C213 Accounting for Decision Makers Practice Questions - Set 3 - Part 3

Correct Answer: c) To provide information for internal decision-making

Managerial accounting focuses on providing detailed financial information to internal users, such as managers, to assist with decision-making, planning, and controlling business operations.

Correct Answer: c) Loss from a natural disaster

Extraordinary items, such as losses from natural disasters, are rare and unusual events that significantly affect a company’s financial position. They are reported separately on the income statement.

Correct Answer: c) Statement of Cash Flows

The statement of cash flows provides insights into how a company generates and uses cash by categorizing cash flows into operating, investing, and financing activities.

Correct Answer: c) Equipment

Equipment is classified as a long-term asset because it is expected to provide economic benefits for more than one year. Accounts payable and inventory are current liabilities and assets, respectively.

Correct Answer: a) Return on Equity

Return on Equity (ROE) measures a company’s profitability by comparing net income to shareholders’ equity. It indicates how efficiently a company uses its equity to generate profits.

Correct Answer: b) To allocate the cost of a tangible asset over its useful life

Depreciation allocates the cost of a tangible asset, such as machinery or buildings, over its useful life. This helps match the expense to the periods in which the asset is used to generate revenue.

Correct Answer: c) Balance Sheet

The balance sheet presents a company’s assets, liabilities, and equity at a specific point in time, providing a snapshot of its financial position.

Correct Answer: c) Going Concern Assumption

The going concern assumption assumes that a business will continue to operate indefinitely unless there is evidence to suggest otherwise. This assumption is important for preparing financial statements.

Correct Answer: c) Collecting cash from customers

Collecting cash from customers is classified as an operating activity because it is part of the company’s day-to-day operations. Paying dividends and issuing stock are financing activities, while purchasing equipment is an investing activity.

Correct Answer: c) Bonds Payable

Bonds payable are classified as non-current liabilities because they represent long-term debts that are typically due in more than one year. Accounts payable and short-term loans are current liabilities.