Question 1

The sole trader form of business organisation:

a. is classified as a separate legal entity.

b. combines the records of the business with the personal records of the owner.

c. must apply for an Australian Business Number.

d. must have at least two owners.

e. None of the above.


Question 2
It is true that a company:

a. has limited liability.

b. is one of the easiest types of business entities to set up.

c. is less risky to supply goods or services to than a partnership.

d. A and C.

e. all of the above are true.


Question 3

A business which is a separate legal entity can be a:

a. sole trader.

b. partnership.

c. company.

d. none of the above.

e. all of the above.


Question 4

An advantage of the company form of business is that:

a. it has a limited life.

b. its owner's personal resources are at stake.

c. its ownership is transferable through the sale of shares.

d. it is simple to establish.

e. none of the above.


Question 5

A company has which of these set of characteristics?

a. Harder to raise funds and gives the owner full control

b. Shared control, tax advantages for family members, limited life

c. Simple to set up and control will always remain with the founder

d. Easier to transfer ownership and raise funds, and no personal liability

e. None of the above


Question 6

A partnership has which of these set of characteristics?

a. Harder to raise funds and gives the owner full control.

b. Shared control, tax advantages for family members, increased skills and
resources.

c. Simple to set up but increased government regulation.

d. Easier to transfer ownership and raise funds, and no personal liability.

e. None of the above.


Question 7

Dividends paid are reported on the:

a. Income statement

b. Retained earnings statement

c. Balance sheet

d. All of the above

e. None of the above



Question 8

Dividends paid:

a. increase assets.

b. increase expenses.

c. decrease income.

d. decrease retained earnings.

e. None of the above



Question 9

Resources owned by a business are referred to as:

a. assets.

b. income.

c. equity.

d. liabilities.

e. A and C











Question 10

Retained earnings at the end of the period is equal to:

a. assets plus liabilities.

b. profit earned for the period plus retained earnings at the start of the period.

c. retained earnings at the beginning of the period plus profit earned for the period minus dividends.

d. retained earnings at the beginning of the period plus profit earned for the period minus liabilities.

e. None of the above


Question 11

Which financial statement must be prepared before others can be completed?

a. Statement of cash flows

b. Income statement

c. Balance sheet

d. Statement of financial position

e. All are prepared at the same time


Question 12

An additional expense in a company's income statement compared to a partnership is:

a. Income tax expense

b. Dividends paid

c. Depreciation

d. Earnings per share

e. A and B



Question 13

Which of these is the most numerous type of company registered in Australia?

a. A proprietary company limited by shares

b. A public company limited by shares

c. A public company limited by guarantee

d. An unlimited public company

e. A public No-liability company


Question 14

Under the Corporations Act which of these tests is not one that must be met for a company to be considered a
small proprietary company?
a. Consolidated gross operating revenue of less than $10 million

b. Consolidated gross liabilities of less than $1 million

c. Less than 50 employees


d. Consolidated gross assets less than $5 million

e. None of the above, i.e. all are tests that must be considered

Question 15

A partnership is a business organised as a separate legal entity that is owned by a number of shareholders.

a. True

b. False



Question 16

A company can retain profits in its own name because of its separate accounting entity status.

a. True

b. False



Question 17

Company shareholders, whose shares are fully paid, have no personal liability for company debts.

a. True

b. False



Question 18

If the assets owned by a business total $50000 and the liabilities total $37000 equity must equal $87000.

a. True

b. False



Question 19

For accounting purposes a sole trader does not need to keep business and personal transactions separate.

a. True

b. False



Question 20

Private companies in Australia must have at least two shareholders.

a. True

b. False


Question 21

An advantage of the company form of organisation is the unlimited liability of its shareholders.

a. True

b. False


Question 22

One of the advantages of a partnership compared to a company is the ease with which partnerships can be set up.

a. True

b. False



Question 23

Private companies are generally smaller than public companies.

a. True

b. False



Question 24

Small proprietary companies are not generally required, under the Corporations Act, to prepare annual financial
reports.
a. True

b. False



Question 25

In Australia a private company will pay less income tax on an income of $20,000 than a sole trader.

a. True

b. False



Question 26
The main advantages of trusts are tax benefits and limited liability.

a. True

b. False



Question 27

An advantage of a company is that the directors have limited liability.

a. True

b. False



Question 28

An advantage of the partnership form of organisation is mutual agency.

a. True

b. False




Question 29

Shareholders in companies decide at their annual general meeting on the amount of dividends they want to be
paid for the year.
a. True

b. False



Question 30

A business that is owned by shareholders and is a separate legal entity is a _______________.

Answer: company