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CAMA_Chapter 1 Questions

The document contains multiple-choice, true/false, and long-answer questions related to financial, cost, and management accounting, as well as ethical considerations in business practices. It addresses the characteristics of financial accounting, the roles of management accounting, and ethical dilemmas faced by companies like Fire Limited and In-Sure Ltd. The questions aim to assess understanding of accounting principles and the importance of ethics in decision-making processes.

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4 views

CAMA_Chapter 1 Questions

The document contains multiple-choice, true/false, and long-answer questions related to financial, cost, and management accounting, as well as ethical considerations in business practices. It addresses the characteristics of financial accounting, the roles of management accounting, and ethical dilemmas faced by companies like Fire Limited and In-Sure Ltd. The questions aim to assess understanding of accounting principles and the importance of ethics in decision-making processes.

Uploaded by

kabelongoepe8
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER 1

ADDITIONAL QUESTIONS

MULTIPLE-CHOICE

Question 1.1
Financial accounting is characterised by which of the following:
a) Reliability
b) Consistency
c) Objectivity
d) Historical nature
e) All of the above

Question 1.2
What type of system is cost accounting?
a) Financial
b) External
c) Internal
d) Governmental
e) All of the above

Question 1.3
Management accounting is used by:
a) Shareholders
b) Internal managers
c) Employees
d) External users
e) None of the above

Question 1.4
Cost accounting has the following functions:
a) Providing information to external parties
b) Estimating costs of products and services
c) Providing information for internal use
d) a and c
e) a, b and c
Question 1.5
In the code of ethics followed by management accountants, integrity is:
a) Being honest, standing for what is right
b) Being just and unbiased
c) Being courteous and decent
d) Not revealing or disclosing privileged or private information
e) Accepting the consequences of actions and decisions

Question 1.6
In the code of ethics followed by management accountants, confidentiality is:
a) Being honest, standing for what is right
b) Being just and unbiased
c) Being courteous and decent
d) Not revealing or disclosing privileged or private information
e) Accepting the consequences of actions and decisions

Question 1.7
In the code of ethics followed by management accountants, accountability is:
a) Being honest, standing for what is right
b) Being just and unbiased
c) Being courteous and decent
d) Not revealing or disclosing privileged or private information
e) Accepting the consequences of actions and decisions

TRUE OR FALSE
State whether the following is true or false. If false, provide a motivation for
your answer.

Question 1.8
Cost accounting creates an overlap between financial accounting and management
accounting.

Question 1.9
Management accounting includes more estimates and fewer facts than financial
accounting.

Question 1.10
Financial accounting is designed to satisfy the full range of needs for business
managers.

Question 1.11
Business leaders only need monetary information for decision-making purposes.
Question 1.12
Financial accounting is designed to meet external information needs.

Question 1.13
Management accounting attempts to satisfy both internal and external information
needs.

Question 1.14
Management accountants only require historical data.

Question 1.15
Management accounting has to adhere to GAAP.

LONG QUESTIONS
Question 1.16
Fire Limited is a large coal mining company situated in a small town in the North
West. The workers have been on strike for three weeks because of wages and
working hours. The company has come under financial strain since the President
announced in his State of the Nation Address that South Africa should look to
powering itself through renewable energy, thus coal sales have dropped
drastically. In an attempt to deal with the crisis, the management of Fire Limited
looked for ways to minimise costs as to be able to afford to pay the workers and
improve their working hours.

The wastage generated through the mining activities is taken to a dumping site
which is 120kms from where the mine is situated and the process takes about
four hours. Fire Limited’s management saw this as their window to save and so
be able to meet the employees’ demands, Management decided to do away with
this service and rather dump the waste on the banks of the river at the site for it
to be washed away by the river. Doing this would save the company enough
money to be able to pay the extra wages. The board decided this was a fabulous
idea and followed through with it.

Required:
Explain how the actions of Fire Limited’s management can be seen as unethical
and what can be done to address the problem ethically? (7)

Question 1.17
You have recently started working for In-Sure Ltd. In-Sure is one of South Africa’s
largest insurance companies and it has grown from strength to strength over the
past 40 years because of its belief that their staff is their most valuable asset.

MI Clark was appointed as a director effective 1 April through a majority


resolution of the board of directors to replace G Moodley, who was removed from
the board of directors at the same meeting through a vote by the board. The
board felt that Mr Moodley was not adding value to the board as he has
consistently missed meetings during the last year due to continued chronic illness
and was not even present at the meeting to remove him. The suggestion to
appoint MI Clark was made by J Rourke who has known MI Clark since boarding
school days. J Rourke personally vouched for the expertise, knowledge and
competence of MI Clark in the insurance industry. MI Clark has not served on a
board of directors before and has “been thrown in the deep end”, as the next
board meeting is to be held on 17 April. J Rourke is confident that MI Clark will
“swim and not sink” and does not need any guidance regarding his duties as a
director.

Your first assignment at In-Sure Ltd is to perform a review of the appointment of


MI Clark to ensure that the appointment is in compliance with the necessary laws
and regulations. As part of your review, it has been requested for you to perform
a background check on MI Clark.

A week later, when you were out to dinner with some friends, you mentioned this
exciting task that you were assigned. You asked your friends for some guidance
as to where exactly you could find background information on the new director,
MI Clark, as the Google searches that you have undertaken haven’t revealed
much other than that he had been employed as a financial manager at another
insurance company, Your-Way Group Holding (Pty) Ltd.

One of your friends noted that his sister worked for Your-Way Group Holdings
and had mentioned that one of the financial managers, a certain Mr MI Clark has
recently left the company under a cloud of suspicion of fraud and corruption.
Rumours at the company were that he had stolen money from the petty cash
account over a number of years (which amounted to a significant sum). Rather
than go through a lengthy legal battle and media scrutiny, the company
dismissed him quietly.

Required:
Discuss how good business ethics should come to the fore regarding the ethical
issue that you are faced with in this scenario. (12)

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