Chapter 1 Self-test questions

. Information on dividends in a set of financial statements would be of most interest to:

Investors

Employees

Customers

Lenders

. Financial information that is faithfully represented is: Please select all that apply

Timely

Free from error

Complete

Understandable

. Which one of the following is not a characteristic of a partnership?

Written agreement

Run by one individual

Unlimited liability

Profits shared

. Accounting summarises numerical data relating to past events and presents this data as information to managers and other interested parties as a basis for both _________________ and control purposes

. Which of the following characteristics describe management accounting? Please select all that apply

Present accounting and cost information to users outside an organisation.

Focuses on what has been achieved in the past.

Produces reports to evaluate the results of plans made in the past to see whether these plans achieved their aims.

Presents information that is used to help managers manage the business and its activities.

. Persons entrusted by others with resources are in the position of ___________, looking after those resources for the benefit of other parties.

. The following are characteristics of different types of business organisation. Match the characteristics to the correct organisations.

Able to sue and be sued in their own name.

.

Two or more individuals are involved in the running of the business.

.

Must comply with corporate governance rules.

.

Assume total responsibility for the success or failure of their businesses.

. Financial accounting is concerned with reporting accounting and cost information to users within an organisation.

True

False

. Accounting information is quantitative not qualitative.

True

False

. Accounting is important because:
Please select all that apply.

It enables control to be exercised over operations and activities.

It provides information for business decision making.

It enables businesses to show the monetary effect of business decisions and economic events.

It presents a wide range of both qualitative and quantitative information from which to evaluate a business' performance.

. Financial statements record all the most valuable assets of organisations.

True

False

. There are two fundamental and four enhancing qualitative characteristics of financial information.

True

False

. To help users understand financial information presented, that information should be:
Please select all that apply.

Verifiable

Presented clearly

Classified

Characterized

. Which one of the following statements is false?

Perfectly faithful representation of economic phenomena in words and numbers requires that the information presented must have three characteristics: it must be complete, neutral and free from error.

Cost and management accounting is concerned with reporting accounting and cost information to users within an organization to assist managers in managing the business and its activities.

The IASB recognizes that there is a cost in collecting, processing, verifying and disseminating financial information so information should only be presented if the benefits of providing that information outweigh the costs of obtaining it.

Accounting reports on the costs of natural resources used in production processes and other business activities.

. Which one of the following statements is not true?

The decision usefulness of information is enhanced if it is available to users in time for it to be capable of influencing their decisions.

To ensure verifiability, it should be possible to prove the financial information presented is accurate in all major respects.

Free from error means that information must be perfectly accurate

Where information is comparable, similarities and differences are readily apparent.

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