1
OTQ (Accounting)
TRUE-FALSE STATEMENTS
1.
Two primary external users of accounting information are investors and creditors?
(a) True
2.
Management Accounting communicates financial information about a business to both internal and external users?
(a) True
3.
(b) False
The origins of accounting are attributed to Luca Pacioli, a famous mathematician?
(a) True
9.
(b) False
Financial statements are the major means of communicating accounting information to interested parties?
(a) True
8.
(b) False
The hiring of a new company president is an economic event recorded by financial information system?
(a) True
7.
(b) False
Transactions that can be measured in rupees are recorded in the financial information system?
(a) True
6.
(b) False
Owners of business are the only people who need accounting information?
(a) True
5.
(b) False
A barter transaction is an exchange that does not involve money?
(a) True
4.
(b) False
(b) False
One of the usual differences between financial and managerial accounting is the time dimension of the information
reported?
(a) True
(b) False
10. Internal users of accounting information include a company's shareholders?
(a) True
(b) False
11. The notes to the financial statements are not required?
(a) True
(b) False
12. Accounting Principle is general law or rule followed in the preparation of financial statements?
(a) True
(b) False
13. The recognition decision deals with the question ‘Should a transaction be included?’ in the accounting records?
(a) True
(b) False
14. Management of a business enterprise is the major external user of information?
(a) True
(b) False
15. External users of accounting information are managers who plan, organize, and run a business?
(a) True
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(b) False
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Accounting Basics
1
OTQ (Accounting)
16. The focus of financial accounting is on an organization's projects, processes, and subdivisions, and the focus of
managerial accounting is on the whole organization?
(a) True
(b) False
17. The information needs and questions of external users vary considerably?
(a) True
(b) False
18. The All Pakistan Trade Unions is an example of an external user of accounting information?
(a) True
(b) False
19. Accounting information is used only by external users with a financial interest in a business enterprise??
(a) True
(b) False
20. An auditor is an accounting professional who conducts an independent examination of the accounting data presented
by a company?
(a) True
(b) False
21. The management discussion and analysis (MD & A) section of an annual report covers various financial aspects of a
company?
(a) True
(b) False
22. Explanatory notes and supporting schedules are an optional part of an annual report?
(a) True
(b) False
23. Examples of notes are descriptions of the significant accounting policies and methods used in preparing the
statements, explanations of contingencies, and various statistics?
(a) True
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(b) False
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Accounting Basics
1
OTQ (Accounting)
MULTIPLE-CHOICE QUESTIONS
1.
Which of the following does not describe accounting?
(a) Language of business
(b) Useful for decision making
(c) Is an end rather than a mean to an end?
(d) Used by business, government, non-profit organizations and individuals
2.
3.
4.
5.
The two most common specialized fields of accounting in practice are?
(a) Environmental accounting and financial accounting
(b) Managerial accounting and financial accounting
(c) Managerial accounting and tax accounting
(d) Financial accounting and accounting systems
Which of the following user groups required the most detailed financial information?
(a) Lenders
(b) Investor and potential investors
(c) Government agencies
(d) The management
AAA stands for?
(a) American accounting agency
(b) American accounting association
(c) Asian accounting association
(d) Australian accounting association
Which one of the following statement completely and correctly describes accounting?
(a) Recording, classifying and summarizing economic activities in systematic way
(b) Recording, classifying and summarizing all activities in useful manner
(c) Accounting is the systematic process of recording social activities only
(d) Recording, classifying and summarizing economic activities in informal manner
6.
Which of the following provides information about the financial information’s, obligations and activities on the
economic entity that is intended for use primarily by external decision makers?
7.
(a) Management accounting
(b) Financial accounting
(c) Tax accounting
(d) Environmental accounting
Which of the following statement is true about purpose of accounting?
(a) The purpose of accounting provide information to manager
(b) Accounting purpose gives quantitative information to economic decision makers
(c) Provision of base for decision making is purpose of accounting
(d) All of above statement are true regarding purpose of accounting
8.
9.
External reporting is the result of?
(a) Financial accounting
(b) Management accounting
(c) Cost accounting
(d) Social accounting
Purpose of an accounting system include all of the following except?
(a) Interpret and record the effects of business transaction
(b) Classify the effects of transactions to facilitate the preparation of reports
(c) Summarize and communicate information to decision makers
(d) Dictate the specific type of business transaction that the enterprise may engage in
10.
Double entry book-keeping was fathered by?
(a) L. Pacioli
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(b) Jones
(c) Henry Fayol
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(d) F. W. Taylor
Accounting Basics
1
OTQ (Accounting)
11.
Which of the following statements about differences between financial and managerial accounting is incorrect?
(a) Financial accounting is aggregated; managerial accounting is focused on products and departments
(b) Managerial accounting pertains to both past and future items; financial accounting focuses primarily on past
transactions and events
(c) Managerial accounting information is prepared primarily for external parties such as stockholders and
creditors; financial accounting is directed at internal users
(d) The Financial accounting is based on generally accepted accounting practices; managerial accounting faces no
similar constraining factors
12.
How many approaches accounting has?
(a) One
13.
(b) Two
(c) Three
(d) None
Which of the following statement/s are true?
(i) Accounting can be described as the recording, classifying and summarizing of economic transactions
(ii) End result of financial accounting is balance sheet only
(a) (i) Only
14.
(c) Neither (i) nor (ii)
(d) Both (i) & (ii)
Accounting is the language of?
(a) Proprietor
15.
(b) (ii) Only
(b) School
(c) Business
(d) Management
To understand and use accounting information in making economic decisions, you must understand?
(a) The nature of economic activities that accounting information describes
(b) The assumptions and measurement techniques involved in developing accounting information
(c) Which information is relevant for a particular type of decision that is being made?
(d) All of Above
16.
17.
The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily related to?
(a) Operational; Financial accounting
(b) Accounting; Financial management
(c) Financial management; Operations
(d) Financial management; Accounting
The outcome of financial accounting is to?
(a) Record all transactions in the books of accounts
(b) Provide management with detailed analyses of costs
(c) Present the financial results to the organization by means of recognized financial statements
(d) Calculate profit
18.
Which of the following is not a user of Management Accounting Information?
(a) Store manager
19.
20.
(c) Chief executive officer
(d) Chief financial officer
An accounting system is used by a business to?
(a) Analyze transactions
(b) Handle routine book-keeping tasks
(c) Structure information
(d) All of the given options
External Users of Financial Accounting Information include all of the following except?
(a) Investors
21.
(b) Creditor
(b) Labor Union
(c) Line Manager
(d) General Public
Which of the following groups use financial accounting information?
(a) Management, employees, shareholders and lenders
(b) Suppliers, customers and competitors
(c) Tax authorities, government and general public
(d) All of the above
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Accounting Basics
1
OTQ (Accounting)
22.
Which of the following best describes management accounts?
(a) Management accounts are normally prepared monthly basis and include details of past performance as
well as budgets and forecasts
(b) Management accounts are mandatory accounts which reflect the past performance of a business and are
prepared in accordance with strict accounting requirements
(c) Management accounts are required by law and include sufficient detail from managers control the business and
prepare for the future
(d) Management accounts include information computed to be relevant to managers and are generally prepared
annually
23.
24.
25.
The end result of financial accounting is?
(a) The measurement of accounting income
(b) The preparation of financial position
(c) The measurement of taxable income
(d) The preparation of financial reports
Which of the following persons are most likely to use accounting information?
(a) Business owners
(b) Lending institutions
(c) All of the above
(d) None of the above
Someone who uses accounting information is?
(a) A user
26.
(b) An external user
(d) A manager
External users include all of the following except?
(a) Lenders
27.
(c) An internal user
(b) Customers
(c) Officers
(d) Employees
The following would be a type of external user who needs financial information to help them decide whether to buy,
hold or sell equity securities in the company, and whether the company can pay dividends?
(a) Investors
28.
29.
(b) Lenders
(c) Suppliers
(d) Customers
Which of the following financial statements answers the question ‘How did the business perform’?
(a) Balance Sheet
(b) Income Statement
(c) Statement of Owners’ Equity
(d) Statement of cash flows
The question of whether the results of certain transactions should be reported separately in the financial statements
refers to?
(a) Disclosure
30.
31.
32.
(b) Recognition
(c) Reporting
(d) Measurement
An example of an external user of an entity’s accounting reports could be?
(a) An employee of the company
(b) the entity’s financial manager
(c) The entity’s general manager
(d) All of the above
Accounting can be defined as the process of?
(a) Identifying economic information
(b) Measuring economic information
(c) Communicating economic information
(d) All of the above
Which of the following financial statements answers the question, ‘What resources have the owners invested in an
organization’?
(a) Statement of financial position
(b) Statement of comprehensive income
(c) Statement of changes in equity
(d) Statement of cash flows
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Accounting Basics
1
OTQ (Accounting)
33.
External users include?
(a) Investors
34.
35.
(d) a and c
(a) Balance Sheet
(b) Income Statement
(c) Statement of changes in equity
(d) Statement of cash flows
The question of what additional information should be provided to external users refers to?
(b) Recognition
(c) Disclosure
(d) Measurement
(c) Tax accounting
(d) All of the above
Accountants today work in areas such as?
(a) Financial accounting
37.
(c) Creditors
Which of the following financial statements reports financial results as of a single date?
(a) Reporting
36.
(b) Managers
(b) Management accounting
The role of an auditor is to?
(a) Check the accuracy of financial reports
(b) check the organizational structure
(c) Ensure the financial reports are prepared in accordance with policies, laws and regulations
(d) Both (a) and (c)
38.
39.
Which of the following is not one of the four basic financial statements?
(a) The Balance Sheet
(b) The Income Statement
(c) The Audit Report
(d) The cash flow statement
Accounting information is designed to meet the needs of?
(a) Internal users
(b) External users
(c) Government agencies only
(d) Internal and external users
40.
The corporate governance structure in an entity should specify the?
(a) Rights and obligations of managers in service industries only
(b) Links between an entity and the government of the day
(c) Distribution of rights and responsibilities among all stakeholders
(d) Winding-up procedures for direct competitors
41.
42.
43.
Management accounting generally provides economic information for?
(a) Managers of competing companies
(b) regulatory bodies such as SECP
(c) External users such as investors
(d) Internal users
Special purpose financial statements are prepared by
(a) Cost Accountants
(b) Management Accountants
(c) Financial Accountants
(d) Both a and c
Which of the following is generally not considered one of the general purpose financial statements issued by
company?
44.
(a) Income statement forecast for the coming year
(b) Balance sheet
(c) Statement of financial position
(d) Statement of cash flows
The personnel, procedure, devices and records used by an organization to develop accounting information and
communicate that information to decision maker are called which of the following?
(a) Audits
(b) Accounting information systems (AIS)
(c) Personnel systems
(d) Internal control structures
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Accounting Basics
1
OTQ (Accounting)
45.
Which one of the following sentences does not explain the distinction between financial accounts and management
accounts?
(a) Financial accounts are primarily for external users and management accounts are primarily for internal users
(b) Financial accounts are normally produced annually and management accounts are normally produced monthly
(c) Financial accounts are audited by an external auditor and management accounts do not normally have an
external audit
(d) Financial accounts are more accurate than management accounts
46.
47.
Accounting is an information and measurement system that?
(a) Identifies business activities
(b) Records business activities
(c) Helps people make better decisions
(d) All of the above
Internal users of accounting information include which of the following?
(a) Company officers
50.
52.
(c) Financial institutions
(d) Competitors
Which one of the following is not a qualitative characteristic of useful accounting information?
(a) Relevance
51.
(b) Investors
(b) Reliability
(c) Cash-basis accounting
(d) Comparability
The differences between financial and management accounting include?
(a) Accounting rules and formality
(b) Timeliness (e.g. of reports)
(c) The level of detail disclosed
(d) All of the above
Which of the following is the best definition of an internal user of accounting information?
(a) Investors who use accounting information to decide whether to buy or sell stock
(b) Creditors like banks that use accounting information to evaluate the risk of lending money
(c) Labor unions that use accounting information to examine the ability of the company to pay wages and benefits
(d) Managers who use accounting information to plan, organize, and run a business
53.
External users of accounting information, like the FBR are most commonly known as?
(a) Taxing authorities
54.
55.
(b) Labor unions
(c) Customers
(d) Regulatory agencies
Which of the following are internal reports that accounting provides to internal users?
(a) Forecasts of cash needs for next year
(b) Financial comparisons of operating activity alternative
(c) Both a and b are internal reports
(d) Neither a or b is an internal report
Which of the following groups uses accounting information to determine whether the company’s net income will
result in a stock price increase?
56.
(a) Marketing managers
(b) Investors in common stock
(c) Creditors
(d) Chief Financial Officer
Which of the following is the most appropriate and modern definition of accounting?
(a) The information system that identifies, records, and communicates the economic events of an organization
to interested users
(b) A means of collecting information
(c) The interconnected network of subsystems necessary to operate a business
(d) Electronic collection, organization, and communication of vast amounts of information
57.
Which of the following would not be considered an external user of accounting data for the Company?
(a) Internal Revenue Service Agent
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(b) Management
(c) Creditors
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(d) Customers
Accounting Basics
1
OTQ (Accounting)
58.
59.
Which of the following would not be considered an internal user of accounting data for a company?
(a) The president of a company
(b) The controller of a company
(c) Creditor of a company
(d) Production manager
Which of the following is a user of accounting information with an indirect financial interest in a business?
(a) Tax authorities
60.
(b) Management
(c) Investor
(d) Creditor
External users want answers to all of the following questions except?
(a) Is the company earning satisfactory income?
(b) Will the company be able to pay its debts as they come due?
(c) Will the company be able to afford employee pay rises this year?
(d) How does the company compare in profitability with competitors?
61.
Which of the following statements concerning users of accounting information is incorrect?
(a) Management is considered an internal user
(d) Present creditors are considered external users
(c) Regulatory authorities are considered internal users (d) Taxing authorities are considered external users
62.
Which of the following is a primary user of accounting information with a direct financial interest in the business?
(a) Taxing authority
63.
(b) Creditor
(c) Regulatory agency
(d) Labor union
The accounting profession can be divided into three major categories; specifically, the practice of public accounting,
private accounting, and governmental accounting. A somewhat unique and important service of public accountants
is?
(a) Financial Accounting
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(b) Managerial accounting
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(c) Auditing
(d) Cost accounting
Accounting Basics