Test Bank for Accounting Information for Business Decisions 1st Edition Which of the following is false? a Accounting keeps track of a business’ economic resources and activities, then reports the results and financial position to users who have an interest b Accounting is a mere numbers game The information is only useful to a limited few The reality is that few managers need accounting information to make quality operating decisions c Accounting focuses on the resources and activities of individual businesses d Products and services affect almost every minute of our lives Which of the following is an example of a manufacturer? a Dell Calculator b Bob’s lawnmower services c Air NZ d Qantas What is the primary difference between a manufacturer and a merchandiser? a Merchandisers purchase finished goods ready to sell, whereas a manufacturer must create the goods b Manufacturers purchase finished goods ready to sell, whereas a merchandiser must create the goods c Merchandisers not sell directly to the public, but rather only to manufacturers d Manufacturers buy the finished goods from a merchandiser then resell it, basically acting as a middle man Which type of business organisation generates the greatest volume of business? a Proprietorships b Partnerships c Company/corporation d Each generates roughly the same amount of business Managerial accounting information: a is a one size fits all approach to reporting business results b can be tailored to the needs of the internal user c follows GAAP in the reporting process d helps shareholders make decisions Financial accounting information: a is a one size fits all approach to reporting business results b can be tailored to the needs of the internal user c follows statements on management accounting in the reporting process d helps only external users make decisions Which of the following would a manager as a part of planning activities? a Compare estimates to benchmarks b Purchase inventory c Hire employees d Prepare cost estimates Operating activities consist of: a how products get made and sold b measuring actual operations and progress against a standard or benchmark 3 c establishing business goals d establishing means of achieving business goals Evaluating activities consist of: a establishing business goals b establishing a means of achieving business goals c providing feedback to managers to correct deviations from standards d setting benchmarks or standards Statements on management accounting: a are binding and contractual in nature b are general guidelines management accountants may turn to when faced with new situations to resolve c are developed primarily to guide the structure of reporting to external users d are issued by CPA Australia A budget: a quantifies management’s plans b determines and evaluates the cost of specific products or activities in a business c compiles actual costs for a given period d is used to determine if a product should be continued or discontinued Which of the following summarises the results of a business’ operating activities for a specific time period? a Income statement b Cash flow statement c Balance sheet d Payables ledger Which of the following summarises a business’ financial position on a given date? a Income statement b Cash flow statement c Balance sheet d Budget The business’ economic resources are: a Revenues b Liabilities c Owners' equity d Assets The business’ obligations to its creditors are: a Liabilities b Expenses 3 c Payments d Owners' equity Which of the following not cover a period of time? a Income statement b Cash flow statement c Balance sheet d Accounts receivable ledger A lack of solvency is demonstrated when: a assets are greater than liabilities b liabilities are greater than assets c revenues are greater than expenses d expenses are greater than revenues Financial position of a business can best be evaluated with which of the following? a Net income b Assets, liabilities and owner’s equity c Cash received and paid d Owner investments Which of the following summarises a business’ receipts and payments? a Budget 2 b Income statement c Balance sheet d Cash flow statement Answer Given Private enterprise is a system in which individuals own businesses that produce and sell services and/or goods for a profit These businesses include service businesses, merchandising businesses, and manufacturing businesses Answer Given Service businesses and merchandising/manufacturing businesses are trying to earn a profit from selling to a customer The difference is in what is sold Service businesses provide a service to their customers, while merchandising and manufacturing businesses provide goods to their customers Answer Given Accounting information helps decision-makers It aids managers by providing quantitative information about the business to help them in planning, operating, and evaluating the business’ activities Accounting information helps external decision-makers by providing them with financial statements containing economic information about the performance and state of the businesses Answer Given Entrepreneurship is a combination of three factors: the entrepreneur's ideas, the willingness of the entrepreneur to take risks, and the abilities of all of the business’ personnel to use capital to produce and sell goods or services Answer Given The two primary sources of capital are the owner's investment and borrowing The owner hopes to get a return on his/her investment greater than the amount that would be obtained from a different investment Borrowings require repayments, along with interest payments If the borrowed money cannot be repaid, then the business may become insolvent and cease operations Answer Given Company/corporations are legally established as entities separate from their owners The company/corporation issues capital stock to its owners as evidence of their ownership The stock is readily transferable to other owners Sole proprietorships and partnerships are not legally organised separately from their owners Answer Given The regulatory environments might be very different between Australia and the international location The tax structures might differ considerably This might lead to substantial tax saving Minimum wage laws and working condition standards are present in Australia and might be non-existent abroad This could lead to substantial labour savings abroad If the plant were located abroad, restrictions on the flow of cash might make it difficult to bring your profits home Some countries restrict foreign ownership of assets The supply lines might be much longer, and burdened by import/export regulations This might cause difficulties in delivering the product on a timely basis Answer Given This is the start of management The plan lays out the organization of and provides direction to the operating and evaluating activities Planning establishes the business’ goals and the means of achieving those goals Planning identifies the resources and employees necessary to achieve the business’ goals It also sets standards against which to measure achievement This allows management to adjust future strategy Answer Given Managers set goals, make decisions, and commit the business’ resources in an attempt to achieve those goals Planning provides organisation and direction for the business Operating involves gathering the necessary resources and employees and implementing the plans Evaluating measures the actual progress against standards or benchmarks so problems can be corrected Answer Given Evaluation measures the actual operations and progress against standards and then acts to correct deviations from the standards It is a continuous process that attempts to prevent problems from occurring and to minimise their effect if they occur Answer Given This set of activities allows the business to conduct its business according to plan They include gathering the necessary resources and employees to achieve the business’ goals Day-to-day decisions are made about how to best achieve the goals Answer Given The budget is the result of quantifying management plans and showing the impact of these plans on the business’ operations Once the planned activities have occurred, managers can evaluate the results against the budget to make sure that the actual operations have achieved the desired results Answer Given Cost analysis is the process of determining and evaluating the costs of specific products or activities within a business Cost analysis is used when making decisions about these products or activities Such a decision might include whether to continue a particular product line Answer Given Manufacturing cost reports are used to monitor and evaluate a business’ operations The manufacturing cost report can highlight variances of actual costs from budgeted costs This might allow the manager to take corrective action Answer Given Accounting principles are the set of currently accepted principles, procedures, and practices that are used for financial reporting in Australia and New Zealand The principles must be followed in the external reports of all businesses that sell stock to the public in Australia and New Zealand, as well as many other businesses Answer Given A business’ income statement summarises the results of its operating activities for a specific time period and shows the business’ profit for that period This is what the business charged its customers for services or goods provided to them It also summarises the business’ expenses This is the cost to the business of providing those goods and services Net income is the difference between revenues and expenses Answer Given The assets section lists the business’ economic resources, such as cash, inventories, and equipment The liabilities section lists the business’ obligations to its creditors, such as banks, suppliers, and employees The owners' equity section shows the owner's current investment in the assets of the business (the contributions of the owner plus the cumulative retained earnings of the business) Answer Given The International Federation of Accountants (IFAC) and AICA (Australian Institute of Chartered Accountants) and, NZICA (New Zealand Institute of Chartered Accountants) code of ethics considers issues such as selfdiscipline, honourable behaviour, moral judgments, the public interest, professionalism, integrity, and technical and ethical standards The different code of ethics addresses competence, confidentiality, integrity, objectivity, and resolution of ethical conduct The code of ethics also addresses objectivity, resolution of conflicts, professional competence, confidentiality, tax practice, cross-border activities and publicity It also addresses independence, fees, and activities incompatible with the practice of accounting, advertising and soliciting Answer Given Many situations and decisions are conducted in an environment in which there is not a clear right or wrong Many situations fall between the two extremes A code of ethics is designed to provide guidance to various people in maintaining high ethical standards when faced with difficult decisions Accounting is an information tool which can help make good business decisions True False Company shares Unless you are a business owner, you will not be making business decisions True False Company shares Many businesses have no need for accounting information and can actually exist without an accounting system True False Company shares Accounting keeps track of a business’ economic resources and activities, then reports the results and financial position to users who have an interest True False Company shares The term ‘Private Enterprise’ means that businesses keep their accounting information private True False Company shares A dental surgery is an example of a service business True False Company shares Woolworths is an example of a retailing business True False Company shares Sources of capital for a business include owner investments, borrowing or seeking investments from outsiders True False Company shares Sole proprietorships are the most common form of business and as such, conduct more volume of business than partnerships and corporations put together True False Company shares A business’ accounting system would provide information for both external and internal users True False Company shares An internal user would receive “tailor-made” information from the accounting system True False Company shares An external user would receive “tailor-made” information from the accounting system True False Company shares External users possess skills to extract the information they need for decisions from the accounting information of a business True False Company shares Feedback from operations can be effectively used in the planning, operating or evaluating stages of a business True False Company shares Operating refers to the set of activities that the business engages in to conduct its business according to its plan True False Company shares Evaluating is the process of establishing the business’ goals and objectives True False Company shares ... “tailor-made” information from the accounting system True False Company shares External users possess skills to extract the information they need for decisions from the accounting information of a business. .. difficult decisions Accounting is an information tool which can help make good business decisions True False Company shares Unless you are a business owner, you will not be making business decisions. .. Company shares Many businesses have no need for accounting information and can actually exist without an accounting system True False Company shares Accounting keeps track of a business economic