Accounting for Decision Making
Textbook Exam Questions
Course Introduction
Accounting for Decision Making is designed to equip students with the foundational knowledge and analytical skills required to interpret accounting information for effective management and strategic business decisions. The course covers core concepts of financial and managerial accounting, emphasizing how to analyze financial statements, apply cost information, and leverage accounting data for planning, control, and performance evaluation. Students will explore budgeting, variance analysis, and relevant cost analysis, learning how accounting insights drive operational efficiency, resource allocation, and long-term organizational success across diverse business environments.
Recommended Textbook
Horngren's Accounting 8th Australia Edition by Tracie Nobles
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Chapter 1: The Role of Accounting in Decision Making
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Q1) Which of the following financial statements lists the entity's assets,liabilities and owners' equity as at a specific date?
A) Cash flow statement
B) Balance sheet
C) Income statement
D) Statement of changes in equity
Answer: B
Q2) The balance sheet of a business represents the account balances as at a particular date in time.
A)True
B)False
Answer: True
Q3) The Australian conceptual framework encompasses non-profit organisations as well as for-profit ones.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Recording Business Transactions
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Q1) Which of the following accounts is NOT an example of an asset?
A) Building
B) Cash
C) Bills payable
D) Accounts receivable
Answer: C
Q2) Which of the following accounts increases with a credit?
A) Accounts receivable
B) Cash
C) Capital
D) Prepaid expenses
Answer: C
Q3) A business makes a cash payment to a supplier 'on credit' (for supplies that were purchased earlier).Which account is debited?
A) Service revenue
B) Accounts payable
C) Cash
D) Supplies
Answer: B
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) Entries that record an expense before the cash is paid are:
A) unearned revenues.
B) prepaid expenses.
C) accrued expenses.
D) accrued revenues.
Answer: C
Q2) Healthy Living,a diet magazine,collected $492,000 in subscription revenue on 31 May.Healthy Living earns a minimum of $369,000 from the buyers who are not the subscribers.Each subscriber will receive an issue of the magazine for each of the next 12 months,beginning with the June issue.The company uses the accrual method of accounting.What is the balance in the Unearned revenue account on 31 December?
A) $287,000
B) $492,000
C) $205,000
D) $369,000
Answer: C
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Chapter 4: Completing the Accounting Cycle
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Q1) Below is a list of various balance sheet accounts and their balances.
\[\begin{array} { | l | l | l | }
\hline & \text { Debit } & \text { Credit } \\
\hline \text { Building } & \$ 130,000 & \\
\hline \text { Cash } & 7000 & \\
\hline \text { Supplies } & 1000 & \\
\hline \text { Furniture } & 6000 & \\
\hline \text { Prepaid insurance } & 4700 & \\
\hline \text { Accumulated depreciation - furniture } & & \$ 950 \\
\hline \text { Land } & 34,000 & \\
\hline \text { Accumulated depreciation - building } & & 4700 \\
\hline \text { Accounts receivable } & 950 & \\
\hline
\end{array}\]
What are the total non-current assets that would be shown on the balance sheet?
A) $164,000
B) $130,000
C) $164,350
D) $170,000
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Chapter 5: Retailing Operations
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Q1) FOB Destination means that the:
A) seller normally pays the transportation costs.
B) transportation costs are billed to the buyer.
C) buyer normally pays the transportation costs.
D) buyer and the seller split the transportation costs.
Q2) Using the perpetual inventory system,discounts taken on an invoice,such as 3/10,n/30,would be:
A) credited to Inventory.
B) debited to Cost of sales.
C) credited to Cost of sales.
D) debited to Inventory.
Q3) Credit terms of 2/10,n/30 indicate that a 2% discount may be taken if the invoice is paid within 10 days,but the total invoice amount is due if paid on the 11<sup>th</sup> to the 30<sup>th</sup> day after the invoice date.
A)True
B)False
Q4) Net sales revenue is equal to Sales revenue less Cost of sales.
A)True
B)False
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Chapter 6: Retail Inventory
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Q1) If the historical cost of inventory falls below replacement cost,the business must write down the inventory cost.
A)True
B)False
Q2) The Cost of goods available for sale is equal to the:
A) Sales revenue minus the Cost of sales.
B) Cost of sales plus the Ending inventory.
C) Ending inventory plus the Sales revenues.
D) Cost of sales minus the Ending inventory.
Q3) Gross profit is Sales revenue divided by Cost of sales.
A)True
B)False
Q4) Using the FIFO costing method will always produce the same results whether a company uses perpetual or periodic inventory.
A)True
B)False
Q5) Ending inventory equals the number of units on hand multiplied by the unit cost.
A)True
B)False
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Chapter 7: Accounting Information Systems
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Q1) Hardware is the electronic equipment that includes:
A) computers, monitors, printers and networks.
B) monitors, printers, software and databases.
C) monitors, printers, software and networks.
D) computers, monitors and software.
Q2) Special journals are a means of classifying transactions according to type to attain greater efficiency in processing.
A)True
B)False
Q3) Which special journal could contain a column for sales discount?
A) purchases journal
B) sales journal
C) cash receipts journal
D) cash payments journal
Q4) The final stage of data processing for an accounting system is the:
A) preparation of the special journals.
B) posting of transactions to the ledger accounts.
C) generation of the accounting reports.
D) preparation of the trial balance.
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Chapter 8: Internal Control and Cash
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Q1) Which of the following describes the internal control procedure assignment of responsibilities?
A) To validate its accounting records, a company should have an audit by an external accountant.
B) The external auditors will monitor internal controls.
C) The company should separate the custody of assets from accounting.
D) Have clearly assigned responsibilities for each position.
Q2) An outstanding cheque is a cheque issued by the company and recorded on its books but not yet paid by its bank.
A)True
B)False
Q3) In a bank reconciliation,a dishonoured cheque will be shown on the bank side of the reconciliation.
A)True
B)False
Q4) If the bank reconciliation includes a book error,no journal entries are required.
A)True
B)False
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Chapter 9: Receivables
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Q1) Interest revenue must be reported for a bill receivable that is outstanding at the end of the accounting period.
A)True
B)False
Q2) The direct write-off method requires an entry with a credit to Accounts receivable to record the Bad debts expense.
A)True
B)False
Q3) Which of the following entries would be used to account for bad debts using the direct write-off method?
A) Accounts receivable is debited and Bad debts expense is credited.
B) Bad debts expense is debited and Allowance for doubtful debts is credited.
C) Bad debts expense is debited and Accounts receivable is credited.
D) Allowance for doubtful debts is debited and Bad debts expense is credited.
Q4) The direct write-off method is in accordance with the accrual method of accounting,whereas the allowance method is not.
A)True
B)False
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11
Chapter 10: Non-Current Assets: Property, plant and Equipment, and Intangibles
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Q1) Goodwill is NOT amortised-but evaluated-each year for a decline in value.
A)True
B)False
Q2) Depletion would be used for all of the following EXCEPT:
A) timber.
B) retail inventory.
C) minerals.
D) oil and gas.
Q3) Which would NOT be accounted for by the depletion method?
A) Oil reserves
B) Coal reserves
C) Timber reserves
D) Land
Q4) A photocopy machine costs $99,000 when new and has accumulated depreciation of $92,000.Suppose the company junks this machine and receives nothing.What is the result of the disposal transaction?
A) gain of $7000
B) no gain or loss
C) loss of $11,500
D) loss of $7000
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Chapter 11: Current Liabilities and Payroll
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Q1) An accrued expense is an expense that has been incurred,but has not yet been paid. A)True
B)False
Q2) General Stores borrowed $50 000 at 6% interest on a long-term loan payable on 31 August.At 31 December,interest plus $10 000 of the principal are payable within one year.What is the account name and amount of a current liability that will be reported on the balance sheet as at 31 December?
A) Interest payable $600
B) Interest payable $1 000
C) Interest payable $3 000
D) Interest payable $2 000
Q3) The Statewide Sales Company has gross pay for March of $45 000.The first journal entry in the payroll cycle to record salary expense would include a credit to Cash for $45 000.
A)True B)False
Q4) PAYG tax is paid by the employer only and is not deducted from gross pay.
A)True
B)False
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Chapter 12: Non-Current Liabilities,debentures Payable and
Classification of Liabilities on the Balance Sheet
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Q1) Balances for debentures payable on the balance sheet will show the balances minus any discount or plus any premium.
A)True
B)False
Q2) When a debenture is sold,the selling price is generally equivalent to the present value of the debenture payments.
A)True
B)False
Q3) On 1 June 2017,Smith Services issued $33,000 of 7% debentures that mature in five years.They were sold at a premium,for a total of $34,375.The debentures pay semiannual interest payments on 30 June and 31 December of each year.On 31 December 2017,how much is the total amount paid to investors?
A) $2406.25
B) $1203.13
C) $2310.00
D) $1155.00
Q4) Instalment payments for mortgages are normally paid once per year.
A)True
B)False
Page 14
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Chapter 13: Partnerships
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Q1) Gary,Peter and Chris own a firm as partners.Gary has a capital balance of $21,000; Peter a capital balance of $38,000; and Chris has a capital balance of $33,000.As per the partnership agreement,Gary gets a profit share of 2/9; Peter has 4/9; and Chris has 3/9.Which of the following is true,if Gary withdraws from the partnership by receiving $21,000?
A) Peter, capital will be credited for $21,000.
B) Cash is debited for $21,000.
C) Peter, capital and Chris, capital will be credited for $10,500 each.
D) Gary, capital will be debited for $21,000.
Q2) When a partner withdraws from a partnership at book value,the partner will take a distribution of assets in the value of his or her capital account balance.
A)True
B)False
Q3) Which of the following statements is TRUE about a limited partnership?
A) The partners all share equally in the profit or losses of the partnership.
B) The general partner takes on greater liability than the limited partners.
C) In a limited partnership, all partners are considered to be limited partners.
D) The general partner has first claim on the profit of the partnership.
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Chapter 14: Companies: Formation and Shareholders
Equity
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Q1) Which of the following is the amount of shareholders' equity on the company's books for each share of its capital?
A) Book value
B) Amortised value
C) Market value
D) Liquidation value
Q2) Deferred tax can either be an asset or a liability.
A)True
B)False
Q3) Which of the following describes the term share capital?
A) The shares that have been sold for the highest price.
B) The total amount of shares that has been authorised by the Corporations Act.
C) The total amount of shares that has not been sold yet.
D) The amounts received from the shareholders.
Q4) If a company's share prices go up from the original issue price,the company will record net profit for the amount of the gain.
A)True
B)False
Page 16
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Chapter 15: Companies: Capital Management and the Income Statement
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Q1) Which of the following will decrease the balance in Retained earnings?
A) Share split
B) Share issue
C) Share dividend
D) Repayment of debenture principal
Q2) Which of the following is a TRUE statement?
A) Both a share split and a share dividend will decrease total assets.
B) Neither a share split nor a share dividend will affect total assets or total liabilities.
C) Both a share split and a share dividend will increase total liabilities.
D) A share split will increase total assets but a share dividend will not.
Q3) Which of the following items is NOT included in comprehensive income?
A) Contingent liabilities
B) Changes in Asset revaluation reserve
C) Profit
D) Gains or losses on some types of superannuation plan
Q4) One of the reasons for a share buy-back is to avoid a hostile takeover by an outside party.
A)True
B)False
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Chapter 16: The Cash Flow Statement
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Q1) Qtopia Company uses the direct method to prepare its cash flow statement.It has reported Cost of sales of $70 000 on its income statement for the year 2016.If the balance in accounts payable (for inventory suppliers only)has gone down by $5 000 during the year,then $5 000 will have to be added to $70 000 as part of the process to calculate payments to suppliers for inventory purchases.
A)True
B)False
Q2) The three activities of the cash flow statement in order of importance,from most important to least important,are:
A) operating, financing and investing
B) operating, investing and financing
C) investing, operating and financing
D) financing, operating and investing
Q3) Companies sometimes make investments that do NOT require cash.Such transactions are called non-cash investing activities and appear in a separate section of the cash flow statement.
A)True
B)False
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Chapter 17: The Framework of Accounting
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Q1) According to the IASB and adopted by the AASB,the primary objective of financial reporting is to provide information:
A) about the profitability of the business.
B) that is useful for decision making, particularly for investors and lenders.
C) to the federal government.
D) regarding the cash flows of the business.
Q2) Due process in standard setting involves public consultation with all interested parties.
A)True
B)False
Q3) Professionals such as solicitors may use the ________ to record income if the receipt of fees is regarded as very uncertain.
A) collection method
B) percentage of completion method
C) instalment method
D) sales method
Q4) In most businesses,profit is recognised at the point of sale.
A)True
B)False
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Chapter 18: Financial Statement Analysis
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Q1) Oglethorpe Company reports the following information from the vertical analysis of their balance sheet:
Current assets:
23)5 % in 2017
23)9% in 2016
Which of the following statements could be logically concluded from the above data?
A) The company's ability to pay current liabilities declined.
B) The company's current ratio declined.
C) The company's total current assets declined by 0.4%.
D) The company's current assets declined in proportion to its total assets.
Q2) e-Ray Ltd has net sales on account of $1,900,000.The average net accounts receivable are $660,000.Calculate the days' sales in receivables.
A) 365 days
B) 350.4 days
C) 126.7 days
D) 2.88 days
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Chapter 19: Introduction to Managerial Accounting and the Master Budget
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Q1) A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for Retained earnings,which document should be used?
A) Budgeted income statement
B) Cash budget
C) Inventory, purchases and cost of sales budget
D) Budgeted cash payments for purchases
Q2) The capital expenditures budget stands alone and is not part of either the operating budget or the financial budget.
A)True
B)False
Q3) Management is accountable to various government bodies in which of the following ways?
A) Providing a return on the stakeholders' investment
B) Obeying laws and regulations, and paying taxes
C) Making timely payments to creditors
D) Making timely payments to vendors
Q4) Retailing businesses resell goods which they purchase from a producer.
A)True
B)False
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Chapter 20: Job Costing
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Q1) Which of the following describes the allocation base for allocating manufacturing overhead costs?
A) The factor that reflects the relationship between goods produced and the amount of overhead costs incurred
B) The estimated base amount of manufacturing overhead costs in a year
C) The formula for allocating depreciation expense over the life on an asset
D) The percentage used to allocate direct labour to work in process
Q2) At the end of the year,Deltona Company has a preliminary debit balance in the Manufacturing overhead account of $3 950.Which of the following is the year-end adjusting entry needed to clear the balance to zero?
A) Debit Work in process $3 950, credit Manufacturing overhead $3 950
B) Debit Gross profit $3 950, credit Cost of sales $3 950
C) Debit Manufacturing overhead $3 950, credit Cost of sales
D) Debit Cost of sales $3 950, credit Manufacturing overhead $3 950
Q3) An activity-based costing system would be of less value to a business making a single product than it would be for a company with multiple products.
A)True
B)False
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) Porterhouse Company has both fixed and variable production costs.If volume goes up by 20%,how would that affect the total of all costs? (Assume all volumes are within the relevant range.)
A) Would go down
B) Would go up 20%
C) Would remain the same
D) Would go up by some amount less than 20%
Q2) Which of the following statements is CORRECT if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?
A) The breakeven point increases.
B) The breakeven point decreases.
C) The breakeven point remains the same.
D) The contribution margin increases.
Q3) A company sells products in two size packages-regular and long.The two products sell in equal numbers.The contribution margin of the regular is $12 and the contribution margin of the long size is $18.The weighted average contribution margin is $15.
A)True
B)False
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Chapter 22: Short-Term Business Decisions
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Q1) Macaulay Company has three product lines-D,E,and F.The following information is available:
\[\begin{array} { | l | c | l | l | }
\hline & \text { D } & { \text { E } } & { \text { F } } \\
\hline \text { Sales } & \$ 90,000 & \$ 50,000 & \$ 30,000 \\
\hline \text { Variable costs } & ( 40,000 ) & ( 10,000 ) & ( 10,000 ) \\
\hline \text { Contribution margin } & \$ 50,000 & \$ 40,000 & 20,000 \\
\hline \text { Fixed expenses } & (15,000 ) & ( 10,000 ) & ( 24,000 ) \\
\hline \text { Operating profit (loss) } & \$ 35,000 & \$ 30,000 & (\$ 4000 ) \\
\hline
\end{array}\]
Macaulay Company is thinking of dropping product line F because it is reporting an operating loss.Assuming fixed costs are unavoidable,if Macaulay Company drops product line F and rents the space formerly used to produce product F for $20,000 per year,total profit will be:
A) $20,000
B) $24,000
C) $10,000
D) $61,000
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Chapter 23: Capital Investment Decisions and the Time Value of Money
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Q1) Which of the following is TRUE regarding capital rationing decisions for capital assets?
A) Companies should always choose the investment with the highest accounting rate of return.
B) Companies should consider several different methods of evaluation before choosing an investment.
C) Companies should always choose the investment with the highest net present value.
D) Companies should always choose the investment with the shortest payback period.
Q2) Which of the following is true of discounted cash flow methods like NPV and IRR?
A) They use simple interest calculations.
B) They focus on the payback period.
C) They comply with the requirements of GAAP.
D) They assume that cash flows will be reinvested when received.
Q3) The benefit foregone by not choosing an alternative course of action is known as an opportunity cost.
A)True
B)False
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