Introduction to Accounting Mock
Exam
Course Introduction
Introduction to Accounting provides students with a foundational understanding of accounting principles and practices used in business. The course covers essential topics such as the accounting cycle, preparation of financial statements, basic bookkeeping, asset and liability management, and the interpretation of financial information. Through practical exercises and real-world examples, students learn how accounting supports decision-making and ensures financial transparency in organizations. This course is designed for those with little or no prior knowledge of accounting and serves as a prerequisite for more advanced accounting courses.
Recommended Textbook
Accounting Business Reporting for Decision Making 4th Edition by Jacqueline Birt
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14 Chapters
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Page 2
Chapter 1: Introduction to Accounting
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Q1) The Corporations Act gets its powers from which section of the Australian Constitution?
A)50
B)51
C)52
D)53
Answer: B
Q2) How many of the following are differences between management and financial accounting?
*Types of reports produced
*Frequency of reports
*The format of reports
*The users of reports
A)One
B)Two
C)Three
D)Four
Answer: D
Q3) The _________________ Reporting Council was established to oversee the AASB.
Answer: Financial
Page 3
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Chapter 2: Business Sustainability
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Q1) Ultimate legal responsibility for the financial statements of a company rests with the:
A)Accounting firm employed to produce the reports.
B)Board of directors.
C)CEO.
D)ASX.
Answer: B
Q2) Which of the following is not an element of triple bottom line reporting?
A)economic performance
B)social performance
C)environmental performance
D)ethical performance
Answer: D
Q3) The major criticism of personal financial planners in Australia is:
A)they are paid too much
B)lack of qualifications
C)lack of independence
D)lack of confidentiality
Answer: C
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4
Chapter 3: Business Structures
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Q1) Which of these entities is not required,under the Corporations Act,to prepare a full set of financial statements in accordance with the accounting standards?
A)A large proprietary company
B)A public company
C)A disclosing entity
D)A partnership
Answer: D
Q2) The accounting report that lists assets,liabilities and equity is the
Answer: balance sheet
Q3) A major (advantage/disadvantage)_________________ of a company is that its shareholders have limited liability.
Answer: advantage
Q4) Which financial statement must be prepared before others can be completed?
A)Statement of cash flows
B)Income statement
C)Balance sheet
D)Statement of financial position
Answer: B
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Chapter 4: Business Transactions
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Q1) For the cash account to decrease and the profit to decrease the transaction occurring could have been:
A)purchase of a new printer for the owner's home computer.
B)repayment of a loan.
C)payment of an electricity bill.
D)agreement with a supplier on the value of the next delivery.
Q2) For the accounting equation to balance each transaction must:
A)always affect two accounts.
B)affect the same number of asset and liability accounts.
C)affect two or more accounts.
D)affect two or less accounts
Q3) When a customer eventually pays for items that have been purchased on credit,the transaction will affect:
A)an asset and a liability
B)an asset and an expense
C)two assets
D)an asset and income
Q4) The accounting principle that requires separation of business transactions from any personal transactions of the owners is known as the _____________________ concept.
6
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Chapter 5: Balance Sheet
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Q1) Select the asset that is \(\bold{not}\) an identifiable intangible asset.
A)Goodwill
B)Brand name
C)License
D)Development expenditure
Q2) Which of these items of importance for decision-making can be measured and included on the balance sheet?
A)The value of employee's skills and abilities
B)Future claims on the business from leasing arrangements
C)The cost of bad publicity
D)Identifiable intangible assets
Q3) Which of these is not a current liability?
A)Dividend payable
B)Accounts payable
C)General reserve
D)Accrued expenses
Q4) The elements of the balance sheet i.e.assets,liabilities and equity are defined in the
Q5) The original cost of an asset less its _____________depreciation is its carrying amount.
7
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Chapter 6: Income Statement and Statement of Changes in Equity
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Q1) Which of the following is \(\bold{not}\) an administrative expense?
A)motor vehicle lease payments
B)salaries and wages
C)rent
D)utilities charges and supplies
Q2) An item is considered to be __________________ based on the size and/or nature of the item,and whether its non-disclosure could influence users' decision making.
Q3) If a car is serviced on 31 May and an invoice is issued,the owner picks up the car on 31 May,the owner sends a cheque to the servicing firm on 4 June,and the firm banks the cheque on 7 June,income is recognised by the servicing firm on
A)31 May
B)4 June
C)7 June
D)5 June
Q4) ______________ _____________
(GAAP)are acceptable accounting practices which have become documented in the accounting standards.
Page 8
Q5) Income accrued is income recognised _________ the cash has been received.
Q6) The ___________ statement is prepared to calculate an entity's profit.
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Page 9
Chapter 7: Statement of Cash Flows
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Q1) The comparison of profit or loss with net cash from operating activities can shed light on how well an entity is managing its ______________ _____________.
Q2) On a statement of cash flows borrowing money and raising share capital are examples of ________________ activities.
Q3) Cash from operating activities less the amount spent on capital expenditure to maintain the existing level of operations is the formula for: A)free cash flow
A
B)the cash flow to sales ratio
C)the cash adequacy ratio
D)the debt coverage ratio
Q4) If cost of sales expense is $350 000 for the period and inventory has decreased by $35 000 during the period,assuming creditors' balances have not altered,cash paid to suppliers is _____________.
Q5) If credit sales are $800 000 and debtors have increased by $60 000 over the period cash inflows from debtors on the statement of cash flows will be __________.
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Page 10
Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) Which of the following categories of ratios is not relevant to all business entities?
A)market performance ratios
B)profitability ratios
C)liquidity ratios
D)efficiency ratios
Q2) Explaining why the ROA (return on assets)ratio has changed necessitates an examination of:
A)the liquidity ratios and asset efficiency ratios
B)the profitability ratios and the market performance ratios
C)the asset efficiency ratios and the liquidity ratios
D)the profitability ratios and the asset efficiency ratios
Q3) If marketing expenses to sales ratio is 4.2% in period 1 and 5.1% in period 2,this indicates that:
A)the firm has become more efficient in controlling its marketing expenses over the period.
B)the firm has become less efficient in controlling its marketing expenses over the period
C)marketing expenses are a lower percentage of sales revenue
D)the firm is more profitable in period 2
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Chapter 9: Budgeting
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Q1) Which of these is not a strategy to improve cash inflow?
A)Offer incentives to debtors for prompt payments
B)Sell off unnecessary non-current assets
C)Defer capital expenditure
D)Increase sales
Q2) Cost of materials required to be purchased equals
A)production in units x materials cost per unit less beginning materials inventory plus target ending materials inventory
B)production in units less materials cost per unit x beginning materials inventory plus target ending materials inventory
C)production in units plus materials cost per unit less beginning materials inventory less target ending materials inventory
D)production in units x materials cost per unit plus beginning materials inventory less target ending materials inventory
Q3) The term for a set of interrelated budgets is the __________ budget.
Q4) If the actual electricity expense is $43 000 for the period and the budgeted expense is $40 000,there is a _____________ variance of $3000.
Q5) A ________________ is the differences between actual and budgeted results.
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Chapter 10: Cost-Volume-Profit Analysis
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Q1) The _______________ margin ratio can be used to perform CVP analysis in circumstances where the there is insufficient data to calculate the number of units of a product required to read the break-even point.
Q2) With all else constant a 10% increase in both the selling price and variable costs will
A)lower the break-even point.
B)raise the break-even point.
C)have no effect on the break-even point.
D)none of the options is correct
Q3) An increase in the level of production,within the relevant range,has what effect on fixed costs per unit?
A)they rise
B)they fall
C)they usually rise
D)they usually fall
Q4) In make or outsource decisions (avoidable/unavoidable)__________________ costs are irrelevant to the decision.
Q5) An important assumption in CVP analysis is that all cost functions are assumed to be _______________.
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Chapter 11: Costing and Pricing in an Entity
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Q1) Costs drivers can be based on either volume or activity.Which of the following is an activity based cost driver?
A)units of output.
B)time taken to set up machines.
C)labour hours.
D)machine hours.
Q2) All of these are indirect costs \(\bold{except:}\)
A)factory rent.
B)machinery maintenance costs.
C)raw materials.
D)supervisor wages.
Q3) Cost-based pricing is a pricing method that:
A)applies a mark-up to the calculation of the product or service cost
B)seeks to establish prices at what the customer is willing to pay
C)determines the minimum amount a customer will pay
D)none of the options is true
Q4) Any non-manufacturing costs incurred to support entity activities such as office salaries and other administration expenses are not permitted under Australian accounting standards to be included in the _________________ product cost.
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Chapter 12: Capital Investment
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Q1) Social and environment concerns are (always/sometimes)_________________ recognised in investment decisions.
Q2) A company is evaluating an investment proposal using the payback method.Cash inflows are expected to be $16 000 in year 1,$12 000 in year 2 and $8000 in year 3.The initial investment required is $32 000.Assuming even cash inflows within each year the payback period is:
A)2 years
B)2.25 years
C)2.5 years
D)2.6 years
Q3) Using the NPV method which factor is not relevant in determining the discount rate?
A)the rate of inflation
B)risk
C)the number of years the firm has been in business
D)opportunity cost
Q4) The investor community is placing increasing importance on care of the natural environment and ____________ responsibility in investment decision making.
Q5) Projects with a higher risk will have a (higher/lower)__________ discount rate.
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Chapter 13: Financing the Business
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Q1) A measure of the success of collection policies for accounts receivable is a low level of ________ debts.
Q2) Finance leases are (cancellable/non-cancellable)___________________ contractual arrangements.
Q3) Which of the following is a cost of granting credit?
A)the opportunity cost of funds being tied up
B)all the options are costs of granting credit
C)administration costs for managing receivables
D)the cost of carrying slow payers and bad debts
Q4) Corporate bonds are classed as:
A)unsecured debt.
B)hybrid debt.
C)uncoordinated debt.
D)secured debt.
Q5) Which of the following statements are applicable to operating leases?
A)the lease is cancellable upon giving notice
B)the lease is for the majority of the useful life of the asset
C)interest and depreciation are expenses of the lessee
D)none of the options apply to operating leases
Q6) There are two types of floor-plan lenders: captives and _________________.
Page 16
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Chapter 14: Performance Measurement
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Q1) In executive remuneration packages,long-term performance is rewarded by:
A)payment of an annual bonus based on profitability
B)long term incentives such as share options
C)fixed remuneration
D)a company car and travel
Q2) A short statement that sets out the overall philosophy and objectives of an entity is known as its ______________ statement.
Q3) If return on sales is 16% and investment turnover is 1.5 times,return on investment is
Q4) Which one of these perspectives is not used by the balanced scorecard?
A)financial
B)employee
C)internal operations
D)innovation and improvement activities
Q5) There is no proven cause and effect link between non-financial performance measures and _________________ success.
Q6) The term ______________________ is used to describe the focus on the efficient use of resources to minimise their impact on the environment.
Q7) The methods used to inventory and audit greenhouse gas emissions are
Page 17
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