Multiple Choice
Identify the choice that best completes the statement or answers the
question.
|
|
|
1.
|
Which one of the following is an external user with a need for information about
the financial position and performance of a company?
a. | Management | b. | Customers | c. | Investors | d. | Economic
planners |
|
|
|
2.
|
Bookkeeping differs from accounting in that bookkeeping primarily involves which
part of the accounting process?
a. | Identification | b. | Communication | c. | Recording | d. | Analysis |
|
|
|
3.
|
Which list below best describes the major services performed by public
accountants?
a. | Bookkeeping, mergers, budgets | b. | Employee training, auditing,
bookkeeping | c. | Auditing, taxation, business advisory services | d. | Cost accounting,
production scheduling, recruiting |
|
|
|
4.
|
The cost of an asset in the books and its fair market value are
a. | never the same. | b. | the same when the asset is
sold. | c. | irrelevant when the asset is used by the business in its
operations. | d. | the same on the date of acquisition. |
|
|
|
5.
|
The organization primarily involved in developing accounting principles
is
a. | the Canada Customs and Revenue Agency. | b. | the Canadian Institute of
Bookkeeping. | c. | the Canadian Institute of Chartered Accountants (CICA). | d. | the Institute of
Internal Auditors. |
|
|
|
6.
|
The International Accounting Standards Board
a. | works to reduce differences in accounting practices across
countries. | b. | promotes unique accounting applications. | c. | works to increase
differences in accounting practices across countries. | d. | promotes a single standard-setting
body. |
|
|
|
7.
|
Mel Green is the proprietor (owner) of Green's, a retailer of athletic
apparel. When recording the financial transactions of Green's, Mel does not record an entry for
a car he purchased for personal use. Mel took out a personal loan to pay for the car. What accounting
concept guides Mel's behaviour in this situation?
a. | Going concern concept | b. | Business entity assumption | c. | Time period
assumption | d. | Monetary unit assumption |
|
|
|
8.
|
The monetary unit assumption of accounting assumes that the dollar is
a. | unrelated to business transactions. | b. | a poor measure of economic
activities. | c. | the common unit of measure for all business transactions. | d. | useless in measuring
an economic event. |
|
|
|
9.
|
A problem with the monetary unit assumption is that
a. | the dollar has not been stable over time. | b. | the dollar has been
stable over time. | c. | the dollar is a common medium of
exchange. | d. | it is impossible to account for international
transactions. |
|
|
|
10.
|
The common characteristic possessed by all assets is
a. | long life. | b. | great monetary value. | c. | tangible
nature. | d. | future economic benefit. |
|
|
|
11.
|
Three accounting issues associated with almost all items (especially assets)
are
a. | amortizing, returns, and valuing. | b. | amortizing, valuing, and collecting or
paying. | c. | acquiring, valuing and adjusting, and disposing. | d. | accrual, bad debts,
and disposing. |
|
|
|
12.
|
The CICA Handbook outlines
a. | a list of all the Chartered Accountants practising in Canada. | b. | accounting and
auditing recommendations and guidelines for Canada. | c. | all Canadian tax
regulations. | d. | none of the above. |
|
|
|
13.
|
An objective of financial reporting is to provide information that is mainly
useful to all but one of these below:
a. | governmental taxing bodies. | b. | employees and labour
unions. | c. | investors and creditors. | d. | internal and external
auditors. |
|
|
|
14.
|
An overriding criterion in evaluating the accounting information to be presented
is
a. | fairness. | b. | legality. | c. | management's
goals. | d. | decision usefulness. |
|
|
|
15.
|
In order for accounting information to be relevant, it must
a. | have very little cost. | b. | have predictive or feedback
value. | c. | not be reported to the public. | d. | be used by a lot of different
firms. |
|
|
|
16.
|
Accounting information should be verifiable in order to enhance
a. | comparability. | b. | reliability. | c. | consistency. | d. | feedback value. |
|
|
|
17.
|
Relevant accounting information
a. | is information that has been audited. | b. | must be reported within the operating cycle or
one year, whichever is longer. | c. | has been objectively
determined. | d. | is information that is capable of making a difference in a
decision. |
|
|
|
18.
|
A company can change to a new method of accounting if management can justify
that the new method results in
a. | more meaningful financial information. | b. | a higher net income. | c. | a lower net income
for tax purposes. | d. | less likelihood of clerical
errors. |
|
|
|
19.
|
Accounting information should be neutral in order to enhance
a. | reliability. | b. | predictive value. | c. | feedback
value. | d. | relevancy. |
|
|
|
20.
|
Qualitative characteristics associated with relevant accounting information
are
a. | consistency, faithful representation, and timeliness. | b. | predictive value,
feedback value, and timeliness. | c. | neutrality, predictive value, and
reliability. | d. | going concern, cost principle, and materiality. |
|
|
|
21.
|
Qualitative characteristics associated with reliable accounting information
are
a. | verifiability, predictive value, and timeliness. | b. | faithful
representation, materiality, and neutrality. | c. | neutrality, verifiability, faithful
representation, and conservatism. | d. | relevance, faithful representation,
verifiability, and conservatism. |
|
|
|
22.
|
Under the instalment method of accounting, gross profit is recognized in the
period
a. | that the most payments are made. | b. | that the sale is made. | c. | that cash is
collected. | d. | after the sale is made. |
|
|
|
23.
|
One criterion for recognition of revenue is to recognize revenue when
a. | the selling price is not known. | b. | collection is not assured. | c. | material expenses
can be determined and matched. | d. | the sales effort is not
complete. |
|
|
|
24.
|
The cost principle is the basis for preparing financial statements because it
is
a. | a conservative value. | b. | relevant and objectively measured, and
verifiable. | c. | an international accounting standard. | d. | the most accurate measure of purchasing
power. |
|
|
|
25.
|
Expenses are recognized when
a. | cash is paid. | b. | the work is performed. | c. | the product is
produced. | d. | the product makes its contribution to revenue. |
|
|
|
26.
|
An item is considered material if
a. | it costs a lot of money. | b. | it is of a tangible nature. | c. | it is likely to
influence the decision of a reasonably prudent investor or creditor. | d. | the cost of
reporting the item is greater than its benefits. |
|
|
|
27.
|
The organization that is working toward uniformity in accounting practices
throughout the world is the
a. | World Bank. | b. | United Nations. | c. | International
Accounting Standards Board. | d. | National Commission on Fraudulent Financial
Reporting. |
|