1 1 multiple choice questions 1 which statement is not correct a financial accountin 4306362

1 1 multiple choice questions 1 which statement is not correct a financial accountin 4306362

1.1   Multiple Choice Questions

1) Which statement is not correct?

A) Financial accounting is the process of providing information to external parties.

B) Accounting is about the communication of financial information.

C) Accounting is the production of information about an enterprise and the transmission of that information to those who need the information.

D) Financial accounting is the process of providing information to internal parties.

2) How does an accountant decide on the appropriate method of accounting for a business transaction?

A) evaluating if the particular method is consistent with the conceptual framework

B) ensuring that the accounting method agrees with that selected by other companies

C) evaluating whether the selected method differs from the underlying economics

D) testing the selected method for numerical accuracy and consistency

3) Which statement is correct?

A) Financial reporting is the process of preparing information for internal parties.

B) Financial reporting involves issuing financial statements to external parties.

C) Financial reporting provides the same information as management accounting.

D) Financial reporting is based on rules issued by the CICA or IASB.

4) Which is not a question that financial accounting theory can answer?

A) Why do companies provide financial information to external parties?

B) Why do all companies use the same accounting policies?

C) Why is certain disclosure mandatory in financial reporting?

D) What is the role of financial accounting and reporting?

5) Which statement best explains 'information asymmetry'?

A) Information asymmetry means that there is uncertainty about the future.

B) Information asymmetry means that some people have more information than others.

C) Information asymmetry means that external parties need financial information.

D) Information asymmetry means information is material to a decision maker.

6) Which statement best explains 'moral hazard'?

A) The term refers to a situation where one party has an information advantage over another.

B) The term refers to the need external parties have for financial information.

C) The term refers to the fact that some people have more information than others.

D) The term refers to a situation where one party cannot observe the actions of another party.

7) Which statement best explains 'adverse selection'?

A) The term refers to a situation where one party has an information advantage over another.

B) The term refers to the need external parties have for financial information.

C) The term refers to the fact that some people have more information than others.

D) The term refers to a situation where one party cannot observe the actions of another party.

8) Which statement is correct about the information needs of financial statement users?

A) All users require the same kind of information.

B) Forward looking information is useful for evaluating management stewardship.

C) Trade offs are necessary in accounting.

D) Historical cost information is useful for pricing the value of a company's shares.

9) Which statement appropriately explains the meaning of 'publicly accountable enterprise'?

A) Firms without equity, debt or other securities traded in public markets.

B) Firms with equity, debt or other securities traded in public markets.

C) Firms with assets and liabilities that provide goods and services in public markets.

D) New firms entering the public markets to provide goods and services.

10) Which statement best explains the semi-strong form of the efficient securities market hypothesis?

A) A market in which the prices of securities traded in that market at all times properly reflect all information that is publicly known about those securities.

B) A market in which the prices of securities traded in that market reflect all information, whether publicly or privately known.

C) A market in which the prices of debt securities traded in that market reflect all information that is privately known about those securities.

D) A market in which the prices of equity securities traded in that market reflect all information that is privately known about those securities.

11) Which statement best explains the relationship between the efficient securities market hypothesis and accounting?

A) Security prices adjust slowly when accounting reports are publicly released.

B) The timeliness of accounting information is irrelevant to securities markets.

C) Accounting information competes with other sources of information.

D) Security prices are unaffected when accounting reports are publicly released.

12) Why is the efficient securities market hypothesis important for accounting?

A) When providing financial information, management need only consider the specifically identifiable users who they know will rely on the information.

B) Accounting standards can assume that the majority of market participants have a reasonable level of sophistication.

C) Individuals with information that is not publicly available cannot make significant profits.

D

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