1. The cost-benefit trade-off is best summarized as:
A. the concept of comparing the benefits of an action with the costs of the action.
B. the concept of measuring all costs and benefits in dollars.
C. the concept of recording all necessary costs to obtain the desired benefits.
D. the cost of ensuring that costs are always equal to benefits.
2. You have decided to spend $75 on a "Guide to Caribbean Cruises" before booking your winter cruise holiday. This is an example of which of the following principles?
A. Relevance
B. Reliability
C. Cost/benefit trade-off
D. Comparability
3. A new shareholder of a small company is concerned about being able to adequately monitor their investment and has asked management to provide them with weekly financial statements. From the company's point of view this would violate which of the following concepts?
A. Privacy
B. Reliability
C. IFRS
D. Cost/benefit trade-off
4. Financial accounting would be used to make which of the following decisions?
A. Deciding if the company should expand.
B. Determining which products are successful.
C. Determining the price of a product.
D. Deciding whether to invest in the company.
5. Which of the following users would rely on management accounting information?
A. Taxation authorities
B. Managers
C. Lenders
D. Investors
6. Which of the following statements about users of financial accounting information is true?
A. Users of financial accounting information are the same as the preparers.
B. Users of financial accounting information normally work for the entity.
C. Users of financial accounting information are normally external to the firm.
D. Users of financial accounting information normally have direct access to the information about the entity.
7. Why is it impossible for a single accounting report to be appropriate for all situations?
A. Due to the diverse backgrounds of the people preparing accounting reports.
B. Due to the diverse accounting environment in which entities operate.
C. Due to the conflicting objectives of preparers and users.
D. Due to lack of laws defining a single accounting report.
8. What are the four key components of the accounting environment?
A. Entities, constraints, stakeholders, environmental factors
B. Entities, constraints, stakeholders, legal factors
C. Users, entities, constraints, environmental factors
D. Users, entities, constraints, legal factors
9. Which type of organization files a business tax return?
A. Proprietorship
B. Partnership
C. Corporation
D. Government
10. Which of the following is the most important feature of a corporation?
A. It is taxable.
B. It provides limited liability to its shareholders.
C. It can have more than one owner.
D. It has a limited life span.