Accounting for Decision Making
Textbook Exam Questions
Course Introduction
Accounting for Decision Making explores the fundamental principles and practices of accounting as they relate to effective managerial decision-making. The course covers essential topics such as cost behavior, budgeting, performance evaluation, and financial statement analysis, equipping students with the analytical tools needed to interpret accounting data and support strategic business choices. Through real-world cases and practical exercises, students learn how accounting information guides planning, control, and evaluation within organizations, preparing them to make informed, value-focused decisions in a variety of managerial roles.
Recommended Textbook
Financial Accounting An Integrated Approach 6th Australia Edition by Trotman
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Page 2
Chapter 1: Introduction to Financial Accounting
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Q1) Which of the following statements about accrual accounting is NOT true?
A) The impact of transactions on the financial statements is recognised when the cash is received or paid.
B) The financial statements include estimates.
C) Judgements made by accountants affect profit.
D) Transactions are recognised at the time when revenue and expenses occur.
Answer: A
Q2) Financial performance means:
A) providing information about the cash position of an entity.
B) setting out the enterprise's set of financial resources and obligations at a point in time.
C) identifying,measuring and communicating economic information to allow informed decisions.
D) generating new resources from day-to-day operations over a period of time.
Answer: D
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Chapter 2: Measuring and Evaluating Financial Position and
Financial Performance
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Q1) A company buys 100 televisions for $500 each.It sells 60 televisions for $900 each.What is the 'cost of goods sold' expense?
A) $50 000
B) $24 000
C) $54 000
D) $30 000
Answer: D
Q2) During 2016,JLK Ltd earned revenue of $2000 and a net profit of $500.Dividends of $400 were declared.At 1 January 2016,the balance of retained profits was $890,assets were $3800 and liabilities were $1500.What was the balance of JLK Ltd's retained profits at 31 December 2016?
A) $790
B) $890
C) $990
D) $2490
Answer: C
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Chapter 3: The Double-Entry System
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Q1) Additional credit sales of $2m (cost price $1.5m)are made on credit.This transaction will:
A) increase net profit,increase cash and increase total assets.
B) increase net profit,increase total assets but not affect cash.
C) increase net profit,and not affect cash or total assets.
D) increase net profit,increase cash.
Answer: B
Q2) The amount of income tax previously estimated now paid.
A) Dr Taxes payable
Cr Income tax expense
B) Dr Income tax expense
Cr Taxes payable
C) Dr Income tax expense
Cr Cash at bank
D) Dr Taxes payable
Cr Cash at bank
Answer: D
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Chapter 4: Record-Keeping
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Q1) Which of the following accounts are not closed off at balance date?
A) Accounts receivable
B) Profit and loss summary
C) Dividend declared
D) Sales revenue
Q2) What does transaction (2)represent?
A) Purchase of inventory on credit
B) Purchase of inventory for cash
C) Sale of inventory on credit
D) Sale of inventory for cash
Q3) Which of the following is an accounting transaction?
A) Make a purchase order.
B) Establish a bank overdraft.
C) Hire a new staff member.
D) Sign a new contract.
Q4) Which of the statements about closing the accounts is NOT true?
A) Revenue accounts are debited.
B) A net profit is credited to the retained profits account.
C) Expense accounts are credited.
D) Dividends received are credited.
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Chapter 5: Accrual Accounting Adjustments
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Q1) RST paid $120 000 in wages during the year.The opening balance of Accrued Wages was $7860 and the closing balance was $8870.What was the wages expense for the year?
A) $118 990
B) $120 000
C) $121 010
D) None of the answers provided
Q2) Choo Ltd invested $200 000 with a bank for one year at 12 per cent on 1 September 2015 (interest payable at end of loan).What is the adjusting journal entry at balance date,30 June 2016?
A) Dr Accrued revenue $18 000 \(\quad \)\(\quad \)Cr Interest revenue $18 000
B) Dr Accrued revenue $20 000 \(\quad \)\(\quad \)Cr Interest revenue $20 000
C) Dr Accrued revenue $24 000 \(\quad \)\(\quad \)Cr Interest revenue $24 000
D) Dr Unearned revenue $18 000 \(\quad \)\(\quad \)Cr Interest revenue $18 000
Q3) Which of the following does NOT appear in the balance sheet?
A) Commission payable
B) Prepaid commission
C) Commission revenue received in advance
D) Commission revenue
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Page 7
Chapter 6: Financial Reporting Principles, accounting
Standards and Auditing
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Q1) Which of the following statements about liabilities is NOT true?
A) An intention to repair a machine in six months' time does not give rise to a liability.
B) If a liability is to be reliably measured,estimation procedures cannot be used.
C) For a liability to exist,the entity must not be able to avoid the sacrifice of economic resources.
D) A liability is a present obligation arising from past events.
Q2) The external auditor renders an adverse opinion when he/she:
A) is unable to express an opinion either way because of a limitation in the work he or she was able to carry out.
B) considers that the financial statements are not presented fairly in accordance with GAAP.
C) is generally satisfied except for a specified departure from GAAP in the statements.
D) is unable to obtain sufficient reliable audit evidence.
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8
Chapter 7: Internal Control and Cash
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Q1) In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for $650 that a customer paid directly into the company's bank account is to:
A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.
Q2) 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.
Q3) Which of the following is NOT a common feature of a petty cash system?
A) Cash in the fund plus vouchers held equals the amount advanced to the petty cashier.
B) When the fund is replenished,the expenses account is debited.
C) When the fund is replenished,the cash account is credited.
D) When the fund is replenished,petty cash is credited.
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Page 9
Chapter 8: Accounts Receivable and Further
Record-Keeping
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Q1) Which of the following statements about the Allowance for doubtful debts account is true?
A) The Allowance for doubtful debts account represents cash available to meet losses incurred when customers are unable to pay their accounts.
B) The Allowance for doubtful debts account functions to adjust the net value of accounts receivable down to the lower of cost and current estimated collectable amount.
C) The Allowance for doubtful debts account represents the total of accounts written off as uncollectable for the current period.
D) None of the answers provided.
Q2) K Ltd reported beginning and ending balances in the Allowance for doubtful debts account of $723 000 and $904 000 respectively.It also reported that write-offs of bad debts amounted to $648 000.Assuming that no previously written-off accounts had been collected,what amount did K Ltd record as bad debt expense for the period?
A) $467 000
B) $648 000
C) $829 000
D) $904 000
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Page 10
Chapter 9: Inventory
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Q1) 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
Q2) The entry to record a credit purchase when the perpetual method is employed is:
A) Dr Purchases\(\quad \) \(\quad \) Cr Accounts payable
B) Dr Purchases\(\quad \) \(\quad \) Cr Inventory
C) Dr Inventory\(\quad \) \(\quad \) Cr Accounts payable
D) Dr Cost of goods sold\(\quad \) Cr Accounts payable
Q3) Which of the following statements about the use of the LIFO assumption is true?
A) The LIFO assumption assigns older costs to the cost of goods sold expense account.
B) The LIFO assumption produces inventory asset values that are close to current costs.
C) The LIFO assumption produces a lower inventory asset value and the highest cost of goods sold.
D) None of the answers provided.
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Chapter 10: Noncurrent Assets
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Q1) A machine purchased on 1 July 2016 cost $100 000 and has a zero estimated salvage value.The useful life of the machine is five years.If the machine was sold on 30 September 2018,what would its net book value be?
A) $45 000
B) $50 000
C) $55 000
D) $60 000
Q2) A building with a cost of $500 000,an estimated residual value of $50 000,and an estimated useful life of 20 years was depreciated by the straight-line method for 10 years.In the eleventh year,it was determined that the useful life should be extended by 10 years (i.e.from 20 years to 30 years).The residual value was to remain the same.The depreciation expense for the eleventh year is:
A) $11 250.
B) $12 500.
C) $13 750.
D) $15 000.
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Chapter 11: Liabilities
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Q1) Interest owed to the bank by MNO Ltd would appear on MNO's balance sheet as:
A) accounts payable.
B) an accrual on the balance sheet.
C) a provision on the balance sheet.
D) contingent liability.
Q2) An employee earns $1000 a week and the following deductions are made: income tax $150,superannuation $90,union dues $20.The journal entry to record this transaction would include:
A) Dr Union dues due $20.
B) Dr Wages expense $740.
C) Cr Wages payable $1000.
D) Dr Wages expense $1000.
Q3) The effect on the 30 June 2016 financial statements was:
A) an increase in liabilities and a decrease in profit.
B) an increase in liabilities but no effect on profit.
C) an increase in profit but no effect on liabilities.
D) no effect on either profit or liabilities.
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13
Chapter 12: Completing the Balance Sheet
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Q1) If Sky-High Ltd used the equity basis,which of the following accounting records would it make on 31 December 2016 in response to Down Ltd's earnings announcement?
A) It would increase investment in Down Ltd by $130 000.
B) It would increase cash by $130 000.
C) It would increase dividend revenue by $130 000.
D) It would increase investment in Down Ltd by $130 000 and increased dividend revenue by $130 000.
Q2) The directors of Behrens Ltd decided to issue 300 000 ordinary shares at $1 each.25 cents per share was payable on application,25 cents per share on allotment and the balance through two equal calls.Applications were received for 250 000 shares,which were duly issued and allotment money was paid in full.The journal entries to record the allotment would include a:
A) credit to allotment,$75 000.
B) credit to cash,$62 500.
C) debit to share capital,$62 500.
D) debit to allotment,$75 000.
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Chapter 13: Revenue and Expense Recognition: Additional Concepts
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Q1) Using the percentage of completion method,what profit would Romulus Ltd report in 2015?
A) $800 000
B) $2 000 000
C) $3 200 000
D) $1 300 000
Q2) What difference would there be to the total profit for two years if the completion of production method were used?
A) Profit would be $1 160 000 higher.
B) Profit would be $690 000 higher.
C) Profit would be $470 000 higher.
D) There would be no difference.
Q3) How much profit was earned during the second year if the percentage of completion method was used?
A) $200 000
B) $240 000
C) $440 000
D) $1 500 000
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Chapter 14: The Statement of Cash Flows
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Q1) What were the proceeds from sale of motor vehicles?
A) $30 000
B) $40 000
C) $50 000
D) $140 000
Q2) What was the value of plant purchased?
A) $20 000
B) $70 000
C) $88 000
D) $120 000
Q3) What were the receipts from customers of Staple Ltd?
A) $25 000
B) $40 000
C) $65 000
D) $135 000
Q4) What were the payments to suppliers and employees of Staple Ltd?
A) $45 000
B) $55 000
C) $80 000
D) $30 000
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Chapter 15: Financial Statement Analysis
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Q1) Which of the following could explain a substantial increase in the current ratio (presently 1:1)?
A) Purchase of inventory for cash
B) Sale of a major noncurrent asset near year-end
C) A large prepayment near year-end
D) Received a cash deposit for work to be done next year
Q2) What was the number of days' sales in receivables?
A) 60.8 days
B) 90 days
C) 120 days
D) 8 times
Q3) f Del Ltd reduces the number of days' inventory on hand to 60,what will be the new inventory turnover?
A) 3 times p.a.
B) 6 times p.a.
C) 12 times p.a.
D) 9 times p.a.
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Chapter 16: Accounting Policy Choices
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Q1) Swing Ltd uses FIFO for its inventory,which is valued at $21 000.It is considering a change to moving weighted average,which would change the valuation of inventory to $22 500.Which of the following would be decreased by the change?
A) Cost of goods sold
B) Sales
C) Liabilities
D) Retained profits
Q2) What would be the effect on net profit after tax if the reducing balance method were used rather than the straight-line method?
A) There would be a $375 000 increase.
B) There would be a $375 000 reduction.
C) There would be a $262 500 increase.
D) There would be a $262 500 reduction.
Q3) Which of the following would be increased by an accounting policy change involving the declaration of a final dividend?
A) Expense
B) Revenue
C) Asset
D) There would be no effect on net profit
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Page 18
Chapter 17: Sustainability Reporting
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Q1) Which of the following are Social GRI performance indicators?
(i)Investment: total number and percentage of significant investment agreements and contracts that include human rights clauses or that underwent human rights screening.
(ii)Occupational health and safety: type of injury and rates of injury,occupational diseases,lost days and absenteeism,and total number of work related fatalities,by region and by gender.
(iii)Compliance: monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations.
A) (i)and (ii)only
B) (i)and (iii)only
C) (ii)and (iii)only
D) (i), (ii)and (iii)
Q2) Measurement and reporting of climate change related information is of use to stakeholders to:
A) evaluate the level of dividend they may receive.
B) understand the impact of the business operations on the environment.
C) identify and evaluate sustainability issues.
D) measure the impact of the business operations on the environment.
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