Deck 1: Accounting in Business

Question 1

Non-business organizations often operate educational and religious services for profit.

Answer 1

False

Question 2

Recordkeeping" is another term for "accounting".

Answer 2

False

Question 3

Internal operating functions include research and development, distribution, and human resources.

Answer 3

True

Question 4

Internal controls include procedures to protect assets and prevent fraud.

Question 5

Budgeting is the process of developing formal plans for an organization's future activities.

Question 6

Although a proprietorship is not a separate legal entity, a partnership is.

Question 7

A partnership requires no special legal requirements to start, other than to register the business name and obtain a business licence.

Question 8

External users include lenders such as banks, and other creditors such as suppliers and bondholders.

Question 9

Ownership of a corporation is divided into units called shares.

Question 10

Career opportunities in accounting include auditing, forensic accounting, and tax planning.

Question 11

Accounting information helps people make better decisions about the performance of a business.

Question 12

Sole proprietorships and partnerships are not subject to income tax in Canada.

Question 13

A corporation is responsible for its actions and any debts incurred. It can enter into its own contracts, and it can buy, own, and sell property.

Question 14

A sole proprietorship is a business owned by one or more persons.

Question 15

The main objective of accounting is to help people to invest in new products and businesses.

Question 16

Internal users include creditors, shareholders, internal auditors and managers.

Question 17

In the partnership form of business, the owners of a business are called shareholders.

Question 18

Accounting is an information system that identifies, measures, records and communicates relevant information that objectively and correctly represents an organization's economic activities.

Question 19

Managerial accounting provides special-purpose reports customized to meet the information needs of internal users.

Question 20

Unlimited liability is an advantage for both a proprietorship and a partnership.

Question 21

The Accounting Standards Board (AcSB), is the body that developed accounting standards for private enterprises (ASPE).

Question 22

The preferred ethical path is to take a course of action that avoids casting doubt on one's decisions.

Question 23

Ethics and social responsibility are incidental to the primary functions of accounting.

Question 24

The purpose of an audit is to add credibility to the financial statements.

Question 25

Ethical practices are not necessary to build trust and long-term relationships with customers.

Question 26

At the request of the Board of Directors, internal auditors perform the audit function to protect shareholder interests.

Question 27

International Accounting Standards have been created to improve comparability of accounting information across countries.

Question 28

Internal auditors perform the audit at the request of the board of directors to protect investor interests.

Question 29

Verifiability ensures that information is complete, neutral and free from error.

Question 30

The Accounting Standards Board (AcSB), is the body that developed the International Financial Reporting Standards.

Question 31

Social responsibility is concern for the impact of our actions on society as a whole.

Question 32

The primary purpose of Generally Accepted Accounting Principles is to ensure the usefulness of financial information.

Question 33

Private enterprises are all required to report using International Financial Reporting Standards (IFRS).

Question 34

Private accountants work for several employers.

Question 35

The currency principle means that transactions are expressed using units of money as the common denominator.

Question 36

The Historical cost principle states that if no cash is involved in a transaction the cash-equivalent value must be used.

Question 37

In Canada, Chartered Professional Accountants of Canada is the national organization that has been established to train and monitor its highly qualified professionals.

Question 38

The underlying concepts that make up acceptable accounting practices are referred to as generally accepted accounting principles (GAAP).

Question 39

Ethics and laws often differ.

Question 40

The assumption that a business will continue to operate until it can sell its assets to pay its creditors underlies the going concern principle.

Question 41

Financial statements are an organization's primary means of financial communication and are the end result of a process, or a cycle, which begins with a business transaction like a sale.

Question 42

The natural business year for businesses is always the same as the calendar year.

Question 43

According to the historical cost principle, it is acceptable for managers to use their own estimate of an asset's value when recording the purchase.

Question 44

Liabilities are defined as "the residual interest in the assets of an entity that remains after deducting its equity".

Question 45

Profit is the excess of expenses over revenues, whereas net loss is the excess of revenues over expenses.

Question 46

The primary qualitative characteristics of financial information are relevance and faithful representation.

Question 47

As a rule, revenues should not be recognized in the accounting records until received in cash.

Question 48

The legitimate claims of a business's creditors take precedence over the claims of the business owner or owners.

Question 49

The statement of cash flows measures the net effect of revenues and expenses for a specified period.

Question 50

A company that is currently in the process of liquidating is considered to be a going concern.

Question 51

A balance sheet covers a period of time such as a month or year.

Question 52

The business entity principle requires that an owner keep accounting records separate from personal records or records of any other businesses owned.

Question 53

A liability expressed by a written promise to make a future payment is usually called an account payable.

Question 54

The income statement is a financial statement that shows revenues earned and expenses incurred by a business over a specified period of time.

Question 55

The conceptual framework summarizes the qualitative characteristics and supportive building blocks that are required to prepare financial information.

Question 56

A characteristic of assets is their ability to provide current benefits to the business.

Question 57

Revenues are the value of assets exchanged for products or services provided to customers as part of the major operations of the business.

Question 58

The balance sheet shows whether or not the firm achieved its primary objective of earning a profit.

Question 59

Expenses are costs incurred or the using up of assets from generating revenue.

Question 60

The balance sheet is also called the statement of financial position because it shows the financial position of the business on a particular date.

Question 61

Transactions that impact only assets do not require the accounting equation to stay in balance.

Question 62

Equity is increased by owner investments, profit and withdrawals.

Question 63

The equity in a partnership belongs to one owner.

Question 64

Profit on the income statement results in an increase in equity on the balance sheet due to profitable operating activities over a period of time.

Question 65

The first section of the income statement reports cash from operating activities.

Question 66

Chuck Taylor invested $8,000 in cash in FastForward. This amount would be reported in the statement of cash flows under financing.

Question 67

The accounting equation is the link between a company's assets, liabilities and equity.

Question 68

Dividends represent distributions of profits to the partners of a business.

Question 69

A loss arises when revenues are higher than expenses.

Question 70

The accounting equation can be restated as assets - equity = liabilities.

Question 71

Although, in a sole proprietorship, owner investments are not recorded as revenue, any withdrawals are recorded as expenses.

Question 72

A characteristic of liabilities is their capacity to reduce future assets.

Question 73

Individuals and organizations who own the right to receive payments from a business are called its debtors.

Question 74

The balance sheet can be used in order to assess the creditworthiness of potential customers.

Question 75

Liabilities represent non-owner financing.

Question 76

An owner's cash investment in a business creates an asset (cash), a liability (note payable), and equity (owner investments).

Question 77

Chuck Taylor withdrew $6,000 in cash for his personal use from his business. This amount should be included as an expense on the income statement.

Question 78

Equity is increased when cash is received from customers in payment of a previously recorded accounts receivable.

Question 79

Withdrawals represent distributions from a corporation to its owners.

Question 80

The financing side of the accounting equation describes where the assets came from.