Introduction to accounting Test

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Introduction to accounting Test - 15

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Weekly Quiz Competition

Question 1
1 / -0

To be comparable, accounting reports must belong to ________.

A
common period

B
use common unit of measurement

C
use common format of reporting.

D
all of the above
Solution
Comparability is one of the most important characteristic of financial information.
It states that accounting information must be capable of being compared between or among different entities.
Further accounting information is comparable only if the accounting policies and standards are consistently applied year after year or from one accounting period to another accounting period.
Also if there is any change in any accounting policy that change should also be reflected retrospectively and prospectively so as to deal with any changes in the amounts of transactions.
Question 2
1 / -0

Which of the following are general objectives of accounting?
I. Maintenance of Accounting Records
II. Providing Information
III. Ascertainment of Profit or Loss
IV. Depiction of Financial Position

A
I and II

B
III and IV

C
I and IV

D
I, II, III and IV
Solution
Accounting is the measurement,processing and communication of financial information about economic entities such as business and corporations. Accounting consists of various objectives. They are as follows:
1. Maintenance of Accounting records;
2. Providing information;
3. Ascertainment pf profit and loss;
4. Depiction of financial position.
5. With all these objectives one can carry out all the accounting process very effectively.
Question 3
1 / -0

To be reliable, accounting information must _________________.

A
Be available in time

B
Help in prediction and feedback

C
Influence the decisions of users

D
All of the above

Solution

Reliability means that the end users must be able to depend/rely on the information presented.
A piece of accounting information is reliable if it is
1. Available in time
2. Help in prediction and feedback
3. Influence the decisions of users
Question 4
1 / -0

Stock does not include __________.

A
Goods in the hands of an agent

B
Goods out on approval (on sale or return)

C
Goods sold awaiting delivery to the buyer

D
Goods (meant for re-sale) hypothecated as security

Solution

Sales are affected in books once the legal title of goods is transferred. The legal title of goods is transferred to the buyer once the invoice is made in his account. There might be a delay in delivery but the ownership has changed.
Hence, the stock should not include such item which is already sold.
Question 5
1 / -0

Internal user is ________of the business entity.

A
Bank

B
Compititors

C
Customer

D
Management

Solution

Management and cost accountants are good examples of internal users. They are managers inside the organization who have knowledge about the inner workings of the company and can use this knowledge to improve the business' performance.
Question 6
1 / -0

Use of common unit of measurement and common format of reporting promotes________.

A
Comparability

B
Understandability

C
Relevance

D
Reliability

Solution

'Comparability' characteristic of accounting information requires the use of common units and common format of reporting. It is the most important quality of accounting information. Comparability means accounting information of a current year can be comparable with that of the previous years.
Question 7
1 / -0

Which qualitative characteristic of accounting information is reflected when accounting information is clearly presented ?

A
Understandability

B
Relevance

C
Comparability

D
Reliability

Solution

Understandability is the concept that financial information should be presented so that a reader can easily comprehend it.
Adherence to a reasonable level of understandability would prevent an organization from deliberately confusing financial information in order to mislead users of its financial statements.
Question 8
1 / -0

A_______ would most likely use an entity's financial report to determine whether or not the business entity is eligible for a loan.

A
Creditor

B
Emplyoee

C
Mangement

D
None of the Above

Solution

There are two types of creditors.

Short term creditors are those who are providing goods or services on credit by analyzing the short-term financial position of the company.

Long term creditors are basically lenders who are providing loans to the business for long term purposes. These creditors uses the financial statements and reports to determine the financial worth and see the repayment capabilities of the firm before lending any amount.
Question 9
1 / -0

______ users are groups outside the business entity, who uses the information to make decisions about the business entity.

A
Mangement

B
Emplyoee

C
Owner

D
External

Solution

There are various stakeholder in the business who want to know about the business performance of the organization. These are internal and external users.

Internal users are management, employees and accountants who wants to analyze the business performance based on various financial reports.

External users are lenders, creditors, investors which are more interested to know about the financial strength to take a decision about the business entity in terms of security of their money.
Question 10
1 / -0

Which is the last step of accounting as a process of information ?

A
Recording of data in the books of accounts.

B
Preparation of summaries in the form of financial statements.

C
Communication of information.

D
Analysis and interpretation of information.

Solution

Accounting starts with
-identifying a transaction
-then recording in Journal
-then classifying in the ledger
-then summarising in final accounts
-then interpretation through Ratio analysis
-then finally communicating the information to the users of the financial statement.
So, the first step is identifying and the last step is communicating the information.

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Introduction to accounting Test - 15

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Introduction to accounting Test - 15

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SHARING IS CARING

Question 1

common period

use common unit of measurement

use common format of reporting.

all of the above

Solution

Question 2

I and II

III and IV

I and IV

I, II, III and IV

Solution

Question 3

Be available in time

Help in prediction and feedback

Influence the decisions of users

All of the above

Solution

Question 4

Goods in the hands of an agent

Goods out on approval (on sale or return)

Goods sold awaiting delivery to the buyer

Goods (meant for re-sale) hypothecated as security

Solution

Question 5

Bank

Compititors

Customer

Management

Solution

Question 6

Comparability

Understandability

Relevance

Reliability

Solution

Question 7

Understandability

Relevance

Comparability

Reliability

Solution

Question 8

Creditor

Emplyoee

Mangement

None of the Above

Solution

Question 9

Mangement

Emplyoee

Owner

External

Solution

Question 10

Recording of data in the books of accounts.

Preparation of summaries in the form of financial statements.

Communication of information.

Analysis and interpretation of information.

Solution

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