Accounting for Decision Making
Exam Materials
Course Introduction
Accounting for Decision Making is designed to equip students with the knowledge and skills necessary to interpret, analyze, and utilize accounting information for effective managerial decision-making. The course explores the fundamental principles of financial and managerial accounting, emphasizing how managers use accounting data in planning, controlling, and evaluating business operations. Key topics include cost behavior, budgeting, performance measurement, and relevant costing for decision-making scenarios. Through case studies and real-world examples, students learn to apply accounting concepts to support strategic decisions, reinforce ethical considerations, and enhance organizational performance.
Recommended Textbook
Financial Accounting An Integrated Approach 5th Australia Edition by Trotman
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Page 2
Chapter 1: Introduction to Financial Accounting
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Sample Questions
Q1) Assets are initially recorded at cost.What assumption/concept underlies this procedure?
A) accounting entity
B) monetary
C) historical cost
D) going concern.
Answer: C
Q2) Which of the following organisations may not find the financial statements useful?
A) Australian Taxation Office
B) a church congregation
C) a university
D) all of the above.
Answer: D
Q3) What is the net profit for the period ending 30 June 2012?
A) $7000
B) $2000
C) $4000
D) $2000.
Answer: A
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Page 3
Chapter 2: Measuring and Evaluating Financial Position and
Financial Performance
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Sample Questions
Q1) Which of the following is NOT an expense of a company?
A) cost of goods sold
B) repayment of principal on a loan
C) repayment of interest on a loan
D) sales commission.
Answer: B
Q2) Which of the following is NOT a revenue of a company?
A) sale of goods
B) dividends received on shares
C) obtaining a loan from the bank
D) rent from premises.
Answer: C
Q3) What is James's working capital?
A) $2810
B) $450
C) $380
D) $430.
Answer: B
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Chapter 3: The Double-Entry System
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Sample Questions
Q1) Which of the following statements is NOT true?
A) If the total assets owned by a business total $110 000 and owners' equity totals $30 000,liabilities total $80 000.
B) If total assets decreased by $30 000 during a specific period and owners' equity decreased by $35 000 during the same period,the period's change in total liabilities was a $65 000 increase.
C) If total assets decreased by $50 000 during a specific period and owners' equity decreased by $40 000 during the same period,the period's change in total liabilities was a $10 000 decrease.
D) If total assets increased by $75 000 during a specific period and liabilities decreased by $10 000 during the same period,the period's change in total owners' equity was an $85 000 increase.
Answer: B
Q2) What were Livermore's retained profits at 30 June 2012?
A) $3750
B) $7250
C) $8750
D) $5500.
Answer: B
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Page 5
Chapter 4: Record-Keeping
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Sample Questions
Q1) An account from a painter for work completed on the office was received.The bill is due to be paid next month.The journal entry is:
A. DR Accounts payable \(\quad \) CR Repairs and maintenance expense
B. DR Accounts payable \(\quad \) CR Prepaid expenses
C. DR Repairs and maintenance expense \(\quad\) CR Accounts payable
D. No entry is required at this stage.
Q2) A set of accounts is called a:
A) trial balance
B) Spreadsheet
C) general ledger
D) balance sheet.
Q3) A chart of accounts is:
A) a means of ensuring that the debits equal the credits
B) a chronological record of all transactions
C) a list of the titles of all accounts in the ledger,together with an appropriate numbering system for the accounts
D) a trial balance.
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Chapter 5: Accrual Accounting Adjustments
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Sample Questions
Q1) What is the journal entry made by Albion Ltd on 15 December 2012?
A) DR Income tax expense
CR Income tax payable
B) DR Income tax payable
CR Cash
C) DR Income tax expense
CR Cash
D) DR Income tax payable
CR Income tax expense
Q2) What is the journal entry made by Albion Ltd on 30 June 2012?
A. DR Income tax payable \(\quad \) CR Income tax expense
B. DR Income tax expense\(\quad \) CR Cash
C. DR Income tax payable\(\quad \) CR Cash
D. DR Income tax expense\(\quad \) CR Income tax payable
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Chapter 6: Financial Reporting Principles, accounting
Standards and Auditing
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Sample Questions
Q1) Which of the following statements about accounting regulation is NOT true?
A) The Financial Reporting Council is responsible for providing broad oversight of the accounting standard-setting process in the private and public sectors.
B) One of the key functions of the Australian Accounting Standards Board is to oversee the operation of the Financial Reporting Council.
C) The Australian Securities and Investments Commission monitors compliance with accounting standards.
D) ASIC promotes honesty and fairness in financial markets.
Q2) Which of the following statements about agency theory is true?
A) Accounting information is viewed as something that is 'right'.
B) Conflicts of interest are regarded as unnatural.
C) It tends to focus on the future-oriented,decision-making role of accounting information.
D) It is concerned with contractual relationships among people.
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Chapter 7: Sustainability Reporting
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Sample Questions
Q1) Which of the following statements regarding corporate sustainability in NOT true?
A) Corporate sustainability creates long-term value to shareholders.
B) Corporate sustainability manages risks from economic,economic and environmental developments.
C) Corporate sustainability involves reducing and avoiding sustainability costs and risks.
D) Corporate sustainability is primarily concerned with maximising the return to shareholders to maintain the future of the organisation's return to its shareholders.
Q2) Which of the following is not a reason for having sustainability reports audited?
A) to provide improved reported process
B) to improve the quality of the information in sustainability reports
C) it is a requirement of Australian accounting standards
D) to increase the credibility of sustainability reports.
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9
Chapter 8: Internal Control and Cash
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Sample Questions
Q1) Which of the following is NOT correct? An effective internal control system for any organisation is one that:
A) discourages inefficient use of resources
B) helps management safeguard assets
C) assists management in controlling the enterprise
D) prevents collusion between employees.
Q2) The practice of issuing identification cards to employees ensures:
A) clear establishment of responsibility lines
B) maintenance of effective records
C) separation of record-keeping from handling assets
D) physical protection of sensitive assets.
Q3) Which of the following is NOT a benefit to be derived from an efficient system of internal control?
A) Assets are protected against damage or loss.
B) Defalcations are completely eliminated.
C) The conduct of the business is more orderly.
D) Errors are identified and corrected on a timely basis.
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Chapter 9: Inventory
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Sample Questions
Q1) The journal entries to record a credit sale under the perpetual inventory system will include a:
A) debit to purchases
B) credit to inventory
C) debit to sales
D) debit to inventory.
Q2) What was the balance of Pinkerton Ltd's accounts payable at the end of the period?
A) $20 000
B) $40 000
C) $90 000
D) $100 000
Q3) Which of the following inventory assumptions provides the best matching of revenues with expenses?
A) FIFO
B) moving weighted average
C) LIFO
D) it depends on the rate of inflation.
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11
Chapter 10: Noncurrent Assets
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Sample Questions
Q1) X buys Y for $1 million.The fair value of the following items is: property,plant and equipment $800 000; accounts receivable $160 000; loan from the bank $60 000; and provision for employee entitlements $80 000.The value of goodwill is:
A) $40 000
B) $10 000
C) $180 000
D) $820 000.
Q2) Where there is an asset revaluation increment that does not reverse a previous decrement,the amount of the increment is credited to:
A) retained profits
B) accumulated depreciation
C) asset revaluation reserve
D) capital.
Q3) What was the balance of accumulated depreciation at 31 December 2011?
A) $300 000
B) $280 000
C) $80 000
D) $230 000
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Chapter 11: Liabilities
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Sample Questions
Q1) Which of the following is a liability?
A) revenue received in advance
B) accrued revenue
C) prepayments
D) none of the above.
Q2) If the company had recorded the lease as a capital lease instead of an operating lease:
A) total assets and total liabilities would be higher than under an operating lease
B) total assets but not total liabilities would be higher than under an operating lease
C) total liabilities but not total assets would be higher than under an operating lease
D) total assets and total liabilities would be lower than under an operating lease.
Q3) Which of the following is NOT a liability?
A) provision for warranty B) reserves
C) accrued expenses
D) revenue received in advance.
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Chapter 12: Completing the Balance Sheet
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Sample Questions
Q1) Springtown Ltd issued 10 000 ordinary shares for $2.50 each,payable $1 on application,50 cents on allotment and $1 in calls as required.The journal entries to record the allotment of 10 000 shares would include a:
A) credit to cash,$5000
B) debit to allotment,$10 000
C) credit to share capital,$25 000
D) credit to share capital,$5000.
Q2) Which of the following statements about a bonus issue is NOT true?
A) Shareholders will only gain if the market value of the combined shares is greater than it was before the bonus issue.
B) Total shareholders' equity remains constant.
C) The total value of the firm must increase.
D) If a shareholder owned 10% of the company before the bonus issue,she or he would still own 10% after the bonus issue.
Q3) Investor P has control over another entity,Q.Q is referred to as the:
A) subsidiary entity
B) economic entity
C) associate entity
D) minority interest.
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Page 14
Chapter 13: Revenue and Expense Recognition: Additional Concepts
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Sample Questions
Q1) What is the effect of the error on the 2008 net profit?
A) It is $3000 too high.
B) It is $1800 too high.
C) It is $1200 too high.
D) It is $3000 too low.
Q2) If the rate of income tax were raised to 40%,what would be the effect on net profit?
A) It would increase by $700.
B) It would decrease by $700.
C) It would increase by $1000.
D) It would decrease by $1000.
Q3) At what point would you expect revenue from sales of building materials to be recognised?
A) during production
B) on completion of production
C) at point of sale or delivery
D) when cash is received.
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Page 15
Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) Income tax expense was $200 000 for the year.Income tax payable was $20 000 at the beginning and $30 000 at the end of the year.Cash payment for income tax reported on the cash flow statement using the direct method is:
A) $200 000
B) $190 000
C) $220 000
D) $230 000.
Q2) Which of the following,if repeated for several consecutive years,would indicate financial distress?
A) negative net operating cash flows
B) negative net investing cash flows
C) negative net financing cash flows
D) positive net investing cash flows.
Q3) Which of the following is classified as an operating activity in a cash flow statement?
A) dividend paid
B) amortisation of goodwill
C) sale of office equipment
D) income taxes paid.
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Good credit control is signalled by:
A) high debtors turnover and high days' sales in debtors
B) low debtors turnover and low days' sales in debtors
C) low debtors turnover and high days' sales in debtors
D) high debtors turnover and low days' sales in debtors.
Q2) Which of the following could NOT lead to an increase in debtors turnover?
A) receipt of cash from debtors
B) increase in selling price of goods
C) tighter credit controls
D) increase in cash sales.
Q3) Which of the following could explain an increase in the gross margin ratio?
A) a decrease in bad debts
B) decreasing prices of raw materials
C) a decrease in depreciation on a delivery vehicle
D) increasing advertising expenses.
Q4) Which of the following would NOT adversely affect return on equity?
A) an increase in company income tax
B) transfers from retained profits to general reserve
C) reduced margins in an aggressive market place
D) a decrease in operating profit.
Page 17
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Chapter 16: Accounting Policy Choices
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Sample Questions
Q1) Most accounting policy choices affect both the income statement and the balance sheet.Select the income statement account(s)that would be affected by a policy choice at the same time as the prepaid expenses balance sheet account.
A) revenue,bad debts expense
B) cost of goods sold expense
C) depreciation or amortisation expense
D) various expense accounts.
Q2) Changing the period of amortisation does NOT affect:
A) net profit
B) cash flow from operations
C) income tax liability
D) Amortisation expense
Q3) Which of the following would be increased by an accounting policy change involving the capitalisation of some repairs expenses?
A) expense
B) revenue
C) liabilities
D) net profit.
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Chapter 17: Appendix: Special Journals, subsidiary Ledgers and
Control Accounts
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Q1) Which of the following statements about a subsidiary ledger is NOT true?
A) The accounts in the subsidiary ledger represent components of the double-entry equation.
B) A subsidiary ledger is a set of ledger accounts that collectively represent a detailed analysis of one general ledger account classification.
C) At any time,the total of the accounts in the subsidiary ledger should equal the balance in the control account.
D) Every entry made to an account in the subsidiary ledger is also reflected in the control account.
Q2) What was the balance of the debtors control account at 31 January 2012?
A) $8400
B) $4100
C) $3900
D) $4400.
Q3) Which of the following may NOT be a subsidiary ledger?
A) creditors
B) property,plant and equipment
C) finished goods inventory
D) cost of goods sold.
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