Chapter1: Accounting in action

Chapter1: Accounting in action

Test Bank

to accompany

Principles of financial accounting 3rd edition

PREPARED BY

Barbara Burns

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Chapter 1 – Accounting in action

© John Wiley & Sons Australia, Ltd 2013 1.1

Chapter 1: Accounting in Action

Learning Objectives

Learning Objective 1.1 Explain what accounting is

Learning Objective 1.2 Understand the importance and value of accounting

Learning Objective 1.3 Understand the role of corporate governance in enhancing the quality of financial reporting

Learning Objective 1.4 Identify the users and uses of accounting

Learning Objective 1.5 Understand why ethics is a fundamental business concept

Learning Objective 1.6 Understand the importance of sustainability, and sustainability reporting, for business

Learning Objective 1.7 Explain the meaning of generally accepted accounting principles and the cost principle.

Learning Objective 1.8 Explain the meaning of the monetary unit assumption and the economic entity assumption

Learning Objective 1.9 State the basic accounting equation, and explain the meaning of assets, liabilities and owner’s equity

Learning Objective 1.10 Analyse the effects of business transactions on the basic accounting equation

Learning Objective 1.11 Understand what the complete set of financial statements is and how statements are prepared

Learning Objective 1.12 Identify the majority fields of the accounting profession and potential accounting careers.

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Testbank to accompany Principles of financial accounting 3e by Weygandt et al

© John Wiley & Sons Australia, Ltd 2013 1.2 Multiple Choice

• Communication of economic events is the part of the accounting process that

involves Learning Objective 1.1 Explain what accounting is

• identifying economic events.
• quantifying transactions into dollars and cents.

*c. preparing accounting reports.

• recording and classifying information.

• The accounting process is correctly sequenced as

Learning Objective 1.2 Understand the importance and value of accounting

• identification, communication, recording.
• recording, communication, identification.

*c. identification, recording, communication.

• communication, recording, identification.

• The first stage of the accounting process is

Learning Objective 1.3 Understand the role of corporate governance in enhancing the quality of financial reporting

• communicating.

*b. identifying economic events

• processing.
• recording.

• The statement concerning corporate governance that is incorrect is

Learning Objective 1.3 Understand the role of corporate governance in enhancing the quality of financial reporting *a. Managers always act in the best interests of shareholders.

• Corporate governance includes how risk is monitored d.
• Corporate governance is about controls in the entity for protecting

shareholders’ interests.

• Corporate governance is concerned with how the performance of the

entity is optimised

• The use of computers in recording business events

Learning Objective 1.4 Identify the users and uses of accounting *a. has made the recording process more efficient.

• does not use the same principles as manual accounting systems.
• has greatly impacted the identification stage of the accounting process.
• is economical only for large businesses.

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Chapter 1 – Accounting in action

© John Wiley & Sons Australia, Ltd 2013 1.3

• Internal users of accounting information include all of the following except

Learning Objective 1.4 Identify the users and uses of accounting

• company officers.

*b. investors.

• marketing managers.
• production supervisors.

• Which of these is an internal user of accounting data?

Learning Objective 1.4 Identify the users and uses of accounting

• The CEO of a company.
• Clerical staff of a company.
• Salespersons of a company.

*d. All of the options are correct.

• Which of these is not an external user of accounting information?

Learning Objective 1.4 Identify the users and uses of accounting

• Regulatory agencies.
• Customers.
• Investors.

*d. All of the options are correct.

• Bookkeeping primarily involves which part of the accounting process?

Learning Objective 1.4 Identify the users and uses of accounting *a. Recording

• Communication.
• Analysis.
• Bookkeeping is equally involved in all parts of the accounting process.

• The branch of accounting that provides economic and financial information

for investors, creditors and other external users is Learning Objective 1.4 Identify the users and uses of accounting *a. financial accounting.

• management accounting.
• cost accounting.
• budgeting.

• The first step in solving an ethical dilemma is to

Learning Objective 1.4 Identify the users and uses of accounting

• identify and analyse the principal elements in the situation.
• identify the alternatives.

*c. recognise an ethical situation and the ethical issues involved.

• weigh the impact of each alternative on various stakeholders.
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