,Chapter 1
Introduction to accounting
Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the most important function of an accounting system?
A) Provide information for decision-making, planning and control
B) Keep employees from embezzling funds
C) Prepare accounting reports
D) Collect and record data
Answer: A
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
2) The best description of the primary purpose of providing accounting information is:
A) to allow the preparation of a taxation return.
B) to assist users in making informed decisions.
C) to calculate the bank account balance.
D) to enable the financial statements to be prepared.
Answer: B
Difficulty: Basic
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
3) The stages of an accounting system are:
A) evaluation, processing, output.
B) identification, recording, analysis, reporting.
C) setting objectives, planning, analysis.
D) none of the above.
Answer: B
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
4) What are the four key qualities of accounting information?
A) Relevance, reliability, comparability and understandability
B) Identification, analysis, reliability and timeliness
C) Planning, control, comparability and analysis
D) Understandability, identification, analysis and relevance
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
,Answer: A
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
5) The best explanation of relevance is:
A) ensuring the benefit of the information is greater than the cost of providing it.
B) ensuring that information is expressed as clearly as possible.
C) ensuring that information is useful for decision-making.
D) ensuring that information is free from bias.
Answer: C
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
6) The quality of accounting information that requires items that are basically the same to be treated in
the same manner is:
A) relevance.
B) timeliness.
C) understandability.
D) comparability.
Answer: D
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
7) When accounting information has the potential to change decision-making it is said to be:
A) consistent.
B) understandable.
C) material.
D) comparable.
Answer: C
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
8) Which of these is a reason why achieving the maximum possible profit in a particular year may not be
in the best interests of a business?
A) Concentrating on the short-term may have detrimental effects in the long-term.
B) It may be achieved by causing environmental problems, which give the business a bad reputation.
C) If it is achieved with high-risk strategies, such as excessive reliance on borrowings, it could lead to
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
, disaster in the longer term.
D) All of the above
Answer: D
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
9) Which test determines if an item of accounting information is worthwhile collecting?
A) Cost test
B) Cost/benefit test
C) Worthwhile test
D) Validation test
Answer: B
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
10) The characteristic of accounting information that requires financial reports to be expressed as clearly
as possible and to be capable of being understood by those they are addressed to, is known as:
A) understandability.
B) reliability.
C) cost versus benefit test.
D) relevance.
Answer: A
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 1 Written and oral communication
11) The statement concerning the key qualities of accounting information that is untrue is:
A) the qualities are frequently in conflict.
B) relevant information may help to predict future events or confirm past events.
C) relevant information often contains a degree of subjectivity.
D) None of the statements is untrue, i.e., all are true statements.
Answer: D
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
12) Which of these is not one of the key qualities of accounting information?
A) Timeliness
B) Reliability
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
Introduction to accounting
Choose the one alternative that best completes the statement or answers the question.
1) Which of the following is the most important function of an accounting system?
A) Provide information for decision-making, planning and control
B) Keep employees from embezzling funds
C) Prepare accounting reports
D) Collect and record data
Answer: A
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
2) The best description of the primary purpose of providing accounting information is:
A) to allow the preparation of a taxation return.
B) to assist users in making informed decisions.
C) to calculate the bank account balance.
D) to enable the financial statements to be prepared.
Answer: B
Difficulty: Basic
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
3) The stages of an accounting system are:
A) evaluation, processing, output.
B) identification, recording, analysis, reporting.
C) setting objectives, planning, analysis.
D) none of the above.
Answer: B
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
4) What are the four key qualities of accounting information?
A) Relevance, reliability, comparability and understandability
B) Identification, analysis, reliability and timeliness
C) Planning, control, comparability and analysis
D) Understandability, identification, analysis and relevance
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
,Answer: A
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
5) The best explanation of relevance is:
A) ensuring the benefit of the information is greater than the cost of providing it.
B) ensuring that information is expressed as clearly as possible.
C) ensuring that information is useful for decision-making.
D) ensuring that information is free from bias.
Answer: C
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
6) The quality of accounting information that requires items that are basically the same to be treated in
the same manner is:
A) relevance.
B) timeliness.
C) understandability.
D) comparability.
Answer: D
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 8 Application of knowledge
7) When accounting information has the potential to change decision-making it is said to be:
A) consistent.
B) understandable.
C) material.
D) comparable.
Answer: C
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
8) Which of these is a reason why achieving the maximum possible profit in a particular year may not be
in the best interests of a business?
A) Concentrating on the short-term may have detrimental effects in the long-term.
B) It may be achieved by causing environmental problems, which give the business a bad reputation.
C) If it is achieved with high-risk strategies, such as excessive reliance on borrowings, it could lead to
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
, disaster in the longer term.
D) All of the above
Answer: D
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
9) Which test determines if an item of accounting information is worthwhile collecting?
A) Cost test
B) Cost/benefit test
C) Worthwhile test
D) Validation test
Answer: B
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
10) The characteristic of accounting information that requires financial reports to be expressed as clearly
as possible and to be capable of being understood by those they are addressed to, is known as:
A) understandability.
B) reliability.
C) cost versus benefit test.
D) relevance.
Answer: A
Difficulty: Moderate
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 1 Written and oral communication
11) The statement concerning the key qualities of accounting information that is untrue is:
A) the qualities are frequently in conflict.
B) relevant information may help to predict future events or confirm past events.
C) relevant information often contains a degree of subjectivity.
D) None of the statements is untrue, i.e., all are true statements.
Answer: D
Difficulty: Complex
Learning Objective: 1.1 Explain the nature and role of accounting.
Topic: Nature and role of accounting
AACSB: 3 Analytical thinking
12) Which of these is not one of the key qualities of accounting information?
A) Timeliness
B) Reliability
Copyright © 2018 Pearson Australia (a division of Pearson Australia Group Pty Ltd)
9781488616570/Atrill/Accounting for Business Students/1e
