Accounting 9th Edition Hoggett Test Bank

Testbank

to accompany

Accounting 9th edition

by John Hoggett, Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie & Jodie Maxfield

Prepared by

Peter Hall

© John Wiley & Sons Australia, Ltd 2015

Accounting 9th Edition Hoggett Test Bank Visit TestBankDeal.com to get complete for all chapters

Testbank to accompany Accounting 9e

© John Wiley and Sons Australia, Ltd 2015 2.2

Chapter 2: Financial statements for decision making

Multiple-choice questions

1. Which of the following statements is incorrect?:

• The liability of shareholders to contribute to the debts of an insolvent company

is limited.

• A sole proprietorship is an accounting entity.
• Individual partners are personally liable for partnership debts.

*d. Partnerships are regarded as separate legal entities.

Correct answer: d

Learning Objective 2.1 ~ identify the common types of business entities.

• In order to avoid later disputes it is desirable that a partnership agreement:

*a. is in writing.

• should have the partners sharing profits and losses equally.
• should set up the partnership as a separate legal entity.
• should set out in detail how the how all likely transactions are to be recorded.

Correct answer: a

Learning Objective 2.1 ~ identify the common types of business entities.

• Which of the following is the correct expression of the accounting equation?

• Assets + liabilities = equity.
• Assets = liabilities – equity.
• Assets + equity = liabilities.

*d. Assets = liabilities + equity.

Correct answer: d

Feedback: Assets = liabilities + equity.

Learning Objective 2.1 ~ identify the common types of business entities.

Chapter 2: Financial statements for decision making

© John Wiley and Sons Australia, Ltd 2015 2.3

• Maintaining a satisfactory relationship between an entity’s resource inputs and its output

of product or services is referred to as:

• planning.

*b. efficiency.

• organising.
• effectiveness.

Correct answer: b

Learning Objective 2.2 ~ discuss the functions carried out by managers.

5. How well an entity attains its goals is referred to as:

• efficiency.
• planning.
• organising.

*d. effectiveness.

Correct answer: d

Learning Objective 2.2 ~ discuss the functions carried out by managers.

6. The statement of changes in equity:

• indicates the ability of the entity to generate cash flow.
• shows the selling price of the entity’s assets.
• shows how profit was determined.

*d. serves as a connecting link between the income statement and the balance sheet.

Correct answer: d

Learning objective 2.3 ~ outline the basic financial statements used in business to report to users for decision-making purposes.

7. A balance sheet:

• is classified into operating, investing and financing activities.
• measures the entities financial performance.

*c. lists assets, liabilities and equity at a specific point in time.

• shows how profit was determined.

Correct answer: c

Learning objective 2.3 ~ outline the basic financial statements used in business to report to users for decision-making purposes.

Testbank to accompany Accounting 9e

© John Wiley and Sons Australia, Ltd 2015 2.4

• Assume you are examining a financial statement headed ‘As at the 31 December 2014’.

The heading indicates the statement is the:

• trial balance.
• income statement.
• statement of changes in equity.

*d. balance sheet.

Correct answer: d

Learning objective 2.3 ~ outline the basic financial statements used in business to report to users for decision-making purposes.

• Which of the following statements concerning the income statement is not true?

• The heading must indicate the length of time the report covers.

*b. It shows the change in the entity’s cash balance for the period.

• If expenses exceed income than a loss has been incurred for the period.
• An alternative name is the statement of financial performance.

Correct answer: b

Learning objective 2.3 ~ outline the basic financial statements used in business to report to users for decision-making purposes.

• Which of the following statements concerning equity is true?

*a. It is the owner’s claim to the assets of the entity after deducting liabilities.

• It is fixed at the amount initially contributed when the business was established.
• It is decreased by profit.
• Assets + liabilities = equity.

Correct answer: a

Learning objective 2.3 ~ outline the basic financial statements used in business to report to users for decision-making purposes.

• Sydney & Associates had the following assets and liabilities. Equity is:

$ Cash in hand 4 000 Bank overdraft 11 000 Sundry creditors 3 000 Inventory 2 700 Sundry debtors 8 100 Office furniture 4 500 Loan from Perth Ltd 12 000 Motor vehicles 12 000

• $8300.