MG1600 – Seminar questions- Chapter 1

1. Which of the following entities has an ownership interest that is divided into individual
shares and profits, distributed to owners by means of the payment of dividends?
(a) A school in state ownership.
(b) A partnership.
(c) A limited company.
(d) A sole trader.

2. A company incorporated under the Companies Act has a legal obligation to supply
annual accounts to which of the following?
(a) its customers.
(b) its employees.
(c) its shareholders.
(d) its suppliers.

3. Which of the following statements is/are correct?

(i) Shareholders of a company appoint the directors of that company.
(ii) The shares of all limited companies are listed on the Stock Exchange.
(iii) Directors exercise day-to-day control of a company's affairs.
(iv) Companies do not make accounting information available to the public.

Is it?
(a) (iv) only.
(b) (iii) only.
(c) (i) and (iii) only.
(d) (ii) and (iv) only.

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4. An investor has bought shares in a limited liability company. The business
subsequently fails and is unable to pay employees’ wages or government tax bills.
Which of the following statements is correct?
(a) The investor cannot recover the amount invested in the shares.
(b) The investor must contribute to the shortfall in wages.
(c) The investor must contribute to the unpaid tax bills.
(d) The investor can claim the value of the investment from a limited liability
compensation fund.

5. Legal disclosure requirements imposed on limited companies act primarily to

safeguard the interests of:
(i) employees.
(ii) the general public.
(iii) shareholders.
(iv) long term lenders.

Which of the above is/are correct?

(a) (i), (ii) and (iii) only.
(b) (i), (ii) and (iv) only.
(c) (ii) and (iv) only.
(d) (iii) and (iv) only.

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6. Accounting is the process of identifying, measuring and ……………………. financial
information about an entity to permit informed judgements and decisions by users of the
information.
Which of the following words completes this definition of accounting?
(a) Translating.
(b) Communicating.
(c) Extracting.
(d) Summarising.

7. Which of the following are forms of limited liability companies?

(i) Sole trader limited companies.
(ii) private limited companies.
(iii) public limited companies.

Is it
(a) i only.
(b) ii only.
(c) i and ii.
(d) ii and iii.

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8. Which of the following statements about partnerships is/are correct?
(i) Partnership agreements must be in writing.
(ii) Partnerships are obliged to make accounting information available to the public.
(iii) Only some of the partners are entitled to share in the running of the business.

Is it
(a) i and ii.
(b) ii and iii.
(c) i and iii.
(d) None of these.

9. Which of the following statements about a limited company is/are correct?

(i) There is no upper limit to the number of shareholders.
(ii) Companies make information available through the Registrar of Companies.
(iii) The company is seen by law as a separate person, distinct from its members.

Is it
(a) i and ii.
(b) ii and iii.
(c) i and iii.
(d) All of these.

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10. Which of the following statements about a public limited company is correct?
(i) It must have a minimum of 5 directors.
(ii) It may offer its shares to the public.
(iii) There is no minimum share capital.

Is it
(a) i.
(b) ii.
(c) iii.
(d) None of these.

11. Which of the following statements about users of accounting information is correct?
(i) Most of the investment in shares through the stock exchange in the UK is carried out
by individual investors.
(ii) Lenders are primarily interested in the short term profitability.
(iii) HM Revenue and Customs (formerly Inland Revenue) is limited to the information
appearing in published financial statement when assessing how much tax the company
must pay.

Is it
(a) i.
(b) ii.
(c) iii.
(d) None of these.

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12. The view taken in agency theory is that there is an inherent conflict between the
……………, as principals and the managers, as agents and so they spend time
agreeing contracts which will minimise the conflict.
Which of the following is the missing word in the above statement?
(a) Government.
(b) Owners.
(c) Employees.
(d) Lenders.