Accounting for Management Review Questions
Course Introduction
Accounting for Management explores the fundamental principles and practices of accounting as tools for effective managerial decision-making. The course covers key topics such as cost classification, budgeting, variance analysis, financial statement interpretation, and performance evaluation. Emphasis is placed on the use of accounting information for planning, controlling, and making strategic business decisions in both manufacturing and service organizations. Through case studies and real-world examples, students gain practical skills in analyzing accounting data to support organizational objectives and enhance managerial effectiveness.
Recommended Textbook
Financial Accounting 5th Canadian Edition by Walter T. Harrison
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) The owners' equity of proprietorships and partnerships is different.
A)True
B)False
Answer: True
Q2) Gains and losses appear on which of the financial statements listed below?
A) the balance sheet
B) the income statement
C) the retained earnings statement
D) the cash flow statement
Answer: B
Q3) The accounting equation must always be in balance.
A)True
B)False Answer: True
Q4) Net earnings are calculated by taking a company's earnings less their dividends paid out.
A)True
B)False Answer: False
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) The normal balance of the Accounts Payable account is a ________ because it is a(n) ________ account.
A) debit, asset
B) credit, shareholders' equity
C) credit, liability
D) credit, revenue
Answer: C
Q2) When a company performs a service and immediately collects the cash from the customer, which of the following would occur?
A) Net income would increase.
B) Expenses would decrease.
C) Assets would decrease.
D) Shareholders' equity would decrease.
Answer: A
Q3) The costs of operating a business are usually called:
A) expenses
B) liabilities
C) assets
D) revenues
Answer: A
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Chapter 3: Accrual Accounting and the Financial Statements
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Sample Questions
Q1) What will be the result if no adjusting entry is made to record revenue earned during the current period when the cash was received in the last accounting period?
A) The assets will be understated.
B) The liabilities will be understated.
C) The liabilities will be overstated.
D) The assets will be overstated.
Answer: C
Q2) On October 25, 2013 Quick Corp. prints a cheque for November's rent payment. Quick Corp. mails the cheque on October 27 to the landlord. The landlord receives the cheque October 31 and cashes the cheque on November 2. When should Quick Corp. record the rent expense associated with this transaction?
A) October 25, 2013
B) October 27, 2013
C) November 30, 2013
D) November 2, 2013
Answer: C
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Chapter 4: Internal Control and Cash
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Sample Questions
Q1) Which characteristic will not be found in an effective system of internal control?
A) a combination of duties
B) a separation of duties
C) competent, reliable, and ethical personnel
D) documents and records
Q2) List and describe at least five characteristics of an effective system of internal control. What is one inherent limitation/weakness of any system of internal control?
Q3) To maintain effective internal control, employees responsible for handling cash should not have access to the accounting records.
A)True
B)False
Q4) Which of the following, when prepared correctly, ensures that all cash transactions have been accounted for and that the bank and book records of cash are correct?
A) bank reconciliation
B) bank statement
C) bank remittance
D) setting up a lock-box system
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Chapter 5: Short-Term Investments and Receivables
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Sample Questions
Q1) Lifecycle Management Corporation uses the percentage-of-sales method to estimate uncollectible receivables. Net credit sales for the current year amount to $2,000,000 and management estimates 5% will be uncollectible. Allowance for doubtful accounts prior to adjustment has a credit balance of $10,000. The amount of expense reported on the income statement will be:
A) $110,000
B) $100,000
C) $90,000
D) $10,000
Q2) Receivables are monetary claims against others.
A)True
B)False
Q3) A company with net sales of $500,000, a beginning balance of net receivables of $80,000, and an ending balance of net receivables of $90,000 has a collection period of:
A) 197 days
B) 62 days
C) 54 days
D) 6 days
Q4) What are 'held-for-trading investments'?
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) FIFO uses "old" inventory costs against revenue.
A)True
B)False
Q2) The largest expense category on the income statement of most merchandising companies is:
A) cost of goods sold
B) other expenses
C) selling expenses
D) administrative expenses
Q3) A perpetual inventory system offers all the following advantages except:
A) inventory balances are always current
B) it enhances internal control
C) it is less expensive than a periodic system
D) it helps salespeople determine whether there is a sufficient supply of inventory on hand to fill customer orders
Q4) The specific unit cost method is frequently used for items with common characteristics, such as gallons of paint.
A)True
B)False
Q5) What is the most important asset of a merchandising business?
Page 8
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Chapter 7: Property, Plant, and Equipment, and Intangible Assets
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Sample Questions
Q1) Amortization of an intangible asset is similar to which amortization method?
A) CCA amortization
B) units-of-production
C) double-declining-balance
D) straight-line
Q2) Goodwill is equal to the excess of the cost of an acquired company over the sum of the:
A) book value of its assets
B) market value of its assets
C) book value of its net assets
D) market value of its net assets
Q3) Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?
A) depletion method
B) straight-line method
C) double-declining-balance method
D) units-of-production method
Q4) Land improvements are subject to depreciation.
A)True
B)False
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Chapter 8: Long-Term Investments and the Time Value of Money
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Sample Questions
Q1) Investment in subsidiaries involves purchasing 25% of the organization's shares.
A)True
B)False
Q2) Under the equity method of accounting, the investor will:
A) reduce the Investment account for investee dividends and increase the Investment account to record investee income
B) increase the Investment account to record dividends and income of the investee
C) reduce the Investment account to record dividends and income of the investee
D) increase the Investment account for investee dividends, and reduce the Investment account to record investee income
Q3) A company that owns less than 20% of another company's stock must use the consolidation method of accounting.
A)True
B)False
Q4) Briefly explain the meaning of the term "present value."
Q5) How does an investor account for a long-term investment in bonds?
Q6) How does a company such as ATCO Ltd. report the results of its diverse worldwide lines of business?
Page 10
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Chapter 9: Liabilities
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Sample Questions
Q1) On January 1, 2013, JetNew Corp. issued $300,000 of 8%, 5-year bonds, with annual interest payments on January 1. The bonds were issued when the market rate was higher than 8% and thus JetNew received $265,000 for this bond. Prepare the journal entry to record the issuance of this bond on January 1, 2013. Show how this bond would appear on the balance sheet.
Q2) On April 1, 2014 JetNew sells 1,000 round trip tickets to Montreal at $770 each. On May 25<sup>th</sup> 250 of these outstanding tickets are used. Prepare the required journal entries for JetNew.
Q3) A bond issued at a premium typically has a market price that decreases toward maturity value.
A)True
B)False
Q4) Airport Software Ltd. includes an 5% sales tax in the amount credited to the sales account. If the sales account has a balance of $675,250, the amount of the sales tax payable to the government is:
A) $29,347
B) $29,450
C) $32,155
D) $33,763
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Chapter 10: Shareholders Equity
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Sample Questions
Q1) Name several accounts that would appear in the shareholders' equity section of a balance sheet.
Q2) Suppose 100 common shares are issued for $12.50 per share. The entry to record this issuance includes a:
A) credit to Retained Earnings for $1,250
B) credit to Common shares for $1,250
C) credit to Contributed Surplus for $250
D) debit to Preferred Shares for $1,000
Q3) List several characteristics of a corporation. Indicate, wherever appropriate, if the characteristic is an advantage or a disadvantage of the corporate form of business.
Q4) For a company that has only common shares outstanding, dividing total shareholders' equity by the number of shares outstanding determines the:
A) liquidation value per share
B) earnings per share
C) market value per share
D) book value per share
Q5) What type of shares would an investor purchase if he or she were primarily interested in increasing dividends?
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Chapter
Income, and the Statement of
Shareholders Equity
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Sample Questions
Q1) Companies issuing publicly-traded stock are required to have their financial statements audited by an external auditor. This requirement is placed on corporations by the:
A) Canada Revenue Agency
B) Provincial Securities Commissions
C) Various federal and provincial incorporating acts
D) the Prime Minister of Canada
Q2) The primary responsibility of the independent auditor is to decide whether the company's:
A) internal controls are effective
B) financial statements are free from errors
C) management has complied with all applicable laws and regulations during the fiscal year under audit
D) financial statements comply with generally accepted accounting principles (GAAP)
Q3) Under the accrual method of accounting, revenues and gains are recorded when they occur, regardless of when the company receives or pays cash.
A)True
B)False
Page 13
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Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) The issuance of bonds for cash would be reported on a statement of cash flows under the:
A) operating activities
B) investing activities
C) financing activities
D) no activities because issuing bonds for cash would not be reported on a statement of cash flows
Q2) All of the following might appear on an indirect method statement of cash flows except:
A) depreciation expense
B) decrease in inventory
C) loss on sale of capital assets
D) interest received on notes receivable
Q3) When calculating cash flow from operations, an increase in prepaid expenses would be added in to the cash flow.
A)True
B)False
Q4) Why is the statement of cash flows of interest to investors, creditors, and management?
Q5) Why is the statement of cash flows necessary?
Page 14
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) Common-size financial statements may identify the need for corrective action.
A)True
B)False
Q2) Briefly discuss what information is provided by the following ratios:
a. inventory turnover
b. accounts receivable turnover
c. days' sales in receivables
Q3) Benchmarking is the process of comparing a company to a standard set by one or more other companies, with a view toward improvement.
A)True
B)False
Q4) A sudden change in a financial ratio from one year to the next indicates a possible problem and provides some insight as to how to identify the problem and how to solve it.
A)True
B)False
Q5) Based upon recent accounting scandals, identify potential red flags that may be discovered in financial analysis.
Q6) Identify three cash flow signs of a healthy company.
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