health of the entity and their ability to repay a loan. The accounting information can help the bank determine the creditworthiness of the entity and evaluate the risks associated with lending money to them. The amount of tax that should be paid and the cash flows from dividends paid may be relevant in certain contexts, but they are not the primary focus of the bank's request. Environmental aspects of the business are generally not a concern for banks seeking accounting information.

Question 16

The steps in the process of accounting take place in the following order:

Accepted Answer

The first step in accounting is identifying the relevant financial transactions, followed by measuring them and then communicating them through financial statements. Finally, decision making takes place based on the information provided in the financial statements. Therefore, the correct order is: identifying, measuring, communicating, decision making, making option B the best choice.

Question 17

The number of countries preparing financial reports using global accounting standards is:

Accepted Answer

As of August 2021, there are over 140 countries using International Financial Reporting Standards (IFRS), which are global accounting standards. Therefore, the correct answer is D: more than 120.

Question 18

Which of the following are differences between management and financial accounting?
I.Types of reports produced.
II.The users of reports.
III.The format of reports.
IV.Frequency of reports.

Accepted Answer

Management and financial accounting differ in the types of reports produced, the users of the reports, the format of the reports, and the frequency of reports. Management accounting focuses on internal decision-making and often involves more flexible, frequent, and detailed reports, while financial accounting targets external stakeholders with standardized, periodic financial statements.

Question 19

Management accounting reports are prepared:

Accepted Answer

Management accounting reports are prepared to provide up-to-date information to managers for decision making. These reports include budgets, forecasts, variance reports, and other financial and non-financial information that helps managers make informed decisions about the business. The information presented in these reports is usually not based solely on historical figures, but rather includes both past and projected information. While management accounting reports may comply with certain accounting standards, they are not necessarily bound by GAAP or IASB guidelines. Shareholders may receive some information from these reports, but they are not the primary audience.

Question 20

An SME (small to medium sized enterprise)is a business entity with:

Accepted Answer

An SME is typically defined as a business with annual revenue between $2 million and $250 million, which distinguishes it from micro-enterprises and large corporations.

Quiz 1: Introduction to Accounting and Business Decision Making