Week 1
Accounting exists primarily to help user -
decision making
What are the two fundamental qualities of accounting information
faithful representation and relevance
The higher the level of risk, the higher the expected return from an investment
True
The various groups seeking access to the financial reports of a business are normally referred to as:
User-groups
Accounting information is - when various, independent experts are able to reach a consensus that it provides a faithful portrayal
Verifiable
1. The only purpose of accounting is to prepare financial reports. 2. Only accounting information can provide decision-making support
1. False 2. False
How should managers deal with risk when settling objectives
Balance it against likely returns
Accounting can only be useful if it is capable of affecting people's
Behaviour
1. Businesses tend to produce accounting information that exceeds the minimum requirements required by accounting regulations. 2. Accounting reports are usually designed to be understood by everyone.
1. True 2. False
The texts states that accounting is concerned with collecting, - and - financial information
Analysing and communicating
Deciding whether to produce an item of accounting information is a question of balancing the - against the -
Benefits against the costs
Which one of the following qualities is most concerned with influencing users' decisions concerning the prediction of future events and the confirmation of past events
Relevance
The various user groups for accounting information use that information in different ways. Match the user group shown in the left column with the corresponding usage shown in the right column, choosing the appropriate letter in the drop-down menu.
Customers-Are there sufficient financial resources to complete an order? Competitors-How well is the opposition doing? Employees-Can the business continue to offer employment? Government-Is there tax due on business profits? Suppliers-Can the business pay for goods bought on credit? Lenders-Can the business repay loans and interest? Owners-Should more shares be bought, or should some be sold? Managers-How can the business become more financially efficient? Investment analysts-Should they advise clients to buy or sell shares? Community representatives-What impact does the business have on the environment?
The study of business investments and financing decisions is known as:
Financial management
Which area of study is most closely associated with acquiring and deploying the short term and long term finance required by a business
Financial management
In recent decades, which one of the following has not resulted in the business environment becoming more turbulent and competitive?
Increasing regulation of domestic markets
Which one of the following is an internal user of financial information
Management
Which user group usually has most control over the range and content of information if receives
Managers
To be relevant, accounting information must cross a threshold of -
Materiality
Which one of the following is not an element of the quality of faithful representation
Materiality
Which of the following changes have occurred to management accounting as a result of changes in the competitive environment i. More outward-looking ii. More concerned with finding new ways to managing costs iii. More subject to external regulation
More outward-looking and more concerned with finding new ways of managing costs
One purpose of accounting information is to help certain users assess how effectively the managers are running the business and to make judgements about likely levels of risk and return in the future. Which user group is most likely to use accounting information for this purpose?
Owners
Accounting information should be produced until the point where -
The cost of providing it is no longer less than the benefits