Contemporary Accounting 8th Edition Test Bank
Contemporary Accounting 8th Edition Test Bank helps you understand exam patterns, improve retention, and develop problem-solving skills.
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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.
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.
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
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. The primary purpose of accounting is to:
A. help people make decisions about economic activities.
B. provide information that management can use to convince shareholders that management
deserves high salaries.
C. provide employment to persons who have a knack for dealing with numbers.
D. 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:
A. qualitative and financial information.
B. quantitative and financial information.
C. quantitative and non-financial information.
D. 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:
A. planning, buying and selling.
B. planning, decision support and spending.
C. saving, controlling and buying.
D. 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:
A. management accounting focuses on external users whereas financial accounting focuses
on internal users.
B. management accounting focuses only on the control function whereas financial accounting
focuses on the reporting function.
C. management accounting focuses on internal users whereas financial accounting focuses on
external users.
D. 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:
A. creditors and investors.
B. managers and unions.
C. creditors and unions.
D. banks and government authorities.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Who uses accounting information?
7. The basic difference between managerial accounting and financial accounting is that:
A. the financial accounting system relies on accounting information whereas managerial
accounting does not.
B. financial accounting relies on information gathered from sources outside the business
whereas managerial accounting relies on internally generated information.
A. help people make decisions about economic activities.
B. provide information that management can use to convince shareholders that management
deserves high salaries.
C. provide employment to persons who have a knack for dealing with numbers.
D. 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:
A. qualitative and financial information.
B. quantitative and financial information.
C. quantitative and non-financial information.
D. 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:
A. planning, buying and selling.
B. planning, decision support and spending.
C. saving, controlling and buying.
D. 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:
A. management accounting focuses on external users whereas financial accounting focuses
on internal users.
B. management accounting focuses only on the control function whereas financial accounting
focuses on the reporting function.
C. management accounting focuses on internal users whereas financial accounting focuses on
external users.
D. 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:
A. creditors and investors.
B. managers and unions.
C. creditors and unions.
D. banks and government authorities.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Who uses accounting information?
7. The basic difference between managerial accounting and financial accounting is that:
A. the financial accounting system relies on accounting information whereas managerial
accounting does not.
B. financial accounting relies on information gathered from sources outside the business
whereas managerial accounting relies on internally generated information.
C. 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.
D. 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?
8. Which of the following is an example of a stakeholder of a business?
A. An owner
B. An investor
C. A manager
D. All of the above
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Who uses accounting information?
9. Financial accounting is the process of:
A. preparing and reporting accounting information for external decision makers.
B. preparing and reporting accounting information for internal decision makers.
C. enacting generally accepted accounting principles.
D. 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:
A. preparing and reporting accounting information for external decision makers.
B. preparing and reporting accounting information for an organisation’s internal decision
makers.
C. enacting generally accepted accounting principles.
D. preparing and reporting accounting information to lenders.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: For what purpose is accounting information?
11. 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
A. Financial accounting Financial accounting
B. Financial accounting Managerial accounting
C. Managerial accounting Financial accounting
D. Managerial accounting Managerial accounting
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: For what purpose is accounting information used?
managerial accounting is concerned with providing information to managers for their use
in directing the activities of the organisation.
D. 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?
8. Which of the following is an example of a stakeholder of a business?
A. An owner
B. An investor
C. A manager
D. All of the above
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Who uses accounting information?
9. Financial accounting is the process of:
A. preparing and reporting accounting information for external decision makers.
B. preparing and reporting accounting information for internal decision makers.
C. enacting generally accepted accounting principles.
D. 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:
A. preparing and reporting accounting information for external decision makers.
B. preparing and reporting accounting information for an organisation’s internal decision
makers.
C. enacting generally accepted accounting principles.
D. preparing and reporting accounting information to lenders.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: For what purpose is accounting information?
11. 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
A. Financial accounting Financial accounting
B. Financial accounting Managerial accounting
C. Managerial accounting Financial accounting
D. Managerial accounting Managerial accounting
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: For what purpose is accounting information used?
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Subject
Accounting