Business Fundamentals
Exam Bank
Course Introduction
Business Fundamentals introduces students to the core concepts and principles that drive successful organizations in todays dynamic environment. The course covers essential topics such as organizational structures, basic accounting and finance, marketing, operations management, human resources, and strategic planning. Emphasis is placed on understanding how these functions interact to achieve business goals, as well as developing critical thinking and decision-making skills. By the end of the course, students will have a foundational understanding of how businesses operate and the key factors that influence their sustainability and growth.
Recommended Textbook
Accounting Business Reporting for Decision Making 6th Edition by Jacqueline Birt
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Page 2
Chapter 1: Introduction to Accounting and Business Decision Making
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Q1) The information that would be of most interest to an organisation's production manager is:
A) the ability to pay off debts as they fall due.
B) annual dividends.
C) continuity of orders for the factory.
D) the company tax rate.
Answer: C
Q2) 'A present obligation of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits' is the definition of:
A) an expense.
B) a liability.
C) equity.
D) an asset.
Answer: B
Q3) The financial reports that meet the information needs of a range of users unable to demand accounting information are called ____________ purpose financial statements.
Answer: general
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Chapter 2: Accounting in Society
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Q1) Individuals or groups with an interest in the success of an entity are collectively A)shareholders.
B)board of directors.
C)stakeholders.
D)employees.
Answer: C
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) The theory that suggests the motive for serving on a board of directors goes beyond the perspective of pure self-interest is ________________________ theory.
Answer: stewardship
Q4) The minimum acceptable standards for accountants,issued by the professional bodies,are known as the code of professional ________________.
Answer: conduct
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Page 4
Chapter 3: Business Structures
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Q1) Manufacturing entities are involved in the conversion of raw materials into _____________ _____________.
Answer: finished goods
Q2) An expense that would not appear in a partnership income statement is:
A) interest expense.
B) depreciation expense.
C) income tax expense.
D) advertising expense.
Answer: C
Q3) Which of the following characteristics of a company business structure is true?
A) Owners have limited liability.
B) Easy to set up.
C) Not a separate legal entity.
D) Owners pay individual tax on company profits.
Answer: A
Q4) The AASB's modified reporting requirements for Tier 1 and Tier 2 disclosing entities is known as ________________ ________________.
Answer: differential reporting
Q5) A major advantage of trusts is that they ________________ tax payments.
Answer: minimise
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Chapter 4: Business Transactions
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Q1) Which of these is not part of a general journal entry?
A) Classification of account (e.g. income, expense, asset, etc.).
B) Debit and credit columns.
C) Date.
D) Account name.
Q2) Occurrences that have the potential to affect the entity in some way,but that will not be recorded as business transactions until an exchange of goods or services takes place between the entity and an outside party are known as ______________
Q3) The effect of profit on the accounting equation is to:
A) increase assets.
B) decrease expenses.
C) increase equity.
D) decrease liabilities.
Q4) 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.
Q5) Profit (or loss)= ___________________ less expenses
Page 6
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Chapter 5: Balance Sheet
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Q1) The amount paid to acquire an asset is known as its:
A) market cost.
B) current cost.
C) present value.
D) historical cost.
Q2) Which of the following is a limitation of an entity's balance sheet?
A) If the business is cyclical, the balance sheet prepared at the end of the financial period may not be representative of the financial position at other times during the financial period.
B) The balance sheet may not include all items that create value for the entity.
C) The balance sheet is a historical representation of an entity's financial position and does not consider future growth potential.
D) All of the above are considered limitations of an entity's balance sheet.
Q3) A company transfers $10 000 from the retained earnings account to a general reserve account.The effect of this transfer on the company's balance sheet is:
A) total shareholders' equity will decrease.
B) total shareholders' equity remains unchanged.
C) total shareholders' equity will increase.
D) total shareholders' equity will decrease and assets will decrease.
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Page 7
Chapter 6: Statement of Profit or Loss and Statement of
Changes in Equity
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Q1) Which of the following transactions will be recorded as income?
A) Borrow $50 000 from the bank.
B) A. J. Smith pays $2 500 for goods sold to him on credit last month.
C) Sold inventory on credit for $5 000.
D) Owner contributes $8 000 of personal funds to the business.
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) When an asset's __________ amount is lower than its carrying amount,the asset is deemed to have been __________.
Q4) Which of the following expenses must be disclosed by a reporting entity?
A) Amortisation expense.
B) Lease costs.
C) Auditors' fees.
D) All of the above.
Q5) The statement of profit or loss measures an entity's financial _________.
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Chapter 7: Statement of Cash Flows
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Q1) Which of the following represents an investing activity on the statement of cash flows?
A) Repaying money previously borrowed.
B) Receiving cash from a share issue.
C) Collecting cash on loans previously made to other entities.
D) Obtaining cash from creditors.
Q2) The amount owing to suppliers for inventory purchases at the beginning of the year is $118 000 and at the end of the year is $94 000.If total credit purchases of inventory for the year are $160 000,the cash paid to suppliers of inventory for the year is:
A) $184 000
B) $66 000
C) $278 000
D) $254 000
Q3) Which of the following statements in relation to converting accrual information to the cash basis is correct?
A) An increase in current assets means less cash.
B) A decrease in current assets means less cash.
C) An increase in current liabilities means less expense.
D) A decrease in current liabilities means more cash.
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Page 9
Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) An entity's profit margin is affected by which of the following ratios?
A) Gross profit margin and expense ratios.
B) Inventory and debtors days ratios.
C) Gross profit margin and return on assets.
D) Debt and equity ratios.
Q2) Return on equity measures the profit generated compared to the _____________ investment.
Q3) Which of the following statements is not true?
A) If the equity ratio is less than 50% then the entity is more reliant on debt funding than equity funding.
B) The sum of the debt ratio and the equity ratio does not have to equal 100%.
C) The debt ratio indicates how many dollars of debt exist per dollar of assets.
D) If the debt to equity ratio is more than 100%, the entity is more reliant on debt funding than equity funding.
Q4) Financial analysis can be categorised as:
A) vertical and horizontal analysis.
B) ratio analysis.
C) trend analysis.
D) all of the above.
Page 10
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Chapter 9: Budgeting
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Q1) 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.
Q2) Production units x material cost per item plus target ending materials inventory less beginning materials inventory is the formula for which budget item?
A) required production units.
B) production overhead.
C) sales.
D) cost of material purchases.
Q3) The decision to expand the business by opening up a new branch in a different city is part of:
A) strategic planning.
B) master budgeting.
C) strategic budgeting.
D) performance planning.
Q4) The cash budget shows the ____________ future cash receipts and cash payments.
Q5) The master budget is a set of __________ budgets for a future period.
Page 11
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Chapter 10: Costvolumeprofit Analysis
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Q1) The break-even point is where:
A) total sales = fixed costs plus profit.
B) total sales = total variable costs.
C) total sales = total variable costs plus profit.
D) total sales = total costs.
Q2) The range of activity over which costs are assumed to be valid is the _____________ range.
Q3) Which of the following is normally a mixed cost?
A) Motor vehicle running costs.
B) Electricity costs.
C) Telephone costs.
D) All of the above options are examples of mixed costs.
Q4) The point where total sales revenue equals total costs is known as the _____________ point.
Q5) If selling price is $25 per unit and variable costs are $16 per unit,the contribution margin per unit is:
A) $11.00
B) $41.00
C) $9.00
D) $1.56
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Chapter 11: Costing and Pricing in an Entity
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Q1) ________________ pricing is the practice of setting low prices when new products are introduced to increase market share.
Q2) Working out how many nails are used when constructing a house frame would not pass which test?
A) Cost analysis.
B) Cost allocation.
C) Cost/benefit.
D) Direct vs. indirect.
Q3) If the cost object is the product,the cost driver that would be the most accurate means of allocating the overhead costs for the ordering and receiving department would be:
A) purchase orders.
B) delivery hours.
C) machine hours.
D) machine set-ups.
Q4) The system used to allocate costs to cost objects is known as:
A) an accounting system.
B) a costing system.
C) a management system.
D) a resource system.
Page 13
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Chapter 12: Capital Investment
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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 cost of forgoing benefits from an alternative investment is known as the ___________ cost.
Q3) The first step involved in making an investment decision is the:
A) collection of data.
B) selection of a decision-support tool.
C) identification of all available investment alternatives.
D) interpretation of results.
Q4) Discounted cash flow models assume that $100 received now is worth (more/less)__________________ than $100 received in the future.
Q5) The ___________ (shorter/longer)a payback period is,the greater the risk.
Q6) The effect of dividend imputation on the PV analysis of investments will depend on the ______________ structure of the entity involved.
Q7) Cash flow analysis for investment decision making can be further complicated by the effect of _______________.
Page 14
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Chapter 13: Financing the Business
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Q1) A loan facility that is attached to a cheque account is a ___________
Q2) ________________ finance is the most important example of inventory finance commonly found in the motor vehicle retail sector.
Q3) The penalty for insolvency is:
A) the winding up of the entity.
B) a possible jail term for the shareholders.
C) a fine determined by the ASIC.
D) an increase in the tax rate payable for the next 2 years.
Q4) A low level of ________ debts is a measure of the success of collection policies for accounts receivable.
Q5) Which of the following is not a cost of granting credit to customers?
A) The opportunity cost of funds being tied up.
B) Administration costs for managing receivables.
C) Attracting new customers.
D) The cost of carrying slow payers and bad debts.
Q6) The issuer of a _______________ security receives less than the face value of the security.
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Chapter 14: Performance Measurement
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Q1) Which of the following is an example of a non-financial employee performance measure?
A) All of these items are examples of a non-financial employee performance measure.
B) Staff educational qualifications.
C) Workers' compensation claims.
D) Percentage of absenteeism.
Q2) Which of the following could undermine the value of the balanced scorecard to an entity?
A) Using the scorecard as an extra level of top-down management control.
B) Not making available appropriate resources such as training for implementation of the balanced scorecard.
C) Not ensuring that top management are committed to the success of the balanced scorecard.
D) All of the options could undermine the value of the balanced scorecard to an entity.
Q3) Environment ____________ indicators provide information about the local,regional,national or global condition of the environment which could be impacted by an entity.
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