Corporate Accounting Exam Review
Course Introduction
Corporate Accounting focuses on the principles, procedures, and practices vital to preparing and presenting financial statements for corporate entities. The course covers topics such as share capital, debentures, company final accounts, corporate restructuring, amalgamation, absorption, and internal reconstruction. Students will explore regulatory frameworks, standards such as IFRS and GAAP, and issues in consolidated financial statements. Emphasis is placed on analytical skills, ethical considerations, and problem-solving related to corporate financial reporting and analysis, equipping students with the knowledge necessary to manage and interpret the accounting processes of modern companies.
Recommended Textbook
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) Which of the following has not been a traditional area of employment for accountants?
A) Forensic accounting.
B) Audit and assurance.
C) Financial accounting.
D) Tax accounting.
Answer: A
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) '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
Page 3
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Chapter 2: Accounting in Society
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Q1) When faced with a moral dilemma,making an ethical decision is:
A) always easy if it will lead to a profitable outcome.
B) difficult, as the decision may be controversial.
C) unnecessary.
D) easy as there is always one simple solution to the problem.
Answer: B
Q2) The ______________ Act identifies specific duties,responsibilities,and potential liabilities of directors of a company.
Answer: Corporations
Q3) The role of accountants in reporting and promoting sustainability includes:
A) reporting sustainability performance.
B) internal control procedures.
C) analysing of energy consumption costs.
D) all of the above.
Answer: D
Q4) 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
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Chapter 3: Business Structures
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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 main (advantage/disadvantage)_________________ of a company is that its shareholders have limited liability for the business' debts.
Answer: advantage
Q3) A sole trader form of business organisation:
A) consists of one individual who controls and manages the business.
B) must have at least two owners.
C) combines the records of the business with the personal records of the owner.
D) is classified as a separate legal entity.
Answer: A
Q4) A company is a separate _______________ entity to the owners of the business.
Answer: legal
Q5) The owners of a company are known as ______________.
Answer: shareholders
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Chapter 4: Business Transactions
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Q1) The sale on credit of printer cartridges by Everything Computers is:
A) a personal transaction.
B) a business transaction.
C) a business event.
D) not a business transaction.
Q2) Which of these is a business transaction?
A) Negotiating trading terms with a new supplier.
B) Buying a new printer.
C) Meeting with the bank manager to extend the bank overdraft.
D) Hiring a new contractor to perform work for your business next week.
Q3) A customer purchased a holiday package worth $5000 from Oasis Holidays Ltd and paid a cash deposit of $1000.The balance is to be paid in two instalments of $2000 each over the next two months.The debit and credit entries for Oasis Holidays Ltd are:
A) debit sales $5000; credit accounts receivable $4000, credit cash $1000.
B) debit cash $1000, debit accounts receivable $4000; credit sales $5000.
C) debit cash $4000, debit accounts payable $1000; credit sales $5000.
D) debit cash $5000, debit accounts receivable $1000; credit sales $4000.
Q4) A journal is a record in which each business transaction appears in ___________ order.
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Chapter 5: Balance Sheet
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Q1) Which of the following factors must be considered when making a recognition decision?
A) uncertainty as to whether a liability exists.
B) probability of an inflow or outflow of economic benefits.
C) uncertainty as to the reliable measurement of a monetary value.
D) all of the above.
Q2) Which of the following statements is correct regarding the use of the first-in first-out (FIFO)method of valuing inventory?
A) Cost of sales for the period is calculated using weighted average cost of the goods acquired.
B) Closing inventory consists of goods purchased earlier in the period.
C) Closing inventory consists of the most recently purchased goods.
D) Cost of sales for the period is calculated using the most recent inventory cost per item.
Q3) Which of the following assets is not required to be depreciated/amortised?
A) Machinery.
B) Motor vehicles.
C) Land.
D) Trademarks.
Q4) Liabilities are known as ______________ claims on the assets of an entity.
Page 7
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Chapter 6: Statement of Profit or Loss and Statement of
Changes in Equity
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Q1) The statement of profit or loss is normally completed:
A) before the balance sheet.
B) after the balance sheet.
C) at the same time as the balance sheet.
D) at any time, the order of completion for these two statements is irrelevant.
Q2) Other ______________ income represents all changes in equity other than profit or loss,and transactions associated with owners such as dividends and capital contributions.
Q3) Which of the following would not be classified as an administrative expense?
A) Salaries and wages of sales staff.
B) Stationery.
C) Depreciation of office equipment.
D) Rates.
Q4) 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.
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Q5) A loss reported on the statement of profit or loss decreases the __________ section of the balance sheet.
Chapter 7: Statement of Cash Flows
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Q1) Investors have increased their reliance on the statement of cash flows due to:
A) the relative difficulty in manipulating the statement of cash flows compared with the ability to manipulate the statement of profit or loss.
B) the comparison of profit or loss to the cash flow from operating activities providing insight to an entity's ability to meet its obligations.
C) the statement highlighting an entity's ability to reinvest in its operations.
D) all of the options are correct.
Q2) 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.
Q3) Borrowing money and raising share capital are included as ________________ activities on a statement of cash flows.
Q4) The receipt of dividends would be classified as a cash inflow from ______________ activities.
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Chapter 8: Analysis and Interpretation of Financial Statements
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Sample Questions
Q1) Which of the following does not measure asset efficiency?
A) Asset turnover ratio.
B) Return on assets.
C) Days inventory.
D) Times debtors turnover.
Q2) From the information provided below,management of an entity calculate the return on assets (rounded to the nearest whole number)to be:
\(\begin{array}{|l|r|}
\hline\text{ Net profit after-tax }& \$ 109000 \\
\hline \text{Net profit before interest and tax }& 152000 \\
\hline \text{Beginning balance of total assets} & 620000 \\
\hline \text{Ending balance of total assets} & 840000 \\
\hline
\end{array}\)
A) 15%
B) 21%
C) 18%
D) 13%
Q3) The gross profit margin is calculated as gross profit divided by _____________
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Chapter 9: Budgeting
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Q1) The purchases budget sets the required level of inventory or direct materials for merchandising or _________________ entities.
Q2) The components of the financial budgets are:
A) budgeted statement of profit or loss, sales or fees budget, cash budget.
B) operating budget and production budget.
C) budgeted statement of profit or loss, budgeted balance sheet, cash budget, and capital expenditure budget.
D) capital expenditure budget and manufacturing budget.
Q3) For a cash budget to enable close monitoring of the entity's cash position it should be prepared on a:
A) yearly basis.
B) daily basis.
C) monthly basis.
D) quarterly basis.
Q4) ____________________ management involves setting business targets in other than just financial terms.
Q5) The difference between actual and budgeted results is known as a ________________.
Q6) Budgets provide the financial frameworks for an entity's _______________ plan.
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Chapter 10: Costvolumeprofit Analysis
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Q1) Which of the following cannot be used to determine a break-even point?
A) graphical representation of CVP analysis.
B) regression analysis.
C) contribution margin calculation.
D) mathematical equation.
Q2) The break-even point would not be affected by changes to:
A) total fixed costs.
B) sales price per unit.
C) variable cost per unit.
D) number of units sold.
Q3) Which of the following statements is correct with regards to the underlying assumptions of CVP analysis?
A) A step up to the next relevant range of activity may incur an increase in fixed costs.
B) All costs can be classified as either fixed or variable.
C) The sales mix between multiple products is always the same.
D) All the above statements are correct.
Q4) An important assumption in CVP analysis is that all cost functions are assumed to be _______________.
Q5) Mixed costs possess both ________ and ________ characteristics.
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Chapter 11: Costing and Pricing in an Entity
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Q1) Under the activity hierarchy of costs,costs incurred for the benefit of the entire entity (e.g.cost of operating the head office)are classified as:
A) unit level costs.
B) batch level costs.
C) product level costs.
D) facility level costs.
Q2) Which of the following statements regarding variances is true?
A) Variances need to be calculated when budgeted costs are used to allocate indirect costs.
B) Variances arise when an entity overestimates the expenditure level of indirect costs assigned to the cost pool or the expected usage of the cost driver.
C) Variances arise when an entity underestimates the expenditure level of indirect costs assigned to the cost pool or the expected usage of the cost driver.
D) All of the statements are true.
Q3) ______________ drivers such as labour hours and machine hours use a measure of output to assign indirect costs to cost objects.
Q4) A cost object is an object that has a __________________ measurement of cost.
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Chapter 12: Capital Investment
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Q1) Which of the following statements is true regarding the decision rule for ARR?
A) All of these statements are true regarding the ARR decision rule.
B) Only investments with an ARR higher than the RRR should be considered.
C) The decision rule for ARR varies among entities.
D) Generally, the investment with the highest ARR is to be accepted.
Q2) The decision rule for the internal rate of return method of investment decision making is that projects will be accepted for rates that are:
A) equal to zero.
B) positive.
C) above the industry average.
D) above the entity's required rate of return.
Q3) The payback period method of investment decision making is generally regarded as:
A) mostly accurate.
B) very accurate.
C) too simplistic to be the only tool used in decision-making.
D) too complex for normal use.
Q4) The cost of forgoing benefits from an alternative investment is known as the ___________ cost.
Q5) The ___________ (shorter/longer)a payback period is,the greater the risk.
Page 14
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Chapter 13: Financing the Business
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Q1) Foreign investment where the investor has significant influence over the key policies of the investee is known as ___________ investment.
Q2) If trade creditors at the beginning of the period are $56 000 and at the end of the period are $68 000,and total credit purchases for the period are $480 000,credit turnover in days is (round your answer up to the next full number of days):
A) 13 days.
B) 52 days.
C) 43 days.
D) 48 days.
Q3) Which of the following businesses would be most likely to have the greatest proportion of working capital held as debtors?
A) A grocery retailer.
B) An accountant.
C) A coffee shop.
D) A restaurant.
Q4) The _______________ share is the main type of share by which companies divide and sell ownership rights to investors.
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Chapter 14: Performance Measurement
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Q1) Material,energy and water consumption are typical environmental indicators of an organisation's (operational/management)_______________ performance.
Q2) Which of the following statements about the economic value added (EVA)performance measure is not true?
A) The charge deducted for the cost of capital can vary depending on the various levels of risk.
B) The formula to calculate EVA uses profit before tax.
C) The adjustments could be manipulated by managers.
D) It is a short-term economic performance indicator.
Q3) The investment _______________ ratio measures the amount of sales generated relative to the level of investment.
Q4) Which of the following is an example of a financial performance measure?
A) Production and delivery lead times.
B) Employee productivity.
C) Process downtime.
D) Return on investment.
Q5) The ___________ value added performance measure is based on the economic increase in an organisation's value after a suitable charge for capital is deducted.
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