Test bank for accounting an introduction 6th edition by atrill
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ompany, a disadvantage of operating as a partnership is:
A) limited life.
B) mutual agency.
C) unlimited liability.
D) all of the above.
63)
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Test Bank for Accounting An Introduction 6th Edition by Atrill
Full file at />64) A common aspect of questionable figures in financial reports is:
A) overstating figures for expenses and liabilities.
B) overstating figures for income and assets.
C) understating figures for income and expenses.
D) overstating figures for income and understating figures for assets.
64)
65) Sustainability reporting focuses on:
A) environmental and social factors.
C) customer satisfaction.
65)
B) financial aspects.
D) Both A and C.
66) Which of these is not generally regarded as a reason for the recent spate of dubious accounting
practices by large companies?
A) Lack of accounting standards.
B) Too rapid growth financed by borrowing, which leads to a liquidity crisis.
C) Greed by executives.
D) Pressure on managers to meet investors' unrealistic expectations for continually rising
profits.
66)
67) Which of the following is not an aspect of accounting and finance potential managers need to
understand?
A) The design of the accounting information system.
B) How investment decisions are made.
C) How businesses are financed.
D) Reading and interpreting financial reports.
67)
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Test Bank for Accounting An Introduction 6th Edition by Atrill
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/>Answer
Testname: UNTITLED1
1) A
2) D
3) C
4) B
5) D
6) D
7) D
8) D
9) A
10) C
11) D
12) B
13) A
14) Relevance means that accounting information should have the ability to influence decision-making. Relevance may
refer to helping to confirm past events or assisting in the prediction of future events. If information is not relevant to
decision-making, it is not useful and should not be produced.
Reliability means accounting information should be objective and able to be independently verified. For example,
transaction-based information is reliable as it is evidenced by documents such as invoices, cheques, credit notes and
contracts. Reliable information should be free from bias and material error. Historical cost information is generally
regarded as more reliable than alternatives such as estimated market values.
Comparability means that valid comparisons can be made between accounting reports across a number of accounting
periods. For comparisons to be valid, items which are basically the same must be consistently measured and presented
in the same manner.
Understandability means that to be most useful, accounting reports should be expressed as clearly as possible and
should be capable of being understood by the user groups they are prepared for.
The cost/benefit test provides a limit on the production of relevant, reliable comparable and understandable
accounting information as, even if the information has all four qualities, it only makes economic sense to produce it if
the benefit of its being available is greater than the cost of providing it. A problem of applying the cost/benefit test is
that, in practice, both the costs and the benefits of accounting information are difficult to identify with accuracy.
15) D
16) D
17) B
18) B
19) C
20) B
21) D
22) C
23) D
24) D
25) D
26) B
27) C
28) C
29) C
30) D
31) D
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Test Bank for Accounting An Introduction 6th Edition by Atrill
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Testname: UNTITLED1
32) A
33) A
34) B
35) A
36) D
37) A
38) B
39) C
40) A
41) C
42) D
43) A
44) B
45) A
46) C
47) The purpose of the statement of comprehensive income is to show how much profit was generated by the entity from
its operating activities during a particular period. This is achieved by recording all the income earned in the period
and deducting from it all the expenses incurred in earning that income. If income exceeds expenses, a profit is earned.
If income is less than expenses, there is a loss.
The purpose of the statement of financial position is to show the financial position of the entity at the end of an
accounting period. This is achieved by listing the assets controlled by the entity on a particular date and deducting all
amounts owed to parties other than the owner. Total assets held less liabilities owed is the amount of equity the owner
has in the entity. Examples of assets owned are: cash at bank, inventory, land and buildings, equipment, motor
vehicles. Examples of liabilities are amounts owing to creditors and lenders.
The purpose of the statement of cash flows is to show the change in the cash position over a particular period and the
movements in cash that caused that change. This is achieved by listing all inflows and outflows of cash for the period.
If inflows exceed outflows, there has been a net increase in cash. If the opposite is true, then there has been a net
outflow of cash.
48) C
49) C
50) B
51) B
52) D
53) C
54) C
55) C
56) A
57) B
58) D
59) D
60) D
61) D
62) B
63) D
64) B
65) A
66) A
67) A
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