F3 Date: TIME:

Nam
e:
ID No Marks:
1. Business transaction means:
A. A business activity that initiates accounting process
B. A business activity that has implications on five elements of financial statements
C. Any business activity
D. Any business activity which has tax implications
2. Which of the following users might be more intereste in the li!uiity position of the company"
#. $rae creitors an leners ##. $ax authorities
###. Customers #%. &rospective investors
A. # an ### only B. ## an ### only C. #' ## an #% only D. # an #% only
(. $he purpose of statement of financial position is to provie information about:
A. $he position of ifferent business units in the mar)et B. $he position of economic resources business hols
C. $he position of inventory in the mar)et D. $he position of financial statements
*. Assets are resources:
A. +se to exchange with other assets A. +se in proucing or converting other goos to be sol by entity
C. +se to pay liabilities D. All of the above
,. -elevance is a !ualitative characteristic of accounting information. Which efinition best applies to the concept of
relevance"
A. $he !uality of information that assures that information is reasonably free from error an bias.
B. $he capacity of information to ma)e a ifference in the ecision process.
C. $he !uality of information that enables users to comprehen the message being communicate.
D. $he !uality of information that enables users to ientify similarities an ifferences between two sets of
economic phenomena.
.. Which of the following is a state ob/ective of financial reporting"
A. $o provie information useful in assessing the amounts' timing' an uncertainty of an organi0ation1s cash inflows
an outflows.
B. $o provie information useful in preparing tax returns an other governmental reports.
C. $o provie information about the current cost of an enterprise1s assets.
D. $o ensure that all companies use the same financial accounting principles.
2. 3nly one of the following statements about the sole traer form of business is correct:
A. A sole traer is not re!uire to pay 4ational #nsurance contributions
B. 5ole traers o not nee to consult accountants
C. 5ole traers must register the name of their business with the -egistrar of Companies
D. A sole traer is liable to income tax on his6her earnings
7. 3ne of the following statements about sole traer businesses is incorrect:
A. $he sole traer form of business is easy to set up
B. 5ole traers are personally responsible for the liabilities of the business
C. A sole traer is entirely responsible for the management of his6her business
D. 5ole traer businesses are oblige to ma)e their accounts available to the general public
8. 3nly one of the following statements about the partnership form of business is correct:
A. &artnerships must ma)e their accounts available to the general public
B. &artners must share their profits in e!ual shares between them
C. &artners are personally liable for the liabilities of the business
D. &artnerships are invariably very small businesses
19. 3ne of the following statements about the partnership form of business is incorrect:
A. &artnerships are liable to corporation tax on their profits
B. A partnership business is not ifficult to set up
C. A partnership is a business run by two or more people
D. :ach partner is liable uner the law for the actions of his or her partners
11. 3nly one of the following statements about the limite company form of business is correct:
A. A limite company cannot itself borrow money; borrowing must be one on its behalf by its shareholers or
irectors
B. <embers of the general public can fin out about the financial affairs of the company
C. 5hareholers of a limite company share the profits e!ually between themselves
D. $he irectors of a limite company are oblige by law to hol shares in the company
12. 3ne of the following statements about the limite company form of business is incorrect:
A. 5hareholers can appoint professional
B. -egular filing of information about the affairs of the company is a legal re!uirement
C. 5hareholers are personally liable for all the liabilities incurre by the business
D. $he limite company form of business allows ownership of the business to be sprea amongst many people
1(. =inancial statements are prepare:
A. 3nly for publicly owne business organi0ations.
B. =or corporations' but not for sole proprietorships or partnerships.
C. &rimarily for the benefit of persons outsie of the business organi0ation.
D. #n either monetary or nonmonetary terms' epening upon the nee of the ecision ma)er.
1*. $he basic purpose of an accounting system is to:
A. Develop financial statements in conformity with generally accepte accounting principles.
B. &rovie as much useful information to ecision ma)ers as possible' regarless of cost.
C. -ecor changes in the financial position of an organi0ation by applying the concepts of ouble>entry accounting.
D. <eet an organi0ation1s nee for accounting information as efficiently as possible.
1,. #nformation is cost effective when:
A. $he information ais management in controlling costs.
B. $he information is base upon historical costs' rather than upon estimate mar)et values.
C. $he value of the information excees the cost of proucing it.
D. $he information is generate by a computer>base accounting system.
1.. Although accounting information is use by a wie variety of external parties' financial reporting is primarily
irecte towar the information nees of:
A. #nvestors an creitors.. B. ?overnment agencies such as the #nternal -evenue 5ervice.
C. Customers. D. $rae associations an labor unions.
12. A complete set of financial statements for @artman Company' at December (1' 1888' woul inclue each of the
following' except:
A. Balance sheet as of December (1' 1888.
B. #ncome statement for the year ene December (1' 1888.
C. 5tatement of pro/ecte cash flows for 2999.
D. 4otes containing aitional information that is useful in interpreting the financial statements.
17. 3ne purpose of accounting information is to help certain users ma)e ecisions an plans for the business an to
exercise control so that the plans come to fruition.
Which one of the following user groups is most li)ely to use accounting information for this purpose"
A. <anagers B. 3wners C. :mployees D. Community representatives
18. Which one of the following is not consiere to be a )ey !ualitative characteristic of accounting"
A. Comparability B. -eliability C. +nerstanability D. $imeliness
29. Consier the following statements.
A1B A partnership is regare as a separate legal entity.
A2B $he partners of a business usually have unlimite liability.
What is the valiity of each statement"
5tatement
A1B A2B
A $rue $rue
B $rue =alse
C =alse $rue
D =alse =alse
21. $he generally>accepte )ey financial ob/ective of a business assume to be:
A. :nhancement6maximisation of the wealth of the owners B. <aximisation of profit
C. <aximisation of return on capital employe D. <aximisation of sales revenue