Introduction to Accounting Exam Solutions
Course Introduction
Introduction to Accounting provides students with a foundational understanding of the principles and practices integral to the accounting profession. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, and the use of accounting information in decision-making processes. Students will learn about key concepts including assets, liabilities, equity, revenues, and expenses, as well as the regulatory environment governing accounting standards. By the end of the course, students will be equipped with practical skills to record, classify, summarize, and interpret financial data, preparing them for further study or entry-level roles in business and finance.
Recommended Textbook
Atrills Accounting for Business Students 1st Australian Edition by Atrill McLaney
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14 Chapters
893 Verified Questions
893 Flashcards
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Chapter 1: Introduction to Accounting
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76 Verified Questions
76 Flashcards
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Sample Questions
Q1) The best explanation of relevance is:
A)ensuring the benefit of the information is greater than the cost of providing it.
B)ensuring that information is expressed as clearly as possible.
C)ensuring that information is useful for decision-making.
D)ensuring that information is free from bias.
Answer: C
Q2) Which of the following is not an aspect of accounting and finance potential managers need to understand?
A)Reading and interpreting financial reports
B)The design of the accounting information system
C)How investment decisions are made
D)How businesses are financed
Answer: B
Q3) The stages of an accounting system are:
A)evaluation, processing, output.
B)identification, recording, analysis, reporting.
C)setting objectives, planning, analysis.
D)none of the above.
Answer: B
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Page 3
Chapter 2: Measuring and Reporting Financial Position
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72 Flashcards
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Sample Questions
Q1) Which of these is not always a characteristic of an asset?
A)Ability of the benefit to be measured in money terms
B)Exclusive control of the economic benefits
C)Legal ownership by the entity
D)Probable expected future economic benefits
Answer: C
Q2) If assets are $36 200 and equity is $13 600, liabilities are:
A)$47 500
B)$22 100
C)$22 600
D)$22 900
Answer: C
Q3) What is the effect on the statement of financial position when the business buys inventory on credit?
A)Increase asset inventory; increase liability creditor
B)Increase asset inventory; increase equity
C)Decrease asset inventory; decrease liability creditor
D)Decrease asset inventory; increase liability creditor
Answer: A
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Page 4
Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) Employees have worked for the full year and have received total wages of $305 000 in cash. However, they must wait until the next payday to be paid for the last three days of the year they have worked. The amount owing is $6 500. Wages expense in the statement of financial performance and accrued wages in the statement of financial position are respectively:
A)$311 500 and $6 500
B)$306 000 and $5 500
C)$306 000 and $0
D)$311 500 and $0
Answer: A
Q2) Which of these is not part of inventory for a manufacturing firm?
A)Partly completed goods (work in process)
B)Raw materials
C)Finished goods
D)None of the above, i.e., all are part of inventory
Answer: D
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Chapter 4: Recording Transactionsthe Journal and Ledger Accounts
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44 Flashcards
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Sample Questions
Q1) If, at the end of the accounting period, non-current assets total $800 000 and depreciation is calculated based on 8% per annum straight line, depreciation expense would total:
A)$64 000
B)$46 000
C)$800 000
D)$10 000
Q2) Doubtful debts provision is a contra asset account.
A)True
B)False
Q3) On the worksheet, a loss would appear as a credit in the profit and loss columns.
A)True
B)False
Q4) An account used to calculate gross profit on trading, prior to the profit and loss account is a/an ________ account.
A)cost of sales
B)inventory
C)contra
D)trading
Page 6
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Chapter 5: Accounting Systems and Internal Control
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) The difference between a cash book and a cash journal is that the cash book allows for the use of analysis columns.
A)True
B)False
Q2) The control account for receivables has a balance of $150 000. The receivables ledger account has a debit balance of $150 000. This agreement shows that the account is error free.
A)True
B)False
Q3) With a computerised accounting system, there is no need for:
A)internal controls.
B)checks and balances.
C)updating each subsystem manually.
D)data backups.
Q4) Which of the following is a subsidiary record?
A)Two-column cash book
B)Three-column cash book
C)A cash account in a separate ledger
D)A cash journal
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Chapter 6: Introduction to Limited Companies
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Sample Questions
Q1) A bonus issue of shares by a company will:
A)increase total shareholders' equity.
B)sometimes increase shareholders' equity and sometimes leave it unchanged.
C)leave total shareholders' equity unchanged.
D)reduce total shareholders' equity.
Q2) Which of the following is a legal entity?
A)Company
B)Partnership
C)Sole proprietorship
D)All of the above
Q3) Which of the following is unlikely to be a reserve found in a company's statement of financial position?
A)Asset replacement
B)Foreign currency
C)Acquisition
D)All of the above are likely to be found
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Chapter 7: Regulatory Framework for Companies
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40 Flashcards
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Sample Questions
Q1) Which of the following is not included in an audit report?
A)An audit opinion on whether or not the financial statements are 'true and fair'
B)Identification of the financial reports audited
C)A statement on the sustainable strategies of the reporting entity
D)A statement that the financial reports were prepared in accordance with accounting standards
Q2) Which of the following is a responsibility of the directors of a public company?
A)To maintain an internal control system within the company
B)To ensure financial statements are prepared showing a true and fair view of an organisation's financial situation
C)To organise for financial reports to be audited
D)All of the above
Q3) Which of the following is not typically included in the notes to the financial statements?
A)All insignificant disclosures
B)Explanations of measuring bases used
C)Details of asset subclassifications
D)Confirmation that accounting standards have been adhered to
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Chapter 8: Measuring and Reporting Cash Flows
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Sample Questions
Q1) In 2015, G Co repaid $45 000 to the bank on a mortgage loan. $35 000 was interest on the mortgage and $10 000 was repayment of the principal. The repayment would appear in the statement of cash flows as:
A)operating outflow $45 000.
B)operating outflow $35 000; investing outflow $10 000.
C)financing inflow $45 000.
D)operating outflow $35 000; financing outflow $10 000.
Q2) In the statement of cash flows, the total of net cash flows from operating activities, net cash flows from investing activities and net cash flows from financing activities for the period equals:
A)the cash balances at the beginning of the period.
B)the cash balances at the end of the period.
C)profit.
D)total net increase or decrease in cash held for the period.
Q3) Which of these items will appear in a statement of cash flows?
A)Carrying value of an asset sold
B)Adjustment in the balance of an asset account caused by a revaluation
C)Proceeds from the sale of a fixed asset
D)All of the above
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Page 10
Chapter 9: Corporate Social Responsibility and Sustainability Accounting
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) A way to encourage more socially responsible behaviour by companies is:
A)market the 'good citizen' concept.
B)make breaches of behaviour more costly.
C)government action such as legislation.
D)All of the above
Q2) The form of the report recommended by the Global Reporting Initiative include:
A)an organisation profile.
B)a description of governance structure and management systems.
C)a vision and strategy statement.
D)All of the above
Q3) The balanced scorecard approach was developed by:
A)John Elkington
B)Kaplan and Norton
C)R Grey
D)KPMG
Q4) On what does sustainability reporting tend to report?
A)Social sustainability
B)Issues impacting on the environment
C)Both A and B
D)Neither A nor B
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Chapter 10: Analysis and Interpretation of Financial Statements
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Sample Questions
Q1) What does financial solvency refer to the ability of an entity to do?
A)Meet its long-term obligations
B)Earn a high rate of profit
C)Improve sales
D)Both A and B
Q2) The incorrect statement concerning financial ratios is:
A)A ratio expresses the relationship between two figures appearing in the financial statements.
B)Ratios are easy to interpret but difficult to calculate.
C)Ratios adjust for scale of operations and allow comparisons between businesses of different sizes.
D)None of the above, i.e., all are true statements
Q3) If Line Ltd has a current ratio of 2.5:1 and current assets are $600 000, how much are the company's current liabilities?
A)$240 000
B)$300 000
C)$360 000
D)$200 000
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Chapter 11: Costvolumeprofit Analysis and Relevant Costing
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70 Flashcards
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Sample Questions
Q1) The vertical axes on a break-even chart and a profit-volume chart respectively are:
A)profit: sales revenue and costs.
B)volume of output: volume of output.
C)sales revenue and costs: profit.
D)fixed costs: sales revenue.
Q2) The method that can be used to separate semi-variable costs into their fixed and variable components is:
A)high-low method.
B)the line of best fit.
C)linear regression method.
D)All of the above methods
Q3) For short-run decisions, which costs can normally be deemed to be irrelevant?
A)Variable costs
B)Relevant costs
C)Fixed costs
D)Total costs
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13
Chapter 12: Full Costing
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Sample Questions
Q1) Refer to the table above. The budgeted overhead recovery rate based on direct labour hours is:
A)$3.85 per DLH.
B)$5.60 per DLH.
C)$2.85 per DLH.
D)$5.85 per DLH.
Q2) Which of the following is an example of a product cost centre?
A)Corporate headquarters
B)Payroll department
C)Accounts payable department
D)Machining department
Q3) Which of the following statements is correct?
A)Full costing takes into account all resources sacrificed to achieve a specific objective.
B)Full costing only takes into account manufacturing costs.
C)Only variable costs are required to determine the selling price for a product.
D)Full costing cannot be used in the service industries.
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14
Chapter 13: Planning and Budgeting
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Sample Questions
Q1) The original budget was set at 15 000 units and estimated variable overheads at $345 000 ($23 per unit). If actual output is 16 000 units, calculate the variable overhead total and unit cost that would be shown in a budget flexed to actual output.
A)$345 000; $23
B)$361 000; $23.50
C)$345 000; $22.50
D)$368 000; $23
Q2) An adverse variance is best described as a:
A)variance where the actual performance falls short of the budget target.
B)variance where labour efficiencies have occurred.
C)combination of variances.
D)variance where actual performance exceeds the budget target.
Q3) If the principal objective of a firm is to enhance wealth, the most important budget target to meet is:
A)bank balance.
B)sales.
C)profit.
D)production.
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Chapter 14: Capital Investment Decisions
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Sample Questions
Q1) Which of the following does the Net Present Value method of investment appraisal not address?
A)The whole of the relevant cash flows
B)Qualitative factors
C)The timing of the cash flows
D)None of the above, i.e., all matters are addressed
Q2) What is the formula for net present value per $1 of investment?
A)Net Present Value/Investment
B)Net cash flows/ Investment
C)Present value of inflows/Initial investment
D)Present values of inflows/Present value of outflows
Q3) Refer to the table above. What is the annual net cash flow for years 1-4?
A)$10 000
B)$30 000
C)$40 000
D)$20 000
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