Question 1

The term that describes differences between actual and budgeted results is:
A)divergence.
B)discrepancy.
C)mistake.
D)variance.

Accepted Answer

Variance is the term used to describe the differences between actual and budgeted results. It is an important concept for financial analysis as it helps in identifying areas where the budget is not being met and where corrective action is required. Option A, B, and C are all related but do not specifically describe the concept of variances.

Question 2

Budgets are typically set for:
A)a decade.
B)one year.
C)one month.
D)five years.

Accepted Answer

Budgets are typically set for one year, as it allows for a reasonable timeframe for planning and forecasting financial goals and expenses. It is also common to break down the annual budget into monthly or quarterly increments for better tracking and adjustment throughout the year.

Question 3

The planning and control process within an entity means that:
A)business can respond to variances between plans and actual performance.
B)business is only concerned with actual performance.
C)plans are followed rigidly at all times.
D)plans and actual performance do not vary.

Accepted Answer

The planning and control process involves setting plans and goals for the business, but it also involves monitoring actual performance and making adjustments as needed to respond to variances between the plans and actual performance. This ensures that the business can stay on track and achieve its goals in a flexible manner.

Question 4

The financial statement which shows all the changes in the owners' interest in the net assets of the business is:
A)statement of changes in owners' equity.
B)statement of cash flows.
C)statement of comprehensive income.
D)None of the above

Accepted Answer

The statement of changes in owners' equity shows all the changes in the owners' interest in the net assets of the business, including the changes in contributed capital, retained earnings, and other comprehensive income. The statement of cash flows shows the sources and uses of cash during the period, while the statement of comprehensive income shows the net income or loss for the period including all the other comprehensive income items.

Question 5

Which financial reports comprise the 'final accounts'?
A)Statement of cash flows and statement of comprehensive income
B)Statement of comprehensive income and statement of financial position
C)Statement of comprehensive income, statement of financial position, statement of cash flows and statement of change in owners' equity
D)Statement of financial position, statement of cash flows and statement of comprehensive income

Accepted Answer

Final accounts typically include the statement of comprehensive income, statement of financial position, statement of cash flows, and statement of changes in owners' equity, as they provide a complete overview of a company's financial performance and position.

Question 6

Control is best defined as:
A)making events conform to plan.
B)making the directors perform according to plan.
C)making the employees work harder.
D)giving orders.

Accepted Answer

Control is the process of ensuring that events conform to plans, which involves monitoring performance, comparing actual results to planned results, and taking corrective action. B, C, and D do not accurately reflect the definition of control.

Question 7

Which accounting reports are concerned with measuring flows over a period of time?
A)Statement of comprehensive income and statement of financial position
B)Statement of comprehensive income and statement of cash flows
C)Statement of cash flows and statement of financial position
D)Statement of comprehensive income, statement of cash flows and statement of financial position

Accepted Answer

The statement of comprehensive income and statement of financial position are concerned with measuring balances at a specific point in time, while the statement of cash flows measures flows over a period of time. Therefore, choice B is the best answer as it identifies the two reports that deal with measuring flows over a period of time.

Question 8

Paul commenced business with $150 cash. He purchased goods for $75 that were later sold for $125. The statement of financial position, after the sale, would show a total business wealth of:
A)$150
B)$50
C)$200
D)$100

Accepted Answer

At the beginning of the business, Paul had $150. 
After purchasing goods for $75, his total assets were $150 - $75 = $75 (cash). His total liabilities were $0. His net worth (assets - liabilities) was $75. 
After selling the goods for $125, his total assets were $150 (cash) + $125 (sale proceeds) = $275. His total liabilities were still $0. His net worth (assets - liabilities) was $275. 
Therefore, the statement of financial position would show a total business wealth of $275, which is choice C.

Question 9

Which statement is true?
A)The statement of cash flows explains the changes between the statement of comprehensive income and the statement of financial position.
B)The statement of financial position links two statements of comprehensive income.
C)The statement of cash flows summarises the movements in the bank account over an accounting period.
D)None of the statements is true

Accepted Answer

The statement of cash flows provides a summary of the cash inflows and outflows over an accounting period, essentially tracking the movement in the company's bank account and cash equivalents.

Question 10

Set out the main purpose of each of the three main financial reports - the statement of comprehensive income, the statement of financial position and the statement of cash flows - and briefly explain how each achieves its purpose.

Accepted Answer

The answer of Set out the main purpose of each...

Question 11

A business that is not a legal entity, where there is one owner who is fully liable for all debts, is:
A)a proprietary company.
B)a partnership.
C)a sole proprietorship.
D)None of the above

Accepted Answer

A sole proprietorship is a business owned by a single individual who is personally responsible for all debts and liabilities. It is not a separate legal entity, and therefore the owner has unlimited liability. A proprietary company is a registered business entity in Australia, and a partnership involves multiple owners who share the profits and liabilities of the business.

Question 12

The three most common types of structures used by businesses in Australia are:
A)partnership, limited company, association.
B)sole proprietor, partnership, limited company.
C)partnership, private company, trust.
D)sole proprietor, limited company, co-operative.

Accepted Answer

The three most common types of business structures in Australia are sole proprietor (sole trader), partnership, and limited company (proprietary limited company). These structures vary in terms of liability, tax obligations, and control.

Question 13

The business most likely to operate as a sole proprietorship is:
A)private hospital.
B)medical specialist.
C)bank.
D)airline.

Accepted Answer

A medical specialist, such as a dentist or a chiropractor, is the business most likely to operate as a sole proprietorship. This is because these businesses typically have a small operation and do not require a large number of employees or a complex ownership structure. Private hospitals, banks, and airlines are large businesses with complex operations that require the involvement of multiple owners or shareholders.

Question 14

Which of these is an accounting entity?
A)Sole proprietor
B)Partnership
C)Company
D)All of the above

Accepted Answer

All three choices - sole proprietorship, partnership, and company - are examples of accounting entities.

Question 15

The most complete description of the planning process for a business is:
A)setting objectives and short-term plans.
B)setting objectives, long-term plans, and short-term plans.
C)setting objectives and detailed budgets.
D)setting long-term objectives and long-term plans.

Accepted Answer

The most complete description of the planning process for a business includes setting objectives, long-term plans, and short-term plans. Detailed budgets can be included as part of the planning process, but they are not the only component. Setting long-term objectives without accompanying plans may not provide sufficient guidance for achieving those objectives.

Question 16

Advantages of operating as a sole proprietor are:
A)total control by the owner over all decisions.
B)low start-up costs.
C)limited liability.
D)Both A and B

Accepted Answer

Operating as a sole proprietor allows the owner to have total control over all decisions and also typically has low start-up costs. However, one disadvantage is that there is unlimited liability, meaning the owner is personally responsible for all business debts and obligations.

Question 17

Calculate the cash available at the beginning of the day if cash at the end is $950, receipts from customers are $360 and payments to suppliers are $425.
A)$150
B)$160
C)$340
D)$885

Accepted Answer

To calculate the cash available at the beginning of the day, we need to subtract the receipts from customers and add the payments to suppliers to the cash at the end of the day. 
Cash available at beginning of day = Cash at end - Receipts + Payments
Cash available at beginning of day = $950 - $360 + $425
Cash available at beginning of day = $1015 - $360
Cash available at beginning of day = $655
Therefore, the correct answer is D) $885, as this is the closest option to the calculated amount.

Question 18

Which statement is incorrect?
A)A budget defines precise targets, e.g., level of sales, levels of inventory.
B)A budget is expressed in monetary terms.
C)A budget is a short-term plan.
D)A budget summarises past information.

Accepted Answer

A budget is a forward-looking plan that outlines future goals and objectives, it does not summarise past information.

Question 19

The planning role within a company is principally undertaken by:
A)consultants.
B)managers.
C)shareholders.
D)lenders.

Accepted Answer

The planning role within a company is primarily undertaken by managers. Managers are responsible for developing strategies and plans to achieve the goals and objectives of the company. They use information on market conditions, customer needs, and company resources to develop plans that will guide the company towards success. Consultants may be hired to assist with the planning process, but the ultimate responsibility lies with the managers. Shareholders and lenders have an interest in the company's success, but they do not typically play a direct role in the planning process.

Question 20

Knowledge of the objectives or mission of a business will be most useful in assisting users of financial reports in understanding:
A)the liquidity position of the business.
B)why it is taking longer than it should to collect money from accounts receivable.
C)the financial reporting cycle.
D)what the business is trying to achieve.

Accepted Answer

Knowledge of a business's objectives or mission will help users of financial reports understand what the business is trying to achieve, which can provide context for the financial information presented. It is not directly related to the liquidity position, accounts receivable collections or financial reporting cycle.

Quiz 1: Introduction to Accounting

The term that describes differences between actual and budgeted results is:

Budgets are typically set for:

The planning and control process within an entity means that:

The financial statement which shows all the changes in the owners' interest in the net assets of the business is:

Which financial reports comprise the 'final accounts'?

Control is best defined as:

Which accounting reports are concerned with measuring flows over a period of time?

Paul commenced business with $150 cash. He purchased goods for $75 that were later sold for $125. The statement of financial position, after the sale, would show a total business wealth of:

Which statement is true?

Set out the main purpose of each of the three main financial reports - the statement of comprehensive income, the statement of financial position and the statement of cash flows - and briefly explain how each achieves its purpose.

A business that is not a legal entity, where there is one owner who is fully liable for all debts, is:

The three most common types of structures used by businesses in Australia are:

The business most likely to operate as a sole proprietorship is:

Which of these is an accounting entity?

The most complete description of the planning process for a business is:

Advantages of operating as a sole proprietor are:

Calculate the cash available at the beginning of the day if cash at the end is $950, receipts from customers are $360 and payments to suppliers are $425.

Which statement is incorrect?

The planning role within a company is principally undertaken by:

Knowledge of the objectives or mission of a business will be most useful in assisting users of financial reports in understanding: