Multiple Choice

1. The managers of an organization are responsible for performing several broad functions. They
are
a. Planning, controlling, and selling
b. Directing, controlling, and evaluating
c. Planning, evaluating, and manufacturing
d. Planning, controlling, and evaluating

2. Which of the following is a primary aspect of the evaluating function within an organization?
a. comparing actual results against expected results for products, departments, divisions, or
the company as a whole
b. reviewing only the quantitative or financial results of the company
c. setting goals
d. putting controls in place for the upcoming year

3. Which of the following is false regarding strategic planning?

a. It is the sole responsibility of supervisors.
b. It will span many years.
c. It should include both short-term and long-term goals.
d. Strategic objectives will be diverse and vary from company to company.

4. Management accounting:
a. emphasizes special-purpose information
b. relates to the company as a whole
c. is limited to strictly cost figures
d. is controlled by GAAP

5. External users of accounting information would include ________.

a. employees
b. managers
c. investors
d. supervisors

6. The stockholders of a company are:

a. the owners
b. policy setters
c. responsible and liable for the financial well-being of the company
d. operating within the company as independent shareholders

7. Which of the following terms means the ability to work in cross-functional teams in order to
complete a task?
a. supervisory skills
b. conceptualization
c. collaboration
 d. resource planning

8. Which of the following is the primary source of revenue for a service business?
a. the production of products from raw materials
b. the purchase and resale of finished products
c. providing intangible goods and services
d. the sale of raw materials to manufacturing firms

9. Conversion costs include all of the following except:

a. wages of production workers
b. depreciation on factory equipment
c. factory utilities
d. direct materials purchased

10. Fixed costs are expenses that ________.

a. vary in response to changes in activity level
b. remain constant on a per-unit basis
c. increase on a per-unit basis as activity increases
d. remain constant as activity changes

11. Which of the following are prime costs?

a. indirect materials, indirect labor, and direct labor
b. direct labor, indirect materials, and indirect labor
c. direct labor and indirect labor
d. direct labor and direct materials

12. In the cost equation Y = a + bx, Y represents which of the following?

a. fixed costs
b. variable costs
c. total costs
d. units of production

13. Management accounting:

a. emphasizes special-purpose information

b. relates to the company as a whole
c. is limited to strictly cost figures
d. is controlled by GAAP

14. Which of the following is false regarding strategic planning?

a. It is the sole responsibility of supervisors.

b. It will span many years.
c. It should include both short-term and long-term goals.
 d. Strategic objectives will be diverse and vary from company to company.

15. The stockholders of a company are:

a. the owners
b. policy setters
c. responsible and liable for the financial well-being of the company
d. operating within the company as independent shareholders

16. Which of the following is the primary source of revenue for a service business?

a. the production of products from raw materials

b. the purchase and resale of finished products
c. providing intangible goods and services
d. the sale of raw materials to manufacturing firms

17. Conversion costs include all of the following except:

a. wages of production workers

b. depreciation on factory equipment
c. factory utilities
d. direct materials purchased

18. In the cost equation Y = a + bx, a represents which of the following?

a. fixed costs
b. variable costs
c. total costs
d. units of production

19. The managers of an organization are responsible for performing several broad functions. They are

a. Planning, controlling, and selling

b. Directing, controlling, and evaluating
c. Planning, evaluating, and manufacturing
d. Planning, controlling, and evaluating

20. Which of the following is a primary aspect of the evaluating function within an organization?
 a. comparing actual results against expected results for products, departments, divisions, or
the company as a whole
b. reviewing only the quantitative or financial results of the company
c. setting goals
d. putting controls in place for the upcoming year

21. Which of the following terms means the ability to work in cross-functional teams in order to
complete a task?

a. supervisory skills
b. conceptualization
c. collaboration
d. resource planning

22. External users of accounting information would include ________.

a. employees
b. managers
c. investors
d. customers

23. Fixed costs are expenses that ________.

a. vary in response to changes in activity level

b. remain constant on a per-unit basis
c. increase on a per-unit basis as activity increases
d. remain constant as activity changes

24. A business organized as a separate legal entity is a

a. corporation
b. proprietor
c. government unit
d. partnership

25. Which of the following would not be considered an internal user of accounting data for the
Xanadu Company?

a. president of the company

b. production manager
c. merchandise inventory clerk
d. president of the employees' labor union
26. The liability created by a business when it purchases coffee beans and coffee cups on credit from
suppliers is termed a(n)

a. account payable
b. account receivable
c. revenue
d. expense

27. The right to receive money in the future is called a(n)

a. account payable
b. account receivable
c. liability
d. revenue

28. The cost of assets consumed or services used is also known as?

a. a revenue
b. an expense
c. a liability
d. an asset

29. The best definition of assets is the

a. cash owned by the company

b. collections of resources belonging to the company and the claims on these resources.
c. owners’ investment in the business.
d. resources belonging to a company that have future benefit to the company

30. Dividends are reported on the

a. income statement
b. retained earnings statement
c. balance sheet.
d. income statement and balance sheet.

31. Which of the following is an asset?

a. Accounts Receivable
b. Accounts Payable
c. Common Stock
d. Dividends

32. To show how successfully your business performed during a period of time, you would report its
revenues and expenses in the
 a. balance sheet
b. income statement
c. statement of cash flows
d. retained earnings statement

33. Which of the following financial statements is concerned with the company at a point in time?

a. Balance sheet
b. Income statement
c. Retained earnings statement
d. Statement of cash flows

34. An income statements

a. summarizes the changes in retained earnings for a specific period of time

b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time
c. reports the assets, liabilities, and stockholders’ equity at a specific date
d. presents the revenues and expenses for a specific period of time

35. Stock is considered as a liquid asset as anytime it can be converted into cash immediately

a. yes
b. no
c. only yes
d. none of the above

36. return on properties funds is also known as

a. return on net worth

b. return on shareholders fun
c. return on shareholder’s investment
d. all of the above

37. Which of the following is not included in current assets

a. debtors
b. stock
c. cash at bank
d. cash in hand

38. Net profit ratio is a

a. turnover ratio
b. long-term solvency ratio
c. short-term solvency ratio
d. profitability ratio
39. Stuck turnover ratio is

a. turnover ratio
b. profitability ratio
c. short-term solvency ratio
d. long-term solvency ratio

40. Current ratio is

a. short-term solvency ratio

b. long-term solvency ratio
c. profitability ratio
d. turnover ratio

41. Proprietary ratio is a

a. short-term solvency ratio

b. long-term solvency ratio
c. profitability ratio
d. turnover ratio

42. Fixed assets turnover ratio is a

a. short-term solvency ratio

b. long-term solvency ratio
c. profitability ratio
d. turnover ratio

43. Fixed cost is a cost:

a. Which changes in total in proportion to changes in output
b. which is partly fixed and partly variable in relation to output
c. Which do not change in total during a given period despise changes in output
d. Which remains same for each unit of output

44. Element/s of Cost of a product are:

a. Material only
b. Labour only
c. Expenses only
d. Material, Labour and expenses

45. Abnormal cost is the cost:

a. Cost normally incurred at a given level of output
b. Cost not normally incurred at a given level of output
c. Cost which is charged to customer
d. Cost which is included in the cost of the product
True/False
1. Although financial and
managerial accounting differ in
many ways, they are similar in
that both rely on the same
underlying financial data.
Answer: True
2. Managerial accounting is a
branch of financial accounting and
serves essentially the
same purposes as financial
accounting.
Answer: False
3. Managerial accounting places
greater emphasis on the future than
financial
accounting, which is primarily
concerned with the past.
Answer: True
4. Managerial accounting is not
needed in a non-profit or
governmental organization.
Answer: False
5. When carrying out their
planning activities, managers
select a course of action and
specify how the action will be
implemented.
Answer: True
6. When carrying out their
planning activities, managers
obtain feedback to ensure that
the plan is actually carried out and
is appropriately modified as
circumstances change.
Answer: False
7. The controller occupies a line
position in an organization.
Answer: False
True/False
1. Although financial and
managerial accounting differ in
many ways, they are similar in
that both rely on the same
underlying financial data.
Answer: True
2. Managerial accounting is a
branch of financial accounting and
serves essentially the
same purposes as financial
accounting.
Answer: False
3. Managerial accounting places
greater emphasis on the future than
financial
accounting, which is primarily
concerned with the past.
Answer: True
4. Managerial accounting is not
needed in a non-profit or
governmental organization.
Answer: False
5. When carrying out their
planning activities, managers
select a course of action and
specify how the action will be
implemented.
Answer: True
6. When carrying out their
planning activities, managers
obtain feedback to ensure that
the plan is actually carried out and
is appropriately modified as
circumstances change.
Answer: False
7. The controller occupies a line
position in an organization.
Answer: False
True/False

1. Although financial and managerial accounting differ in many ways, they are similar in that
both rely on the same underlying financial data
True

2. Managerial accounting is a branch of financial accounting and serves essentially the same
purposes as financial accounting
 False

3. Managerial accounting places greater emphasis on the future than financial accounting,
which is primarily concerned with the past.
True

4. Managerial accounting is not needed in a non-profit or governmental organization

False

5. When carrying out their planning activities, managers select a course of action and specify
how the action will be implemented
True

6. When carrying out their planning activities, managers obtain feedback to ensure that the
plan is actually carried out and is appropriately modified as circumstances change.
False

7. The controller occupies a line position in an organization

False

8. Decentralization means the delegation of decision-making authority throughout an

organization by allowing managers at various operating levels to make key decisions relating
to their own area of responsibility
True

9. A firm’s organization chart will normally show both the formal and informal lines of
reporting and communication
False

10. The Chief Financial Officer of an organization is responsible for ensuring that line operations
run smoothly
False

11. Traditionally, companies have maintained large amounts of raw materials, work in process,
and finished goods inventories to act as a buffer so that operations can proceed smoothly
even if there are unanticipated disruptions
True

12. Managerial accounting places less emphasis on precision and more emphasis on flexibility
and relevance than financial accounting.
True

13. Managerial accounting is not governed by generally accepted accounting principles (GAAP).
True
14. Financial accounting and managerial accounting reports must be prepared in accordance
with generally accepted accounting principles (GAAP).

False

15. When carrying out their directing and motivating activities, managers mobilize the
organization's human and other resources so that the organization's plans are carried out.
True

16. When carrying out planning activities, managers rely on feedback to ensure that the plan is
actually carried out and is appropriately modified as circumstances change.
False

17. When carrying out their directing and motivating activities, managers select a course of
action and specify how the action will be implemented.
False

18. Persons occupying staff positions provide support and assistance to other parts of the
organization.
True

19. Staff departments generally have direct authority over line departments in an organization.
False

20. Informal relationships and channels of communication often develop that do not appear on
the organization chart.
True

21. The controller's position in a retail company is considered a line position rather than a staff
position.
False

22. The Chief Financial Officer of an organization should present facts and refrain from offering
advice and personal opinion.
False

23. A strategy is a game plan that enables a company to attract customers by distinguishing itself
from competitors.
True

24. Equity to fixed interest-bearing securities is the acid test ratio.

False
25. Debt equity ratio is a ‘solvency ratio.’
True
26. Ratio analysis is a technique of planning & control.
False

27. A firm’s ability to meet the interest charges and repayment dues on
True

28. Long term obligations are referred to as its solvency.

False

29. Rate of return on capital employed is a turnover ratio.

True

30. Capital gearing is the ratio of debt to equity.

True