Question

6. Whether a business is successful and thrives is determined by a. markets. b. free enterprise. c. competition. d. all of these. 7. An effective capital allocation process a. promotes productivity. b. encourages Innovation. S provides an efficient market for buying and selling securities. d all of these. 8. Which of the following is not a major challenge facing the accounting profession? a. Nonfinancial measurements. b. Timeliness. Accounting for hard assets. d. Forward-looking Information. 9. What is the objective of financial reporting? a. Provide information that is useful to management in making decisions. b. Provide information that clearly portray nonfinancial transactions. ( Provide Information about the reporting entity that is useful to creditors, present and potential equity Investors, lenders, and others. d. Provide information that excludes claims to the resources. 10. Primary users for general-purpose financial statements include a. creditors. b. employees. c. Investors. both creditors and investors. 11. When making decisions. Investors are interested in assessing a. the company's ability to generate net cash inflows. b. management's ability to protect and enhance the capital providers' investments. Both a and b. d. the company's ability to generate net income. 12. Accrual accounting is used because a. cash flows are considered less important. bit provides a better indication of ability to generate cash flows than the cash basis. c. It recognizes revenues when cash is received and expenses when cash is pald. d. none of the above. 13. Which perspective is adopted as part of the oblective of general-purpose financial reporting? a. Decision-usefulness perspective. b. Proprietary perspective. Entity perspective. d. Financial reporting perspective.

Answer 1

All of the answers provided to the MCQs above by circling the option are correct. I have mentioned the reasons below for all of them :

Question No.	Correct Answer	Reason
6	d	Whether a business is dependent is dependent on several factors. It cannot be dependent on a single factor.
7	d	All options mentioned in a to c are outcomes of an effective capital allocation process.
8	c	Accounting for hard assets is relatively simple. Hard assets may be gold, silver or any type of raw material for which straight-forward accounting principles are present. On the other hand Non-financial instruments is one area which is highly complex. Also timeliness and forward-looking information is one of the major challeneges.
9	c	Objective of financial reporting is to help provide information to all the stakeholders including govenrnment, creditors, lenders etc. for their decision-making.
10	d	Primary users include both creditors and investors. Employees are secondary users.
11	c	Investors are concerned with the management's ability to generate cash flows so that the retained earnings would grow which would protect their investments.
12	b	Accrual accounting is very important because it represents a true and fair picture of the entity's ability to generate cash flows.
13	c	During general purpose financial reporting, entity perspective is always adopted as it is required for giving information about the whole entity to the stakeholders so that they can make effective decisions.