,1. Multiple Choice: What is the primary objective of financial
reporting?
a) Provide information that is useful in investment and credit
decisions.
b) Ensure that tax liabilities are calculated correctly.
c) Assist in determining the market value of the entity.
d) Report the financial position of the company to the
government.
Correct Answer: a) Provide information that is useful in
investment and credit decisions.
Rationale: The primary objective of financial reporting is to
provide financial information that is useful to existing and potential
investors, lenders, and other creditors in making decisions about
providing resources to the entity.
2. Fill-in-the-Blank: The ________ method of accounting
recognizes revenue when it is earned and expenses when they are
incurred.
Correct Answer: Accrual
Rationale: The accrual method of accounting is based on the
matching principle, where revenues and expenses are recognized in
, the period they occur, regardless of when the cash transactions
happen.
3. True/False: In managerial accounting, external reporting is as
crucial as internal decision-making.
Correct Answer: False
Rationale: Managerial accounting focuses primarily on providing
information for internal decision-making and does not emphasize
external reporting, which is the focus of financial accounting.
4. Multiple Response: Which of the following are characteristics of
managerial accounting? (Select all that apply)
a) Forward-looking
b) Must comply with GAAP
c) Emphasizes timely data
d) Focuses on segments of an organization
Correct Answers: a) Forward-looking, c) Emphasizes timely
data, d) Focuses on segments of an organization
Rationale: Managerial accounting is forward-looking, emphasizes
timely data for decision-making, and often focuses on segments of
an organization rather than the organization as a whole. It does not
need to comply with GAAP, which is a requirement for financial
accounting.
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