Introduction to accounting

Chapter 1 – Introduction to accounting

TRUE/FALSE

1.An objective of accounting is to provide information to predict and evaluate the going concern of an entity.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting

2.Accounting information is always quantitative and objective.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting

3.Stewardship is the term used to refer to management’s role in protecting an entity’s economic resources from theft, fraud and wastage.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting used?

4.Management is an external user of accounting information.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Who uses accounting information?

5.The balance sheet is an example of a management accounting report.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Who uses accounting information?

6.The statement of comprehensive income is an example of a financial accounting report.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: Who uses accounting information?

7.The difference between management accounting and financial accounting is that management accounting focuses on external users whereas financial accounting focuses on internal users.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting used?

8.Management has the responsibility of selecting accounting policies.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: Economic consequences of accounting information.

9.Where an Accounting Standard exists, accounting policies must comply with the Accounting Standard.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: Economic consequences of accounting information.

Contemporary Acco unting 8e Mike Bazley, Phil Hancock (Test Bank All Chapters, 100% Original Verified, A+ Gra de) 1 / 4

10.The economic consequences of accounting information are limited to the compensation schemes paid to managers.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Economic consequences of accounting information.

11.Political costs create incentives for managers to select accounting policies that increase reported profits.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Economic consequences of accounting information.

12.Triple bottom line reporting confirms the maximisation of profit as the major objective of listed companies.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Triple bottom line reporting

13.A triple bottom line report refers to the publication of economic, environmental and corporate governance information in an integrated report.ANS: F PTS: 1 AACSB: Knowledge

TOP: Triple bottom line reporting

14.Because triple bottom line reports are voluntary, the provision of an independent verification of the reports should enhance the reliability of the information provided.ANS: T PTS: 1 AACSB: Knowledge, Analytical

TOP: Triple bottom line reporting

15.The GRI indicators are established by the committee without any input from stakeholders.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Triple bottom line reporting

16.The audit of a triple bottom line report is normally completed by the financial auditor.ANS: F PTS: 1 AACSB: Knowledge, Analytical

TOP: Triple bottom line reporting

MULTIPLE CHOICE

1.Accounting information:

A.is helpful for financing decisions but not for marketing decisions.B.is useful for profit-making entities but is not needed for not-for-profit entities.C.must follow accounting principles provided by management.D.is useful for all economic organisations.ANS: D PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting 2 / 4

2. The primary purpose of accounting is to:

• help people make decisions about economic activities.
• provide information that management can use to convince shareholders that management

deserves high salaries.

• provide employment to persons who have a knack for dealing with numbers.
• minimise the amount of profit that a firm has earned.

ANS: A PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting

3. Accounting is likely to involve:

• qualitative and financial information.
• quantitative and financial information.
• quantitative and non-financial information.
• qualitative and non-financial information.

ANS: B PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting

4. For the individual, accounting has at least three functions. They are:

• planning, buying and selling.
• planning, decision support and spending.
• saving, controlling and buying.
• planning, controlling and decision support.

ANS: D PTS: 1 AACSB: Knowledge, Analytical

TOP: What is accounting

5. The difference between management accounting and financial accounting is:

• management accounting focuses on external users whereas financial accounting focuses

on internal users.

• management accounting focuses only on the control function whereas financial accounting

focuses on the reporting function.

• management accounting focuses on internal users whereas financial accounting focuses on

external users.

• management accounting focuses on the reporting function whereas financial accounting

focuses on the control function.

ANS: C PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting information?

6. Examples of internal and external users of information are:

• creditors and investors.
• managers and unions.
• creditors and unions.
• banks and government authorities.

ANS: B PTS: 1 AACSB: Knowledge, Analytical

TOP: Who uses accounting information?

• The basic difference between managerial accounting and financial accounting is that:
• the financial accounting system relies on accounting information whereas managerial

accounting does not.

• financial accounting relies on information gathered from sources outside the business

whereas managerial accounting relies on internally generated information. 3 / 4

• financial accounting is concerned with providing information to outsiders, whereas

managerial accounting is concerned with providing information to managers for their use in directing the activities of the organisation.

• managerial accounting information is useful to not-for-profit organisations, but financial

accounting information is not.

ANS: C PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting information?

• Which of the following is an example of a stakeholder of a business?
• An owner
• An investor
• A manager
• All of the above

ANS: D PTS: 1 AACSB: Knowledge, Analytical

TOP: Who uses accounting information?

9. Financial accounting is the process of:

• preparing and reporting accounting information for external decision makers.
• preparing and reporting accounting information for internal decision makers.
• enacting generally accepted accounting principles.
• preparing and reporting accounting information to lenders.

ANS: A PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting information?

10. Management accounting is the process of:

• preparing and reporting accounting information for external decision makers.
• preparing and reporting accounting information for an organisation’s internal decision

makers.

• enacting generally accepted accounting principles.
• preparing and reporting accounting information to lenders.

ANS: B PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting information?

• Match the type of accounting information to the term that best describes it.

Information prepared for Information prepared for external decision makers internal decision makers

• Financial accounting Financial accounting
• Financial accounting Managerial accounting
• Managerial accounting Financial accounting
• Managerial accounting Managerial accounting

ANS: B PTS: 1 AACSB: Knowledge, Analytical

TOP: For what purpose is accounting information used?

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