Question 1 (30 marks)
60 multiple choice questions (MCQ) of 0.5 mark each.
1. Financial accounting is concerned with _______________.
a) reporting to external users, such as shareholders
b) reporting to internal users, such as managers
c) personal financial planning
d) none of the above
2.Management accounting is concerned with _______________.
a) reporting to external users, such as shareholders
b) reporting to internal users, such as managers
c) personal financial planning
d) none of the above
3.Reliable accounting information would be ____________.
a) verifiable
b) neutral
c) relevant
d) (a) & (b), but not (c)
e) (a), (b) & (c)
4.__________ is one of the financial reports that are produced by a company for
public use.
a) The balance sheet
b) The budget
c) The external audit
d) Attention directing
e) None of the above
5.Measuring assets at what they originally cost the company is an example of the
accounting concept of ____________.
a) going concern
b) disclosure
c) recognition
d) historic cost
e) none of the above
6.The statement that summarizes all revenues and expenses to show operating
profit is called ____________.
a) the income statement
b) the statement of retained earnings
c) the cash flow statement
d) the balance sheet
e) none of the above
7.A list of the company’s assets, liabilities and equity, at a point in time, is called
____________.
a) the income statement
b) the statement of retained earnings
c) the cash flow statement
d) the balance sheet
e) none of the above
8.In measuring revenues, the income statement includes _______________.
a) all sales received in cash
b) all sales realized, whether received or not yet received in cash
c) all sales realized, plus the expected value of future orders
d) all sales, less expected expenses
e) none of the above
9.A company purchases inventory of goods for resale and then sells it. This
expense is referred to as _______________.
a) organizational expense
b) cost of goods sold
c) gross profit
d) gross profit percentage
e) none of the above
10.The difference between operating profit and net income is _______________.
a) the deduction of interest expense
b) the deduction of tax expense
c) the deduction of amortization (depreciation) expense
d) (a) & (b), but not (c)
e) (a), (b) & (c)
11.Equity is _______________.
a) increased by revenues
b) decreased by expenses
c) decreased by payments
d) (a) & (b), but not always (c)
e) (a), (b) & (c)
12.Amortization (depreciation) is an example of _______________.
a) the matching principle
b) cost of goods sold
c) revenues, that increase equity
d) a profitability ratio
e) none of the above
13.Revenue is recognized _______________.
a) when it is earned
b) when the cash is received
c) annually
d) periodically, but not always annually
e) none of the above
14.Dividends are reported in __________.
a) the statement of retained earnings
b) the statement of cash flow
c) the balance sheet
d) (a) & (b), but not (c)
e) (a), (b) & (c)
15.The assets are listed on the balance sheet __________.
a) in a random order
b) in order of size/importance
c) in order of liquidity
d) in order of variability
e) none of the above
16.Should buildings be amortized?
a) Yes, over their useful life.
b) Yes, at the rate of 2% per year.
c) Yes, on the basis of annual revaluation.
d) No, they should not be amortized as they increase in value.
e) None of the above.
17.Profits made by the company but not distributed to shareholders appear on
the balance sheet as __________.
a) they do not appear on the balance sheet
b) cash
c) accounts payable
d) retained earnings
e) none of the above
18.A current liability is one that the company __________.
a) will pay within one year
b) will receive within one year
c) intends to use indefinitely to earn money
d) is disputing
e) none of the above
19.Pearl’s Pizza made an operating profit of $50,000 and a net income of
$30,000. It paid a dividend of $10,000. Retained earnings __________.
a) stayed the same
b) decreased by $10,000
c) increased by $10,000
d) increased by $20,000
e) none of the above
