Multiple-choice questions

Testbank For Company Accounting 11 th

edition by Leo et al. 1 / 4

Chapter 1: Nature and regulation of companies

© John Wiley and Sons Australia, Ltd 2018 1.1

Chapter 1: Nature and regulation of companies

Multiple-choice questions

• The advantages of a company over a partnership and sole trader do not include which of

the following?

• Members are able to sell their shares at any time to another person without having to

obtain permission from the other members.

• Members are liable for only a limited amount of the company’s debts.
• A company has a legal existence distinct from its owners.

*d. A company is only entitled to raise small amounts of cash by issuing shares.

Correct answer: d

Learning objective 1.1

2. In Australia, the Corporations Act 2001 is administered by the:

• Australian Securities Exchange.
• Australian Accounting Research Foundation.

*c. Australian Securities and Investments Commission.

• Securities and Exchange Commission.

Correct answer: c

Learning objective 1.1

• The two main types of companies permitted to be registered under the Corporations Act

2001 are a:

• private company and a proprietary company.
• public company and a trade union.

*c. proprietary company, and a public company.

• proprietary company and a partnership.

Correct answer: c

Learning objective 1.2

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Testbank to accompany: Company accounting 11e by Leo et al.

© John Wiley and Sons Australia, Ltd 2018 1.2

• According to the Corporations Act 2001, a small proprietary company is one which

satisfies at least two of the following tests: it must have consolidated revenue of less than

$25 million, consolidated gross assets of less than $12.5 million and:

• total liabilities of less than $10 million.
• total liabilities of less than $20 million.
• fewer than 100 employees at the end of the financial year.

*d. fewer than 50 employees at the end of the financial year.

Correct answer: d

Learning objective 1.2

• A proprietary company must have at least one shareholder and cannot have more than:

• 100 shareholders.

*b. 50 shareholders.

• 20 shareholders.
• 500 shareholders.

Correct answer: b

Learning objective 1.2

6. A disclosing entity includes:

• a company that is not a reporting entity.

*b. an entity which has its shares listed on the ASX.

• an entity which issues its shares only to the company directors.
• a small proprietary company.

Correct answer: b

Learning objective 1.2

• The certificate of registration issued by the Australian Securities and Investments

Commission is valid:

• for 12 months only and must be renewed annually.
• for a maximum period of 5 years.
• for 15 years.

*d. until the company is deregistered.

Correct answer: d

Learning objective 1.3

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Chapter 1: Nature and regulation of companies

© John Wiley and Sons Australia, Ltd 2018 1.3

• The replaceable rules built into the Corporations Act deal with which of the following?

*a. Appointment, powers, remuneration and termination of directors.

• Meetings between the external auditors and the company’s audit committee.
• Remuneration of the external auditors.
• Annual dividend payments to members.

Correct answer: a

Learning objective 1.3

• The replaceable rules that apply to a company have effect as a contract between:

• the company and each member.
• the company and each director and company secretary.
• a member and each other member.

*d. all of the above.

Correct answer: d

Learning objective 1.3

10. The share capital of a company may consist of:

*a. ordinary or preference shares issued by the company either fully paid or partly paid.

• loans from banks.
• secured and unsecured notes issued by the company.
• debentures issued by the company.

Correct answer: a

Learning objective 1.5

• The main role of the trustee for debenture holders is to protect the interests of:

• suppliers.

*b. debenture holders.

• directors.
• employees.

Correct answer: b

Learning objective 1.5

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