Accounting for Decision Making Pre-Test Questions
Course Introduction
Accounting for Decision Making introduces students to the principles and practices of using accounting information as a vital tool for informed managerial decision making. The course covers key topics such as financial statement analysis, cost behavior, budgeting, performance measurement, and the application of accounting data in planning and control. Emphasizing real-world scenarios, it equips students with the analytical skills necessary to interpret financial data and make strategic choices that drive organizational success. Students will develop a thorough understanding of how accounting information influences both short-term operations and long-term business strategies.
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Accounting Business Reporting for Decision Making 6th Edition by Jacqueline Birt
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Chapter 1: Introduction to Accounting and Business Decision Making
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Q1) The ACCC is responsible for:
A) enforcement of the Corporations Act 2001.
B) the stability of the Australian financial system.
C) administration of the Competition and Consumer Act 2010.
D) the ASX Market and Listing Rules.
Answer: C
Q2) A company's financial statements include the Statement of _____________________ Income,the Statement of Financial Position and the Statement of Cash Flows.
Answer: Comprehensive
Q3) Which of the following is not a business transaction?
A) Incurring interest on a business loan.
B) A business owner purchasing a new home.
C) Purchasing inventory.
D) Receiving cash payment for services provided.
Answer: B
Q4) The major constraint on the preparation of financial information is ______________ .
Answer: cost
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Chapter 2: Accounting in Society
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Q1) Which of these is not an ethical principle?
A) Do unto others as you would have them do unto you.
B) The end justifies the means.
C) The greatest good for the greatest number.
D) The end does not justify the means.
Answer: B
Q2) Which of the following elements of triple bottom line reporting
A)Environmental performance.
B)Economic performance.
C)Social performance.
D)None of the above.
Answer: A
Q3) Not compromising your professional judgement because of bias or a conflict of interest is known as maintaining ______________.
Answer: objectivity
Q4) Ethically,businesses are obliged to act in the way expected of them by ____________.
Answer: society
Q5) Directors owe a legal duty to their company to act with _______ and _________.
Answer: care,diligence
4
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Chapter 3: Business Structures
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Sample Questions
Q1) The full implementation of differential reporting came into effect on:
A) 1 July 2013.
B) 1 January 2014.
C) 1 July 2014.
D) 1 January 2015.
Answer: A
Q2) The Reduced Disclosure Requirements implemented by the AASB in 2013 enable:
A) tier 1 entities to reduce the volume of disclosure notes to the financial statements.
B) all entities to reduce the number of financial statements produced.
C) tier 2 entities to reduce the volume of disclosure notes to the financial statements.
D) all entities to reduce the volume of disclosure notes to the financial statements.
Answer: C
Q3) Manufacturing entities are involved in the conversion of raw materials into _____________ _____________.
Answer: finished goods
Q4) A major advantage of trusts is that they ________________ tax payments.
Answer: minimise
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5
Chapter 4: Business Transactions
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Q1) Borrowing $10 000 from the bank to purchase new machinery will result in a (debit/credit)_________ entry to the asset machinery account and a (debit/credit)_________ entry to the liability bank loan account.
Q2) _________ is added to opening equity to calculate ending equity.
Q3) A business borrowed $200 000 from GT Finance.The debit and credit entries for this transaction are:
A) debit cash $200 000; credit loan from GT Finance $200 000.
B) debit loan from GT Finance $200 000; credit cash $200 000.
C) debit accounts payable $200 000; credit loan from GT Finance $200 000.
D) debit loan from GT Finance $200 000; credit accounts payable $200 000.
Q4) If total claims equal $950 000 and equity is $460 000,assets must be:
A) $590 000
B) $490 000
C) $950 000
D) $460 000
Q5) Which of the following statements is incorrect?
A) A debit entry is used to increase expenses.
B) A credit entry is used to increase equity.
C) A credit entry is used to increase assets.
D) A debit entry is used to increase assets.
Page 6
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Chapter 5: Balance Sheet
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Q1) Accounts payable,GST payable,and accrued expenses are classified as _____________ and _____________ _____________ on the balance sheet.
Q2) Blue Sea Resort Ltd acquired all the shares in Scuba Ltd for $750 000.The fair value of the assets acquired was $1 000 000 and the fair value of the liabilities assumed was $300 000.The amount of goodwill acquired by Blue Sea Resort Ltd is:
A) $750 000
B) $700 000
C) $ 50 000
D) $300 000
Q3) ________________ assets are non-monetary assets without physical form.
Q4) Inventory is categorised in the balance sheet as a:
A) current asset.
B) current liability.
C) non-current asset.
D) non-current liability.
Q5) Financial information that is complete,neutral,and free from error is providing a __________ representation for its users in their decision making.
Q6) Liabilities are known as ______________ claims on the assets of an entity.
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Chapter 6: Statement of Profit or Loss and Statement of
Changes in Equity
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Sample Questions
Q1) Which of the following will be classified as income?
A) Interest received.
B) Fees charged for services provided.
C) Gain on sale of equipment.
D) All of the above.
Q2) For the month of October: total sales = $125 000,total purchases = $80 000,beginning inventory = $32 000 and ending inventory = $44 000.The cost of sales for October is:
A) $68 000
B) $125 000
C) $45 000
D) $8 000
Q3) An owner contributes $50 000 to expand the business.This transaction would:
A) increase income.
B) increase expenses.
C) increase capital.
D) decrease income.
Q4) For a transaction to be recognised as income in the statement of profit or loss the elements must satisfy both the ________________ and ________________criteria as specified in the Conceptual Framework.
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Chapter 7: Statement of Cash Flows
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Q1) The primary purpose of the statement of cash flows is to:
A) provide information about the profit or loss during the accounting period.
B) provide information about the cash receipts and cash payments made during the accounting period.
C) show the deficit of cash during the period.
D) show the cash balance at the end of the period.
Q2) Which relationship between items in the statement of cash flows (CF)and items in the balance sheet (BS)is not correct?
A) Cash from investing activities (CF); Non-current assets (BS).
B) Cash from financing activities (CF); Non-current liabilities and equity (BS).
C) Cash from financing activities (CF); Non-current assets (BS).
D) Cash from operating activities (CF); Current assets and liabilities (BS).
Q3) The receipt of dividends would be classified as a cash inflow from ______________ activities.
Q4) Free cash flow is:
A) the cash available to loan to other entities.
B) the cash available to pay current liabilities.
C) the cash available to repay debt, pay dividends and expand operations.
D) the cash available to purchase supplies.
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Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) A high times debtors turnover indicates:
A) the entity's credit sales have decreased.
B) a small percentage of the entity's sales are on credit.
C) the entity is more efficient in collecting monies owing from customers.
D) customers are taking longer to pay their accounts.
Q2) Liquidity ratios measure the ability of an entity to:
A) remain a going concern.
B) meet its short-term obligations and unexpected cash needs.
C) generate profit.
D) all of the options are correct.
Q3) It is argued that the cash flow ratio is a better measure of ________ than the current ratio as it uses cash flows generated over the whole reporting period rather than at a particular point in time.
Q4) The gross profit margin is calculated as gross profit divided by _____________
Q5) A measure of long-term solvency is:
A) debt ratio.
B) debt to equity ratio.
C) equity ratio.
Page 10
D) all these options measure long-term solvency.
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Chapter 9: Budgeting
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Q1) Sharpe Ltd made these estimates for the six months ending 31 December. Estimates: \( \begin{array}{lr}\text { Cash receipts from services provided } & \$ 60000 \\ \text { Cash payments for expenses, including rent paid in advance }(\$ 3000) & 43000 \\ \text { Purchase of equipment }(\$ 1500 \text { will not be paid until February) } & 20000 \\ \text { Depreciation of equipment } & 4000 \\ \text { Borrowings } & 15000\end{array} \)
The cash balance at 1 July is $13 000.The estimated cash balance at 31 December is: A) surplus of $13 500. B) surplus of $26 500. C) surplus of $11 000. D) deficit of $15 000.
Q2) Applicable budgets for an accounting firm are likely to include: A) budgeted balance sheet. B) expenses budget. C) labour budget.
D) each of the above budgets.
Q3) ____________________ management involves setting business targets in other than just financial terms.
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Page 11
Chapter 10: Costvolumeprofit Analysis
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Q1) Using the information below,calculate the weighted average contribution margin. \(\begin{array}{|l|r|r|}
\hline & \text{ Product A} & \text{ Product B } \\
\hline \text{ Contribution margin }&\$ 60.00 &\$ 20.00 \\
\hline \text{ Sales Mix }& 40 \% & 60 \% \\
\hline \text{ Fixed costs \$ 30000} & & \\ \hline
\end{array}\)
A) $36
B) $42
C) $32
D) $48
Q2) Which of these is not a fixed cost?
A) Depreciation on motor vehicles.
B) Direct labour.
C) Management salaries.
D) Lease payments.
Q3) The mix between fixed and variable costs in the cost structure of an entity is known as operating _______________.
Q4) The horizontal axis of a CVP graph represents the ____________________ level.
Page 12
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Chapter 11: Costing and Pricing in an Entity
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Q1) Setting high prices when products are first introduced into the market is known as:
A) peak-load pricing.
B) penetration pricing.
C) price discrimination.
D) price skimming.
Q2) Which of the following statements is true regarding the traceability of direct costs?
A) Source documents can be used to link a resource to a specific cost object.
B) The accuracy of the costs of the cost object are increased by the more costs that can be directly traced.
C) Entities should only commit resources to trace costs if such costs are deemed important or the cost of tracking is minimal.
D) All of the statements are true.
Q3) The ____________________ value chain represents all the linked activities undertaken within an entity from the inception of the product or service,to the final delivery to customers.
Q4) ________________ pricing is the practice of setting low prices when new products are introduced to increase market share.
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Chapter 12: Capital Investment
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Sample Questions
Q1) A major deficiency of the ARR method is:
A) it ignores the importance of cash as the ultimate resource.
B) profits and costs are measured the same way.
C) it ignores the timing of cash flows and subsequent profits.
D) it is too simplistic to be an appropriate decision-support tool by itself.
Q2) The dividend imputation scheme means investors in companies that pay income tax are able to claim back which of the following against their dividend income?
A) tax expenses.
B) tax credits.
C) tax debits.
D) the full amount of dividend income.
Q3) When considering whether to keep a machine or replace it,the original cost of the machine (is/is not)________ a factor that must be considered in the decision making process.
Q4) Investments requiring specialised services must also consider whether or not the ____________ with the relevant skills will be available when they are needed.
Q5) A project with a higher discount rate will generally have a (higher/lower)__________level of risk.
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Chapter 13: Financing the Business
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Sample Questions
Q1) How do entities manage their customer credit policies?
A) Ask potential customers to complete a credit-scoring questionnaire.
B) All of these options help entities to manage their credit policies.
C) Set upper credit limits.
D) Maintain strict payment terms.
Q2) Common types of short-term finance include:
A) commercial bills and bank under-drafts.
B) bank overdrafts and trade debit.
C) paid taxes and trade credit.
D) accrued wages and floor-plan finance.
Q3) A low level of ________ debts is a measure of the success of collection policies for accounts receivable.
Q4) Foreign investment,where capital is invested in an entity by an investor with significant influence over the key policies of the entity,is known as:
A) portfolio investment.
B) hybrid investment.
C) indirect investment
D) direct investment.
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Chapter 14: Performance Measurement
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Sample Questions
Q1) Appointing managers to be responsible for the performance of specific divisions of an entity assists in which of the following?
A) Freeing up central management time for strategic long-term planning.
B) Improving the commitment and motivation of managers.
C) Improving the timeliness of and access to information as a result of localised decision making.
D) All of the options are ways in which appointing division managers assists an entity.
Q2) If an investment is $400 000,credit sales are $350 000 and cash sales are $200 000,the investment turnover ratio is:
A) 0.73 times.
B) 0.88 times.
C) 1.38 times.
D) 2 times.
Q3) Which of the following could be included in a director's salary package?
A) Travel.
B) Additional superannuation contributions.
C) Company car.
D) All of these options could be included in a director's salary package.
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