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Accounting Information for Business Decisions 2nd Edition by Billie Cunningham - Test Bank
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Chapter 2 – Developing a Business Plan: Cost–Volume–Profit Analysis COMPLETION 1. Instead of rushing into a business right away, it is wise to develop a ____________________. ANS: businessplan PTS: 1 DIF: Easy TOP: Planning in a new business 2. A ____________________ describes a business...

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  • August 18, 2023
  • 174
  • 2023/2024
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Chapter 1 – Introduction to Business Accounting and the Role of Professional Skills


COMPLETION

1. Information explosion, evolving forms of businesses, more complex business activities, increased
regulations, globalisation and technological advances are all factors affecting the ______________of
the business environment.

ANS: complexity

PTS: 1 DIF: Difficult TOP: The changing business environment

2. An __________ ___________ is a means by which accounting information about a business’ activity
is identified, measured, recorded and summarised so it can be communicated in an accounting report.

ANS: accounting system

PTS: 1 DIF: Moderate TOP: The accounting system

3. A business financial statement is meant to convey information about the business to ________ and
__________ users in order to help them make decisions about the business.

ANS: internal; external

PTS: 1 DIF: Difficult TOP: Ethics in business and accounting

4. __________ ___________ is a system in which individuals own businesses that produce and sell
services and/or goods for a profit.

ANS: Private enterprise

PTS: 1 DIF: Moderate TOP: Private enterprise

5. _________ ___________ perform services or activities that benefit individuals or business customers.

ANS: Service businesses

PTS: 1 DIF: Easy Top: Service businesses

6. ____________________ businesses purchase goods for resale to their customers.

ANS: Merchandising

PTS: 1 DIF: Easy TOP: Merchandising business

, 7. ____________________ are merchandising businesses that sell their products directly to the final
customer or consumers.

ANS: Retailers

PTS: 1 DIF: Easy TOP: Merchandising business

8. ____________________ are merchandising businesses that sell their goods to retailers or other
commercial users.

ANS: Wholesalers

PTS: 1 DIF: Easy TOP: Merchandising business

9. ____________________ refers to the funds a business needs to operate or expand operations.

ANS: Capital

PTS: 1 DIF: Moderate TOP: Entrepreneurship and sources of capital

10. ____________________ businesses make their products and then sell these products to their
customers.

ANS: Manufacturing

PTS: 1 DIF: Moderate TOP: Manufacturing business

11. ____________________ are businesses owned by two or more individuals.

ANS: Partnerships

PTS: 1 DIF: Easy TOP: Partnership

12. An ____________________ is an individual who is willing to risk the uncertainty of not knowing if
customers will buy what their business provides, in exchange for the reward of a profit, along with the
reward of seeing their business succeed.

ANS: entrepreneur

PTS: 1 DIF: Moderate TOP: Entrepreneurship

13. _________________________ are businesses owned by one person who is the sole investor of capital
into the business.

ANS: Sole proprietorships or sole traders

PTS: 1 DIF: Moderate TOP: Sole proprietorship

,14. _________________________ are the most common type of business organisation.

ANS: Sole proprietorships or sole traders

PTS: 1 DIF: Easy TOP: Sole proprietorship

15. A ____________________ is a business organisation that has a separate identity from its owners.

ANS: Company/Corporation

PTS: 1 DIF: Moderate TOP: Company/Corporation
16. _________________________ are issued to the owners of a company as evidence of their investment
of capital in the business.

ANS: Company shares

PTS: 1 DIF: Difficult TOP: Company/Corporation

17. _______________ ____________ ____________ __________ are the currently accepted principles,
practices and standards that businesses use for financial accounting and reporting in Australia, New
Zealand and all over the world.

ANS: Generally accepted accounting principles

PTS: 1 DIF: Difficult TOP: Generally accepted accounting principles

18. _______________ is the difference between the cash and credit sales of a business (revenues) and its
total costs (expenses).

ANS: Profit

PTS: 1 DIF: Easy TOP: Basic financial statements

19. An _______________ shows a business’ revenues, expenses and net income (or net loss) for a time
period, usually one year.

ANS: income statement

PTS: 1 DIF: Moderate TOP: Income statement

20. The International Federation of Accountants (IFAC) is an independent, worldwide organisation. It has
developed a ________ ___ ______ for accountants in each country to use as a basis for producing their
own versions.

ANS: code of ethics

, PTS: 1 DIF: Moderate TOP: Professional organisations’ code of ethics


TRUE/FALSE

1. Accounting is an information tool which can help make good business decisions.

ANS: T PTS: 1 DIF: Easy TOP: The accounting system

2. Unless you are a business owner, you will not be making business decisions.

ANS: F PTS: 1 DIF: Easy TOP: Accounting support for
management activities

3. Many businesses have no need for accounting information and can actually exist without an
accounting system.

ANS: F PTS: 1 DIF: Easy TOP: The accounting system

4. Accounting keeps track of a business’ economic resources and activities, then reports the results and
financial position to users who have an interest.

ANS: T PTS: 1 DIF: Moderate TOP: The accounting system


5. The term ‘private enterprise’ means that businesses keep their accounting information private.

ANS: F PTS: 1 DIF: Moderate TOP: Private enterprise


6. A dental surgery is an example of a service business.

ANS: T PTS: 1 DIF: Moderate TOP: Service business


7. A supermarket is an example of a retailing business.

ANS: T PTS: 1 DIF: Moderate TOP: Merchandising businesses

8. Sources of capital for a business include owner investments, and borrowing or seeking investments
from outsiders.

ANS: T PTS: 1 DIF: Difficult TOP: Sources of capital


9. Sole proprietorships are the most common form of business and as such, conduct more volume of
business than partnerships and corporations put together.

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