Accounting & Auditing
Branches of Accounting
Which statement about tax accounting is correct?
A. It may use rules different from financial accounting
B. It must always equal financial accounting profit
C. It applies only to individuals
D. It ignores legislation
Correct Answer: A
Tax rules may differ significantly from financial reporting standards.
Accounting & Auditing
Branches of Accounting
Which professional task would most likely fall under tax accounting?
A. Determining audit sample size only
B. Designing a factory layout
C. Advising on tax consequences of a business transaction
D. Preparing a social impact score only
Correct Answer: C
Tax accountants analyze tax consequences and compliance obligations.
Accounting & Auditing
Branches of Accounting
Deferred tax arises mainly from:
A. Only dividend policy
B. Only project budgets
C. Differences between accounting and tax bases or timing of recognition
D. Only cash theft
Correct Answer: C
Temporary differences can create deferred tax assets or liabilities under applicable reporting rules.
Accounting & Auditing
Branches of Accounting
Which branch is most concerned with calculating current tax liability?
A. Tax accounting
B. Project accounting
C. Human resource accounting
D. Fiduciary accounting
Correct Answer: A
Tax accounting determines liabilities under tax law.
Accounting & Auditing
Branches of Accounting
Tax evasion is:
A. A required accounting method
B. The same as lawful tax planning
C. Illegal
D. A cost accounting technique
Correct Answer: C
Tax evasion involves unlawful avoidance or concealment of tax liabilities.
Accounting & Auditing
Branches of Accounting
Tax planning aims to:
A. Evade taxes illegally
B. Arrange transactions lawfully to manage tax consequences
C. Ignore tax law
D. Replace financial statements
Correct Answer: B
Legitimate tax planning seeks lawful and efficient tax outcomes.
Accounting & Auditing
Branches of Accounting
Which task is most closely associated with tax accounting?
A. Preparing a production variance report
B. Issuing an audit opinion
C. Preparation of income tax returns
D. Managing a trust
Correct Answer: C
Tax return preparation is a core tax accounting activity.
Accounting & Auditing
Branches of Accounting
Taxable income may differ from accounting profit because:
A. Tax accounting ignores expenses
B. Tax rules and financial reporting rules may recognize items differently
C. Financial accounting ignores revenue
D. They are always legally identical
Correct Answer: B
Different recognition and measurement rules can create permanent or temporary differences.
Accounting & Auditing
Branches of Accounting
Tax accounting is primarily governed by:
A. Only audit sampling rules
B. Applicable tax laws and regulations
C. Only production standards
D. Only management preferences
Correct Answer: B
Tax accounting applies the tax law of the relevant jurisdiction.
Accounting & Auditing
Branches of Accounting
Cost accounting can serve both:
A. Only trustees
B. Internal decision needs and certain external inventory-costing requirements
C. Only tax courts
D. Only external investors
Correct Answer: B
Cost information is used internally and may also support external inventory measurement.
Accounting & Auditing
Branches of Accounting
Which statement best describes the relationship between cost accounting and management accounting?
A. Cost accounting supplies important cost information used by management accounting
B. Management accounting is narrower than bookkeeping
C. Cost accounting is only for tax authorities
D. They are completely unrelated
Correct Answer: A
Cost accounting is a major information source for management planning and decisions.
Accounting & Auditing
Branches of Accounting
A sunk cost is usually:
A. Irrelevant to a future decision because it has already been incurred
B. Always a variable cost
C. A tax credit
D. A future avoidable cost
Correct Answer: A
Sunk costs cannot be changed by current decisions.
Accounting & Auditing
Branches of Accounting
Which cost generally remains constant in total within a relevant range for a period?
A. Variable cost
B. Sales commission
C. Direct material cost per total output
D. Fixed cost
Correct Answer: D
Fixed cost remains constant in total within the relevant range, though per-unit fixed cost changes.
Accounting & Auditing
Branches of Accounting
Which cost changes in total as activity changes, within the relevant range?
A. Sunk cost necessarily
B. Fixed cost
C. Committed cost necessarily
D. Variable cost
Correct Answer: D
Variable costs change in total in relation to activity.
Accounting & Auditing
Branches of Accounting
A cost object is:
A. Only a bank account
B. Only a tax return
C. Only a legal document
D. Anything for which a separate measurement of cost is desired
Correct Answer: D
Products, services, projects, departments, customers, or activities can be cost objects.
Accounting & Auditing
Branches of Accounting
Which branch is especially useful in determining the cost of a contract, batch, or process?
A. Cost accounting
B. Tax accounting
C. Environmental accounting only
D. Fiduciary accounting
Correct Answer: A
Cost accounting includes methods tailored to jobs, batches, contracts, processes, and services.
Accounting & Auditing
Branches of Accounting
Activity-based costing assigns overhead using:
A. Bank interest rates
B. Only direct labor hours in every case
C. Activities and cost drivers
D. Tax brackets
Correct Answer: C
ABC traces overhead through activities and cost drivers.
Accounting & Auditing
Branches of Accounting
Cost reduction differs from cost control because cost reduction seeks:
A. A real and sustainable decrease in unit cost without impairing required quality
B. Only higher selling prices
C. Only changes in tax rates
D. Only temporary budget cuts
Correct Answer: A
Cost reduction seeks permanent efficiency improvements rather than merely adherence to standards.
Accounting & Auditing
Branches of Accounting
Cost control aims to:
A. Ignore standards
B. Keep costs within planned or acceptable limits
C. Replace all budgets
D. Eliminate every cost regardless of benefit
Correct Answer: B
Cost control compares actual performance with plans and takes corrective action.
Accounting & Auditing
Branches of Accounting
Which branch is most directly concerned with cost centers and cost units?
A. Financial accounting only
B. Cost accounting
C. Fiduciary accounting
D. Tax accounting
Correct Answer: B
Cost centers and cost units are core cost accounting concepts.