Fundamentals of Business Accounting Test Questions
Course Introduction
Fundamentals of Business Accounting introduces students to the basic concepts, principles, and practices of financial accounting and its role in business decision-making. The course covers key topics such as the accounting cycle, preparation and analysis of financial statements, recording of transactions, internal controls, and the interpretation of financial information for planning and control purposes. Emphasis is placed on understanding how accounting information is used by internal and external stakeholders to evaluate organizational performance, maintain accountability, and support strategic business objectives. This foundational course is essential for students pursuing business, finance, or related fields and provides the groundwork for advanced accounting studies.
Recommended Textbook
Atrills Accounting for Business Students 1st Australian Edition by Atrill McLaney
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Chapter 1: Introduction to Accounting
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Sample Questions
Q1) Financial accounting reports, compared to management reports, tend to be:
A)general purpose.
B)qualitative.
C)unstructured.
D)detailed.
Answer: A
Q2) The goal of business in relation to profit is generally taken as:
A)profit maximisation.
B)profit planning.
C)profit generation.
D)profit stabilisation.
Answer: A
Q3) The most complete description of the planning process for a business is:
A)setting objectives and short-term plans.
B)setting objectives, long-term plans, and short-term plans.
C)setting objectives and detailed budgets.
D)setting long-term objectives and long-term plans.
Answer: B
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Chapter 2: Measuring and Reporting Financial Position
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Q1) Which of the following is not a potential conflict in the statement of financial position?
A)The statement of financial position is generally only determined annually.
B)In reality, a country's money may not be 'a stable monetary unit'.
C)Relevant information is not always entirely reliable.
D)Australian dollars in 2005 may not have the same purchasing power in 2018.
Answer: A
Q2) Identify the current liability.
A)Wages owing
B)Loan from B Buy (due in 4 months)
C)Bill payable (due in 2 years)
D)Both A and B
Answer: D
Q3) Which aspect of business performance does the statement of financial position directly provide insight into?
A)Cash flows
B)Profitability
C)Share price
D)The relative proportions of funds contributed by owners and outsiders
Answer: D
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Chapter 3: Measuring and Reporting Financial Performance
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Q1) The accounting principle underpinning the practice of providing for bad and doubtful debts is the:
A)matching convention.
B)dual aspect convention.
C)historical cost convention.
D)going concern convention.
Answer: A
Q2) An item of inventory costing $750 can now only be sold at auction for $200. Auction costs of $50 will be incurred to make the sale. The net realisable value of the inventory is:
A)$700
B)$150
C)$750
D)$200
Answer: B
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Chapter 4: Recording Transactionsthe Journal and Ledger Accounts
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Q1) The process of transferring revenue and expense accounts to the profit and loss account, and then transferring the balance of the profit and loss account and drawing account to the capital account is:
A)creating the trial balance.
B)creating the profit and loss statement.
C)balancing the accounts.
D)closing off the accounts.
Q2) Explain the purpose of the closing off process and identify which accounts will remain after the process is completed.
Q3) Doubtful debts provision is a contra asset account.
A)True
B)False
Q4) In closing off the accounts, profit is transferred to capital. A)True
B)False
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Chapter 5: Accounting Systems and Internal Control
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Sample Questions
Q1) The records for all accounts are kept in a single, large book called the ledger.
A)True
B)False
Q2) Which of the following is not a name used to describe the subsidiary record in which credit transactions are usually first recorded?
A)Journal
B)Book of original entry
C)Ledger
D)Day book
Q3) C. Palmer opens a new computer sales and repair business. His assets are: Premises $700 000, Equipment $100 000, Inventory $150 000, and Cash $30 000. His liabilities are: Payables - M Rice $25 000. The journal entry to record the opening would include:
A)a credit to Capital for $955 000.
B)a debit to Capital for $955 000.
C)a credit to Capital for $1 050 000.
D)a debit to Capital for $1 050 000.
Q4) A sales book is used to record sales returns.
A)True
B)False
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Chapter 6: Introduction to Limited Companies
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Q1) An audit fee expense will most likely be found in the statement of financial performance for a:
A)Sole proprietorship
B)Partnership
C)Company
D)Both B and C
Q2) A company issued 120 000 fully paid, 5% preference shares priced at $2 each. The dividend to be paid on the shares for a financial year is:
A)$5 000
B)$10 000
C)$20 000
D)$12 000
Q3) Which of the following statements is correct?
A)Most companies see retained profits as the least likely source of finance.
B)The law quite clearly specifies the size of the non-distributable portion of capital a firm must hold back.
C)Preference capital redeemed by a company is always held in retained profits.
D)A company is not allowed to acquire and hold its own shares.
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Chapter 7: Regulatory Framework for Companies
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Q1) Which of the following is not true about segmented financial reports?
A)Under-performing segments will be revealed.
B)Risks and profitability of individual segments are identified.
C)Segments that have been sold will be identified and can be evaluated.
D)Investors can evaluate the company as a whole.
Q2) Which of the following financial statements does not have to be prepared by a publicly listed company?
A)Statement of comprehensive income
B)Statement of changes in equity
C)Statement of cash flows
D)All of the above must be prepared
Q3) Which of the following is not a problem associated with segment reporting?
A)Allocation of assets and expenses may vary among segments
B)Identifying a segment
C)Identifying unprofitable segments
D)Transfer pricing
Q4) Three key groups associated with companies are directors, shareholders and auditors. a. Explain the relationship between these three groups.
B. Define a reporting entity and a disclosing entity.
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Chapter 8: Measuring and Reporting Cash Flows
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Q1) How much cash was received from the disposal of machinery?
A)$100 000
B)$20 000
C)$110 000
D)$90 000
Q2) Which of these is a reason why a statement of cash flows could show a negative cash flow from operating activities even though the statement of comprehensive income showed a profit?
A)An increase in the amount of inventory held
B)A decrease in the amount owing by debtors
C)An increase in the amount owing by creditors
D)An increase in depreciation charged
Q3) Company W received $10 000 in cash in repayment of a loan made to B Free. In the statement of cash flows of Company W, the $10 000 would appear as:
A)an investing outflow.
B)an investing inflow.
C)a financing outflow.
D)a financing inflow.
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Chapter 9: Corporate Social Responsibility and Sustainability Accounting
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Sample Questions
Q1) Which of the following statements in relation to triple bottom line (TBL)reporting is correct? TBL reporting:
A)can only be used by companies.
B)can and is being used by at least one Australian council.
C)is not supported by the Australian government.
D)All of the above statements are correct
Q2) Aspects of corporate social responsibility are:
A)impact on employment and job creation.
B)health and safety.
C)pollution.
D)All of the above
Q3) For a business to be seen as socially responsible, the business must:
A)assess the social costs and benefits of the actions it takes.
B)develop and implement policies and practices in the area of social responsibility.
C)ensure the media is aware that it takes social responsibility seriously, even though there may be no real indicators.
D)Both A and B
Q4) Briefly outline the essence of the balance scorecard approach.
Page 11
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Chapter 10: Analysis and Interpretation of Financial Statements
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Q1) Ratios should not be used in isolation because:
A)different ratios may give contradictory messages.
B)their behaviour is interrelated.
C)a decision will often have a number of aspects.
D)All of the above
Q2) A company with a higher level of gearing will have:
A)a high liabilities/total assets ratio.
B)a lower owners' equity/total assets ratio.
C)a higher owners' equity/total assets ratio.
D)Both A and B
Q3) If the price-earnings ratio is 8 times, the earnings yield is:
A)8%
B)12.5%
C)80%
D)10%
Q4) Earnings per ordinary share is:
A)$2.50
B)$3.00
C)$1.80
D)$1.50
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Chapter 11: Costvolumeprofit Analysis and Relevant Costing
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Q1) Variable costs per unit are also known as:
A)marginal costs.
B)break-even costs.
C)activity costs.
D)semi-variable costs.
Q2) A marginal analysis of two or more possible courses of action takes into account:
A)all the revenue received from each course of action.
B)all of the costs involved in each course of action.
C)only the fixed costs involved in each course of action.
D)only the costs that vary with each course of action.
Q3) The contribution margin is so called because it contributes to:
A)variable costs.
B)fixed and variable costs.
C)fixed costs and profit.
D)fixed costs.
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Chapter 12: Full Costing
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Sample Questions
Q1) What does an overhead recovery rate represent?
A)A rate at which jobs will be charged with overheads
B)A rate at which jobs are charged labour costs
C)A rate at which jobs are charged to clients
D)A rate at which jobs use overhead
Q2) Refer to the table above. The overhead recovery rate (rounded), using direct labour hours as the allocation base, is:
A)$3.90 per DLH.
B)$7.20 per DLH.
C)$5.90 per DLH.
D)$7.00 per DLH.
Q3) An example of a service cost centre is:
A)finished goods department.
B)machining department.
C)payroll department.
D)assembly department.
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Chapter 13: Planning and Budgeting
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Q1) If actual sales are $96 000 and budgeted sales are $87 000 and actual advertising paid is $6 100 and budgeted advertising is $7 300, the variances are respectively are:
Note: F - Favourable, U - Unfavourable (adverse).
A)$9 000F; $1 200U
B)$9 000U; $1 200U
C)$9 000F; $1 200F
D)$9 000U; $1 200F
Q2) How is a master budget best described?
A)As a budget of the cash flows predicted for a future period of time
B)As the one and only budget that is of interest to management
C)As a summary of a number of interrelated budgets
D)As a budget for a manufacturing business
Q3) Refer to the table above. What is the total cash expected to be collected from all sales in March?
A)$50 000
B)$58 000
C)$62 000
D)$36 000
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Chapter 14: Capital Investment Decisions
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Q1) Refer to the table above. The payback period is:
A)between years 2 and 3.
B)between years 4 and 5.
C)between years 3 and 4.
D)between years 1 and 2.
Q2) What discount rate should be used in Net Present Value assessments?
A)The weighted average cost of capital of the business
B)The government bond rate
C)The specific cost of capital associated with funding a particular project
D)The expected rate of return required by ordinary shareholders
Q3) Which of the following statements is incorrect?
A)It may be very difficult to quantify all factors that impact on an investment decision.
B)Investment decisions are made easier as cash forecasts are always correct.
C)The validity of assumptions made in relation to an investment proposal may influence the final decision.
D)The results from using an investment appraisal method is only one input into the final decision.
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