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.

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. 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.

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?

12. Information contained in external financial reports can be useful to a firm’s:
Suppliers Employees
A. No No
B. No Yes
C. Yes No
D. Yes Yes
ANS: D PTS: 1 AACSB: Knowledge, Analytical TOP:
Who uses accounting information?
13. Match the type of accounting information to the term that best describes it.
Information prepared Information prepared
for suppliers’ use for creditors’ use
A. Managerial accounting Financial accounting
B. Managerial accounting Managerial accounting
C. Financial accounting Financial accounting
D. Financial accounting Managerial accounting
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: For what purpose is accounting information?
14. Which one of the following groups is not generally regarded as an external user of the accounting
information of an entity?
A. Employees
B. Customers
C. Management
D. Lenders
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Who uses accounting information?
15. A possible limitation of accounting information is that accounting information:
A. can only be used by bankers.
B. is relevant depending on the needs of users.
C. does not report in money terms.
D. relates to past information
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Limits on the usefulness of accounting information
16. The selection of appropriate accounting policies for a company is the responsibility of:
A. the body that sets Accounting Standards.
B. the company secretary.
C. the internal auditors of the company.
D. the management of the company.
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Economic consequences of accounting information
17. What is meant by the term economic consequences of accounting policy choice?
A. The selection of accounting policies is expensive and time-consuming.
B. Accounting numbers affect the financial positions of various users.

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C. Accounting policies are selected to minimise the position of creditors.
D. The creation of accounting standards consumes a large amount of resources.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Economic consequences of accounting information
18. In a firm that offers a bonus scheme based on accounting profit, managers can, in most cases, be
expected to adopt a:
A. profit-decreasing accounting policy.
B. profit-increasing accounting policy.
C. dividend-increasing accounting policy.
D. liability-increasing accounting policy.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Economic consequences of accounting information
19. Debt covenants primarily protect the interests of which of the following parties?
A. Shareholders
B. Creditors
C. Employees
D. Companies
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Economic consequences of accounting information
20. Triple bottom line reporting
A. reinforces profit as the primary objective of companies.
B. recognises the legal and non-legal obligations of a company to all legitimate stakeholders
in a company.
C. is mandatory in Australia.
D. is where a result is produced for financial, social and environmental benefit.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
21. Arguments in favour of triple bottom line reporting include:
A. enhanced all-round company credibility from greater transparency.
B. that it facilitates the implementation of an environmental strategy.
C. enhanced communication with stakeholders.
D. all of the above.
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
22 The Global Reporting Initiative:
A. refers to an institution based in Sweden.
B. is the most widely cited benchmark for the determination of the content of a triple bottom
line report.
C. was established as a private, profit-making initiative.
D. is a set of reporting obligations agreed as part of the Kyoto agreement.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting

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23 . Which of the following would not form part of social reporting under the GRI 3?
A. Number of female employees.
B. Number of indigenous employees.
C. Donations to charities.
D. Greenhouse gas emissions.
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
24. Which of the following would not be part of environmental reporting under the GRI 3?
A. Greenhouse gas emissions
B. Amount of recycled paper
C. Child labour
D. Biodiversity management
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
25. Which of the following reports are not reports specifically on sustainability issues?
A. Sustainability report
B. Annual report
C. Triple bottom line report
D. Stakeholder impact report
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
26. Which of the following disclosures would you expect to be included by a company in a triple
bottom line report?
A. Greenhouse gas emissions
B. Donations to charities
C. Percentage of female staff in senior management positions
D. All of the above
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Triple bottom line reporting
27. Accounting firms generally provides the following services:
A. audit, assurance and taxation.
B. audit, budgeting and management consulting.
C. audit, budgeting and cost accounting.
D. internal audit, budgeting and management consulting.
ANS: A PTS: 1 AACSB: Knowledge, Analytical
TOP: Careers in accounting
28. Managers may select accounting policies for which of the following reasons?
A. To provide useful information to users
B. To avoid violating debt contracts
C. To influence compensation plans
D. All of the above are correct
ANS: D PTS: 1 AACSB: Knowledge, Analytical
TOP: Economic consequences of accounting information

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SHORT ANSWER
1. What is the role of accounting information in business?
ANS:
Accounting information helps decision makers. It aids managers by providing quantitative
information about the entity to help them in planning, operating and evaluating the entity’s
activities. Accounting information helps external decision makers by providing them with financial
statements containing economic information about the performance and financial position of the
entity.
PTS: 1 AACSB: Knowledge, Communication TOP: For what purpose is
accounting information used?
2. Distinguish managerial accounting from financial accounting. Your answer should include a brief
discussion of differences in the types of information provided to users as well as differences in the
identity of users of financial and managerial accounting information.
ANS:
Financial accounting is used primarily by external users such as shareholders and creditors and by
senior management as a means of evaluating performance. Financial accounting is presented in
summary form and must follow generally accepted accounting principles (GAAP). GAAP ensures
that information is consistent from period to period and comparable across entities.
Managerial accounting is used internally by senior management, functional and division managers
and middle managers. Managerial accounting information is frequently presented with detailed
information for day-to-day decisions. The information provided does not have to conform to
GAAP or need not be consistent between periods or comparable across entities. Rather, it focuses
on the information needs of managers. It is critical that managerial accounting information be
provided in a timely manner.
PTS: 1 AACSB: Knowledge, Communication TOP: For what purpose is
accounting information used?
PROBLEM
1. Doug Murphy, a newly hired accountant, wanted to impress his boss, so he stayed late one night to
analyse the office supplies expense. He determined the cost by month, for the past 12 months, of
each of the following: computer paper, copy paper, fax paper, pencils and pens, note pads, postage,
corrections supplies, stationery, and miscellaneous items. Why do entities, such as companies, not
include information of this nature in published (general purpose) financial statements?
ANS:
Entities provide information to external users to make decisions. The primary decision makers
external to the business are creditors, bankers, analysts, shareholders, and potential shareholders.
These users need to know that the company can repay its debts, earn a profit, and pay dividends.
The cost by month for each item of office supplies does not provide any additional information that
would be helpful for any external users. In addition, the time and expense necessary to create the
additional detail would outweigh the benefits of the final product.
PTS: 1 AACSB: Knowledge, Communication, Analytical TOP: For what
purpose is accounting information used?

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CASE
1. In October 2002, Duke Power, the regulated electricity utility of the United States (US)
corporation Duke Energy, agreed to pay $25 million to its customers to settle allegations by
regulators in North and South Carolina that it had underreported net earnings by about $123
million between 1998 and 2002. The under reporting of net earnings by Duke Energy was
allegedly undertaken in order to avoid having to cut its electricity rates.
Required:
Explain what is meant by the term ‘economic consequences’ and relate this to the underreporting
of net earnings by Duke Energy.
ANS:
Economic consequences: wealth effects, resulting from accounting policy choices, impacting, for
example, managers, the firm, shareholders and/or debtholders.
Given Duke Energy’s status as a regulated electricity utility, and the explanation for the
underreporting, from an economic consequences perspective the entity’s choice of accounting
policies lies with political costs ( p 17).
Further, ultimately if large companies attract lower political costs its managers will be rewarded
(p 17).
PTS: 1 AACSB: Knowledge, Communication, Analytical
TOP: Economic consequences of accounting information

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Chapter 2 – Types of organisations and the financial reporting framework
TRUE/FALSE
1 Mutual agency refers to the fact that each member of the partnership form of business entity can
bind the other(s) in contract within the scope of normal operations.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
2. There are several advantages to forming a partnership, including the ease with which it can be
formed and the limited rules and regulations that apply to it. However, as for a company, one of
the regulations is that a partnership must prepare financial statements in accordance with
Accounting Standards if it is deemed to be a reporting entity.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
3. Although partnerships may have a tax advantage over companies in that it is the partners that are
taxed and not the partnership, a disadvantage of partnerships is that they have unlimited liability.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
4. All companies can raise funds through the general public but not all companies have limited
liability.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
5. If a company has sales of $8 million, assets of $4 million and 60 employees, then it may be
classified as a small proprietary company.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
6. All limited-by-shares companies must have ‘Ltd’ in their names, but a private company is
distinguishable from a public company because it has ‘Pty’ as well as ‘Ltd’ in its name.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
7. Two companies were formed on 1 January 20X3, with the names Pluto Pty Ltd and Neptune NL.
From the names of the companies, it is clear that the former is a proprietary company and the latter
is a mining company.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations

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8. There are several differences between the financial statements of a company and those of a
partnership, not least of which is the disclosure of taxation on the balance sheet as a liability. For a
company, the disclosure is a single amount as it is the company that is liable and not the owners.
For a partnership, the amount of taxation is split and reported separately in accordance with each
partner’s liability.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
9. The reason why company shareholders may have the advantage of limited liability rests with the
entity principle in accounting, not the legal status of the company.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
10. The partnership form of business organisation exists where two or more carry on a business in
common with a view to profit.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
11. Accounting Standards set by the Australian Accounting Standards Board (AASB) apply to both the
private and public sectors in Australia.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The framework for setting accounting standards
12. Due process is primarily concerned with producing Accounting Standards that meet managers’
objectives.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The standard setting process
13. The Corporations Act 2001 requires that financial statements include a directors’ report, a
directors’ statement and an auditor’s report.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The Corporations Act
14. The directors’ report included with a company’s financial statements contains an opinion on
whether the balance sheet and income statement present a ‘true and fair’ view.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The Corporations Act
15. Half-yearly reports contain more detailed information than annual reports.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The Corporations Act

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16. A conceptual framework can be defined as a set of interrelated objectives and fundamentals that is
expected to lead to consistent standards, and that prescribes the nature, function and limits of
financial accounting and reporting.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: What is a conceptual framework?
17. One of the objectives of a conceptual framework is that it is considered to be a defence against
politicisation.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: Objectives of a conceptual framework
18. A general-purpose financial report is primarily directed toward the common information needs of a
wide range of users.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
19. Users of general-purpose financial reports include investors, financial advisors, employees,
lenders, suppliers and customers.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
20. A reporting entity is an entity for which there are users who rely on financial statements as their
major source of information about the entity.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
21. General-purpose financial reports provide the information that is required for both internal and
external user group needs.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
22. Accrual accounting refers to the method of measuring profit on the basis of cash flow, rather than
when revenues and expenses occur.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
23. The going concern assumption assumes that an entity will continue to operate successfully into the
foreseeable future.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
24. An asset must have physical qualities that can be measured reliably.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework

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25. A liability must always be a legal obligation that arises from past events.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
26. Equity is the residual interest in the assets of the entity after deduction of all its liabilities.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
27. Revenue means the gross inflows arising from normal operations plus all gains during the
accounting period.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
28. The elements of financial statements are always measured using the historical cost method.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: Measurement of the elements of financial statements
29. The Australian Financial Reporting Council is not able to directly influence the content of the
AASB’s accounting standards, but has the capacity to do so given its control of the budget and
priorities of the AASB.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The framework for setting accounting standards
30. The political nature of standard setting refers to the fact that, for example, preparers may lobby the
standard setters to promote their own self-interest rather than the decision-making usefulness of
general purpose reports.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The political nature of accounting standard setting
31. The fundamental element equity does not require recognition criteria, because it represents the
residual interest in assets, after deducting liabilities.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
32. In accordance with the IASB Conceptual Framework, income includes both revenue and gains.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The conceptual framework
33. The external auditor is responsible for preparing the general-purpose financial reports of a
company.
ANS: F PTS: 1 AACSB: Knowledge, Analytical
TOP: External audits

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34. The responsibilities of the Australian Financial Reporting Council include advising the
government on the process of setting accounting standards.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The framework for setting accounting standards
35. In Australia the overriding responsibility for the preparation and presentation of general-purpose
reports resides with the directors of a company.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: The corporations act
36. An external auditor seeks to provide reasonable assurance that the financial statements of a
company are true and fair, not a guarantee that every error in the financial statements of the entity
has been detected.
ANS: T PTS: 1 AACSB: Knowledge, Analytical
TOP: External audits
MULTIPLE CHOICE
1. Which of the following is not true of sole traders?
A. They are one-owner businesses.
B. They are not normally reporting entities.
C. They are separate legal entities.
D. They usually have limited funds at their disposal.
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
2. Which of the following is not true for a partnership?
A. Creditors can supply goods on credit to a partnership.
B. Debtors can purchase goods on credit from a partnership.
C. Partnerships have to pay their tax yearly.
D. Partnerships can enter contracts on behalf of the partnership.
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
3. Which of the following statements regarding partnerships is incorrect?
A. There are no legal formalities required to form a partnership and it can be an oral
agreement.
B. Partnerships have unlimited liability not subject to the amount contributed by each partner.
C. The partnership is subject to income tax, not the individual partners.
D. Each partner has the authority to enter contracts on behalf of the partnership, provided the
contracts relate to normal operations.
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
4. Which of the following would not be considered a disadvantage of forming a partnership?
A. Limited life
B. Unlimited liability
C. Ease of formation
D. Mutual agency

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ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
5. Jack and Jill Repairers is founded by partners Jack, Jill and Jolly. Jack, Jill and Jolly contributed
$3000, $5000 and $8000 respectively. For the year ending 20X2, Jack and Jill Repairers produced
a profit of $12,000. If the profits are distributed in accordance with the initial investment which of
the following is true?
A. Jack gets $2250 and Jill gets $6000.
B. Jack gets $3750 and Jolly gets $6000.
C. Jack gets $2250 and Jill gets $3750.
D. Jack gets $2250 and Jolly gets $8000.
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
6. Which of the following items of information would not be found in the balance sheet of a
partnership?
A. Assets
B. Liabilities
C. Dividends payable
D. Distribution of profits to partners
ANS: C PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
7. Which of the following is true of companies? All companies:
A. are limited liability companies.
B. are separate legal entities.
C. have a limited life.
D. are bound by the contracts signed by shareholders.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
8. A large proprietary company must have its financial statements audited and lodged with the:
A. Australian Securities Exchange.
B. Australian Securities and Investments Commission.
C. Financial Reporting Council.
D. Australian Accounting Standards Board.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations
9. Which of the following types of business organisation has a legal identity separate from those of
the owners?
A. Sole proprietorships
B. Companies
C. Partnerships
D. All of the above.
ANS: B PTS: 1 AACSB: Knowledge, Analytical
TOP: Types of organisations

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Contemporary Accounting 8th Edition Test Bank

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