Accounting and Finance Exam Bank
Course Introduction
Accounting and Finance is an essential course that introduces students to the fundamental principles and practices of financial accounting, management accounting, and corporate finance. The course covers topics such as financial statement preparation and analysis, budgeting, cost control, investment appraisal, and sources of finance. Students will develop analytical skills necessary for interpreting financial information to support business decision-making and strategy. By understanding the frameworks and ethical considerations guiding both accounting and financial management, students will be equipped to contribute effectively to organizational success and ensure compliance with regulatory requirements.
Recommended Textbook
Financial Accounting and Reporting A Global Perspective 5th Edition by Herv Stolowy
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Page 2
Chapter 1: Accounting: the Language of Business
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Sample Questions
Q1) Financial accounting only recognizes transactions that have or will have monetary implications.
A)True
B)False
Answer: True
Q2) What kind(s)of delegation occur(s)in business?
A) Delegation from the capital providers to the enterprise
B) Delegation from the capital providers to managers
C) Delegation within the organization to specialized managers
D) All of these.
Answer: D
Q3) The usefulness of financial information is enhanced if it is comparable,verifiable,timely and relevant.
A)True
B)False
Answer: False
Q4) Accounting standards are authoritative statements.
A)True
B)False
Answer: True
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Chapter 2: Introduction to Financial Statements
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Sample Questions
Q1) Which of the following cannot be stored?
A) Merchandises
B) Finished products
C) Raw materials
D) Services
Answer: D
Q2) Shareholders' equity is made up of which two components?
A) Share capital and expenses
B) Expenses and revenues
C) Share capital and retained earnings
D) Expenses and retained earnings
Answer: C
Q3) Which items are traditionally listed first in Continental Europe?
A) Short-term
B) Valuable
C) Long-term
D) None of these.
Answer: C
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Chapter 3: Financial Statements: Interrelations and Construction
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Sample Questions
Q1) Which of the following statements is true?
A) If you decrease an asset account,you could decrease a liability account.
B) If you increase a liability account,you could increase a shareholders' equity account.
C) If you increase an asset account,you could increase another asset account.
D) All of these.
Answer: A
Q2) Which of the following statements is true?
A) The statement of financial position/balance sheet,the income statement and the statement of cash flows are totally linked.
B) There are links only between the statement of financial position/balance sheet and statement of cash flows.
C) There is no link between the statement of financial position/balance sheet,the income statement and the statement of cash flows.
D) There are links only between the income statement and the statement of cash flows. Answer: A
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Chapter 4: Accounting Principles and End-Of-Period Adjustments
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Q1) Using replacement cost,at what time are liabilities carried at the undiscounted amount of cash,or cash equivalents,that would be required to settle the obligation?
A) Before the end of the accounting period
B) In a near future
C) Within 12 months
D) Right now
Q2) A 'contra asset' account is listed in the balance sheet on the assets side but with a negative (credit)balance.
A)True
B)False
Q3) Which of the following is an example of an adjusting entry?
A) The payment of wages which have been accrued
B) The collection of an accounts receivable
C) The return of defective inventory
D) The accrual of interest expense
Q4) Financial accounting only records transactions expressed in financial units.
A)True
B)False
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Chapter 5: Regulation of Accounting and Financial Reporting
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Sample Questions
Q1) The different formats that exist for the presentation of the statement of financial position/balance sheet do not affect its generic content.
A)True
B)False
Q2) IAS 1 specifies that: 'an entity shall disclose the amount expected to be recovered or settled after more than ____ months for each asset and liability line item that combines amounts expected to be recovered or settled: (a)no more than ____ months after the reporting period,and (b)more than ____ months after the reporting period'
A) Three
B) Six
C) Twelve
D) Twenty-four
Q3) Accounting terminology differs from one country to another.Which terms deal with the same concept respectively in US,UK and IASB terminology?
A) Long-term/Fixed/Non-current Assets
B) Short-term/Fixed/Non-current Assets
C) Long-term/Fixed/Non-operating Assets
D) Long-term/Tangible/Non-current Assets
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Chapter 6: Revenue Recognition Issues
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Sample Questions
Q1) IFRS 15 states that,revenue associated with a transaction should be recognized as a function of the stage,or percentage of completion of the transaction,at the end of the reporting period,when the outcome of a transaction involving the rendering of services can be estimated ____.
A) Approximately
B) Undoubtedly
C) Accurately
D) Reliably
Q2) When accounting for and reporting government grants relating to assets,the entity should record the grant directly as an increase in shareholders' equity.
A)True
B)False
Q3) Permanent differences are created by revenue and expense items,which are recognized for accounting purposes but not for tax purposes or which are recognized for tax purposes but not for accounting purposes.
A)True
B)False
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Chapter 7: Tangible Fixed Assets
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Q1) What is the distinguishing feature of a tangible asset compared to other fixed assets?
A) A tangible asset has a physical substance.
B) A tangible asset is subject to a reduction of its value over time.
C) A tangible asset is a long-lived asset.
D) A tangible asset is used in the course of the operations of the business and is not acquired for the purpose of resale.
Q2) How is the useful life of a tangible asset defined?
A) The period of time over which an asset is expected to be used by the entity.
B) The number of production output or similar units expected to be obtained from the asset by the entity.
C) a or b
D) Neither a nor b
Q3) It is appropriate to use the straight-line method of depreciation if the decline of service potential relates primarily to the passage of time rather than to the level of activity,and if it can be assumed the asset will be equally productive each year.
A)True
B)False
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Chapter 8: Intangible Assets
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Sample Questions
Q1) The acquisition value of soccer players is always expensed.
A)True
B)False
Q2) The IASB accounting standard currently regulating goodwill accounting is:
A) IAS 22
B) SFAS 142
C) IFRS 3
D) None of these
Q3) Recognition policies are the same for purchased and for internally generated intangible assets.
A)True
B)False
Q4) The R&D intensity can also be computed as R&D expenses/operating expenses.
A)True
B)False
Q5) 'Purchased goodwill' is:
A) Recognized only in the unconsolidated financial statements.
B) Recognized only in the consolidated financial statements.
C) Recognized both in the unconsolidated and consolidated financial statements.
D) Never recognized.
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Chapter 9: Inventories
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Q1) Which of the following statements is not correct?
A) Contract in progress can legitimately represent large amounts.
B) Contract in progress measures the amount of resources consumed in realizing all or part of a long-term contract but for which no invoicing has been issued to the customer.
C) As soon as an invoice is issued,all corresponding resources are carried,as depreciation expense,to the income statement.
D) If invoicing on contract takes place,for example,every four months,up to the cost of four months of production may be listed under contract in progress.
Q2) Which of the following procedures does not exist for the valuation of inventory outflows?
A) First-In,First-Out (FIFO)
B) Weighted average cost method (WAC)
C) First-In,Last-Out (FILO)
D) Specific identification method
Q3) The periodic inventory system relies on periodic physical counting.
A)True
B)False
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Chapter 10: Financial Instruments in the Statement of Financial Position
and Fair Value Accounting
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Q1) Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
A)True
B)False
Q2) Held-to-maturity investments are valued at fair value through profit or loss in the balance sheet.
A)True
B)False
Q3) Generally,the uncollectibility risk is evaluated and an allowance for uncollectibles is recorded as a provision.What is this method called?
A) Provision method
B) Allowance method
C) Prudent method
D) None of the above
Q4) What does the credit policy of a firm impact?
A) Sales revenue
B) The level of receivables
C) The length of the cash collection cycle
D) All of these
12
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Chapter 11: Shareholders Equity
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Sample Questions
Q1) What happens to yearly earnings?
A) They are always retained in the business as retained earnings.
B) They are always distributed as dividends.
C) Some are retained in the business as retained earnings,and some are distributed as dividends.
D) None of these
Q2) The voting power of a common shareholder is strictly proportional to the number of common shares she or he holds.
A)True
B)False
Q3) In which of the following ways are dividends allocated?
A) Proportionately to the rights attached to the shares.
B) Discretionally by the board of directors.
C) Uppermost to the most important shareholders.
D) None of these
Q4) How is the debt/equity ratio calculated?
A) Shareholders' equity/Total assets
B) Shareholders' equity/Long-term debts
C) Total assets/Shareholders' equity
D) Long-term debts/Shareholders' equity
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Chapter 12: Liabilities and Provisions
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Sample Questions
Q1) Which of the following statements is not correct?
A) Employers pay salaries or wages to their employees in exchange for their labor.
B) Salaries are paid on a periodic basis as a fixed installment of an agreed upon total amount defined as the remuneration for the person making her or his services available to the employer for an agreed upon annual number of hours.
C) Salaries are dependent on the level of occupation the employer will be able to provide.
D) Wages refer to the payment of an amount defined by an agreed hourly rate or piecework applied to the actual number of units of labor provided during the period for which the wages are calculated.
Q2) What is the term used for the amount that will be given to the bondholder on the date of redemption?
A) Principal
B) Face value
C) Maturity value
D) All of these.
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Chapter 13: Business Combinations
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Sample Questions
Q1) What represents the claim held by the parent company over the shareholders' equity of its subsidiaries or associates?
A) Percentage of interest
B) Percentage of control
C) Percentage of stake
D) Percentage of voting rights
Q2) How are non-controlling [minority] interests reported in the financial statements?
A) Between shareholders' equity and liabilities.
B) As a part of liabilities of consolidated entity.
C) Included as a part of shareholders' equity.
D) All of these.
Q3) According to IAS 31,a jointly controlled entity is a corporation,partnership,or other entity in which two or more venturers have an interest.Which type of arrangement establishes joint control over the entity?
A) Commercial arrangement
B) Contractual arrangement
C) Tacit arrangement
D) Supply arrangement
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Chapter 14: Income Statement Analysis
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Q1) What is the term used for the analysis which measures the changes over past accounting period(s)of a limited number of items or of the whole set of financial statements?
A) Limited analysis
B) Vertical analysis
C) Trend analysis
D) Common-size analysis
Q2) Firms A and B are in all points identical with the exception of their choice of depreciation method for their fixed assets.Firm A uses an accelerated depreciation method while firm B used a straight-line method.In the first year of their operations,which firm has the higher EBITDA
A) Firm A has the higher EBITDA.
B) Both firms have the same EBITDA.
C) Firm B has the higher EBITDA.
Q3) Which of the following items is not a key intermediate balance?
A) Market value added
B) Value added
C) Gross operating profit
D) Commercial margin
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Page 16
Chapter 15: Balance Sheet Analysis
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Sample Questions
Q1) How is the working capital need calculated?
A) Working capital + Net cash
B) Fixed assets - Current liabilities
C) Current assets (except cash)- Current liabilities
D) Long-term debt - Current assets
Q2) Two firms are completely identical in all aspects,except for their capital structure.Firm A is more leveraged than firm B.
A) Firm A shows higher profit and lower risk than firm B
B) Firm A shows higher profit and higher risk than firm B
C) Firm A show a lower profit and a higher risk than firm B
D) Firms A shows a lower profit and a lower risk than firm B
Q3) How is the working capital calculated?
A) Working capital need - Net cash
B) Fixed assets - Equity and Long-term liabilities
C) Current assets (except cash)- Current liabilities
D) Equity and Long-term liabilities - Fixed assets
Q4) A positive working capital need is typical of a firm operating in the distribution sector.
A)True
B)False
Page 17
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Chapter 16: Statement of Cash Flows Construction
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Sample Questions
Q1) Which of the following transactions is not included in the operating activities in the statement of cash flows?
A) Sale of goods
B) Sale of fixed assets
C) Purchase of goods
D) Salaries and social expenses
Q2) Which of the following equations is correct?
A) Income statement items + Increase in related receivables + Decrease in related receivables - Increase in related liabilities - Decrease in related liabilities = Cash flow
B) Income statement items - Increase in related receivables + Decrease in related receivables + Increase in related liabilities - Decrease in related liabilities = Cash flow
C) Income statement items - Increase in related receivables - Decrease in related receivables + Increase in related liabilities + Decrease in related liabilities = Cash flow
D) Income statement items + Increase in related receivables - Decrease in related receivables - Increase in related liabilities + Decrease in related liabilities = Cash flow
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Chapter 17: Statement of Cash Flows Analysis and Earnings
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Q1) Which of the four definitions offered best represents 'Free cash flow' for a business entity:
A) Cash flow from operations minus absolute value of cash flow from investing.
B) Cash flow from operations minus absolute value of dividends paid minus interest payments.
C) Cash flow from operations minus investments for the maintenance of the competitive position minus absolute value of average dividends paid minus interest payments.
D) Cash flow from operations minus debt reimbursements.
Q2) Which of the following action is unlikely to help a business entity increase its cash flow from operations?
A) Push sales at year-end by invoicing before shipment.
B) Grow sales by courting marginal customers not serviced by any other firm.
C) Structure credit terms for customers on the basis of the level of risk of default they represent.
D) Reduce the diversity of suppliers to increase the entity's negotiation power with the remaining selected suppliers.
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Chapter 18: Ratio Analysis, financial Analysis and Beyond
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Q1) The asset turnover ratio (ATR)for Jovial Inc.has evolved as follows over the past three years:
ATR(Y-3)= 200% ATR(Y-2)= 190% ATR(Y-1)= 180%
A) New assets are acquired for the same amount as the annual depreciation expense.
B) Sales revenue grew at a rate that is more rapid than the rate of growth of net assets.
C) Assets are being used more efficiently over time.
D) Assets are being used less efficiently over time.
Q2) Firm A and firm B are in the same risk class.Firm A has return on sales of 3% and an asset turnover of 4.Firm B generates 2 CU of profit per 100 CU of sales revenue and requires 25 CU of assets in order to support 100 CU of sales.In order for firm B to be seen as generating a better return on assets than firm A:
A) Firm A must increase its asset turnover to 6.67.
B) Firm A must increase its sales revenue to 110 CU.
C) Firm B must reduce the assets required to support its sales to 16.67 CU.
D) Firm B must increase its sales revenue to 110 CU.
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