FA- Ch-1

Which Of the following statements is true?

• The directors of a company are liable for any losses of the company

• A sole trader business is owned by shareholders and operated by the proprietor

• Partners are liable for losses in a partnership in proportion to their profit share ratio

• A company is run by directors on behalf of its members

Which of the following statements best defines a statement of financial position?

• It is a summary of income and expenditure for an accounting period

• It is a summary of cash receipts and payments made during an accounting period

• It is a summary of assets, liabilities and equity at a specified date

• It is a summary of assets and expenses at a specified date

Which of the following statements best defines a statement of profit or loss?

• It is a summary of assets and expenses at a specified date

• It is a summary of cash receipts and payments made during an accounting period

• It is a summary of assets, liabilities and equity at a specified date

• It is a summary of income and expenditure for an accounting period

Which of the following user groups is likely to require the most detailed financial

information?

• The management

• Investors and potential investors

• Government agencies

• Employees

Which of the following statements are true?

1. 1. Accounting can be described as the recording and summarising Of transactions.

2. 2. Financial accounting describes the production Of a statement of financial position and

   statement Of profit or loss for internal use.

• I only

• 2 only

• Both 1 and 2

• Neither 1 nor 2

What is the main purpose of financial accounting?

• To record all transactions in the books of account

• TO provide management with detailed analyses Of costs

• To enable preparation of financial statements that provides information about an

  entity's financial performance and position

• TO calculate profit or loss for an accounting period

Which of the following statements does NOT explain the distinction between financial

statements and management accounts?

• Financial statements are primarily for external users and management accounts are

  primarily for internal users.

• Financial statements are normally produced annually and management accounts are

  normally produced monthly.

• Financial statements are more accurate than management accounts.

• Financial statements are audited by an external auditor and management accounts do

  not normally have an external audit.

Which of the following statements best defines a liability?

• A liability is an obligation arising from a past transaction or event.

• A liability is a legally binding amount owed to a third party.

• A liability is a present obligation of the entity to transfer an economic resource as a

  result of past events.

• A liability is anything which results in an outflow Of economic benefits from an entity.

Which of the following staternents defines an expense?

• An expense is any outflow of economic benefits in an accounting period.

• An expense is an outflow of economic benefits resulting from the purchase of

  resources in an accounting period.

• An expense is an outflow of economic benefits resulting from a claim by a third party.

• An expense is decrease in assets, or increase in liabilities, that result in decreases in

  equity other than those relating to distributions to holders of equity claims.