Deck 1: Overview of Corporate Financial Reporting

Question 1

Verifiability is one of the fundamental characteristics that make accounting information relevant.

Answer 1

False

Question 2

Which of the following is not a qualitative characteristic of accounting information?

A)Comparability
B)Reliability
C)Liquidity
D)Understandability

Answer 2

C

Question 3

Under IFRS, which of the following characteristics is included in "faithful representation"?

A)Conservatism
B)Predictive value
C)Neutrality
D)Understandability

Answer 3

C

Question 4

The shareholders are an example of an internal user of annual report information.

Question 5

Which of the following statements best describes accounting?

A)An information system in which the underlying economic conditions of organizations are recorded, summarized, and reported.
B)The reports that management prepares for the owners of the company summarizing how the company performed during the period.
C)An information system in which all transactions with the company are accurately reported.
D)The reports that management prepares for use in making decisions related to the financing, investing and operating activities of a company.

Question 6

What is the initial investment by the shareholders in a company called?

A)Owners' capital
B)Shareholders' capital
C)Retained earnings
D)Shareholders' equity

Question 7

Information contained in the financial statements of a company is of use to both internal and external users.

Question 8

Assets and liabilities are listed in the order of their liquidity on both classified and unclassified balance sheets.

Question 9

The shareholders typically elect which of the following to represent their interests:

A)Senior Management
B)Independent Auditors
C)Board of Directors
D)Chief Operating Officer

Question 10

The constraints on the qualities of accounting information are:

A)Comparability and consistency
B)Understandability and neutrality
C)Cost\benefit and materiality
D)Verifiability and timeliness

Question 11

A firm's activities can be divided into borrowing, investing, and operating.

Question 12

Which of the following is an internal user of annual report information?

A)Creditors
B)Board of directors
C)Regulators
D)Shareholders

Question 13

The financial statements of a company are prepared by the auditors.

Question 14

Which of the following is a not characteristic of reliability?

A)Verifiability
B)Neutrality
C)Representational faithfulness
D)Consistency

Question 15

Which of the following is a characteristic of relevance?

A)Timeliness
B)Verifiability
C)Consistency
D)Neutrality

Question 16

Relevant information may have the following kinds of value:

A)Timeliness and materiality
B)Comparability and consistency
C)Verifiability and neutrality
D)Predictive value and confirmatory value

Question 17

Accountants are concerned that the information they provide is both relevant and reliable.

Question 18

What does the CICA use to deductively justify new accounting standards?

A)The notes to the financial statements.
B)The audit report
C)The conceptual framework
D)The CICA Handbook

Question 19

A corporation whose shares are held by a small number of individuals is referred to as a:

A)Proprietorship
B)Publicly traded corporation
C)Small business corporation
D)Privately held corporation

Question 20

Which of the following users is least focused on the corporations debt levels?

A)Suppliers
B)Corporate bondholders
C)Corporate regulators
D)Financial institutions

Question 21

The fundamental types of business activities that a firm typically engages in include all of the following except:

A)Operating
B)Borrowing
C)Investing
D)Financing

Question 22

In 2010 Dowor Ltd.earned gross revenues of $2,500,000 and had net income of $480,000.During 2010 the company had 200,000 common shares outstanding and its average shareholders equity was $1,000,000.Dowor's basic earnings per share for 2010 is:

A)$2.50
B)$2.40
C)$12.50
D)$0.48

Question 23

Which of the following is an example of an operating activity?

A)Paying dividends
B)Sale of investment in other companies' shares
C)Purchase of property, plant, and equipment
D)Payment of interest expense

Question 24

Disclosing the market value of a short-term investment is an example of which of the following characteristics of accounting information?

A)Relevance
B)Timeliness
C)Neutrality
D)Consistency

Question 25

Where would the information about company operations be found?

A)On the income statement.
B)On the balance sheet.
C)In the notes of the financial statements.
D)In the statement of management responsibility.

Question 26

Operating activities include all of the following except:

A)Collections of accounts receivable
B)Payment of tax expense
C)Payment of dividends
D)Payment of interest expense

Question 27

Which of the following is the basic accounting equation?

A)Assets = liabilities - shareholders' equity
B)Assets = liabilities × shareholders' equity
C)Assets = liabilities ÷ shareholders' equity
D)Assets = liabilities + shareholders' equity

Question 28

All of the following can be found on an income statement except:

A)Interest expense
B)Amortization expense
C)Prepaid rent expense
D)Other income

Question 29

Determining the amount of a liability based on a written contract is an example of which of the following characteristics of accounting information?

A)Comparability
B)Neutrality
C)Consistency
D)Verifiability

Question 30

All of the following are investing activities except:

A)Earning interest income
B)Purchasing property, plant, and equipment
C)Purchasing other companies' shares
D)Selling property, plant, and equipment

Question 31

What are the two primary outside sources of funds for a business entity?

A)Creditors and investors
B)Creditors and suppliers
C)Suppliers and shareholders
D)Investors and shareholders

Question 32

Which of the following is the proper order to list current assets on the balance sheet?

A)Cash, short term investments, inventory, prepaid expenses
B)Cash, short-term investments, prepaid expenses, accounts receivable
C)Cash, inventory, accounts receivable, short-term investments
D)Cash, accounts receivable, short-term investments, inventory

Question 33

Reliable information rests on the following fundamental characteristics:

A)Relevance and neutrality
B)Comparability and consistency
C)Cost\benefit and materiality
D)Verifiability and conservatism

Question 34

Which of the following is a typical financing activity?

A)Purchasing property, plant or equipment
B)Purchasing another company's shares
C)Paying interest expense
D)Paying dividends

Question 35

Which of the following is closest to the accounting definition of an asset?

A)Things that have probable future value and the company controls.
B)Things that have certain future value and the company controls.
C)Things that have probable future value and the company owns.
D)Things that have certain future value and the company owns.

Question 36

In which section of the annual report are you likely to find prospective information about a firm?

A)Financial section
B)Summary of industry segments
C)Selected financial data
D)Management Discussion and Analysis

Question 37

Which of the following is not a typical operating activity?

A)Payment of accounts payable
B)Payment of long term notes payable
C)Payment of wages
D)Collection of accounts receivable

Question 38

Which of the following is a typical financing activity?

A)Payment of dividends
B)Payment of interest expense
C)Payment of wages
D)Purchases of inventory

Question 39

The use of a specific accounting method by a company over time is an example of which of the following characteristics of accounting information?

A)Understandability
B)Verifiability
C)Consistency
D)Neutrality

Question 40

Which of the financial statements provides information about the company's financial position?

A)Income statement
B)Balance sheet
C)Statement of cash flows
D)Statement of retained earnings

Question 41

Where in the financial statements would a user find out which accounting policies management has selected to use?

A)Statement of Management Responsibility
B)Notes to the Financial Statements
C)Auditors' Report
D)Management Discussion and Analysis

Question 42

Changes in financial position are reflected on the:

A)Balance sheet
B)Income statement
C)Retained earnings statement
D)Cash flow statement

Question 43

The section of the annual report that establishes whether or not the financial statements are presented in conformity with accounting principles is called the:

A)Summary of industry segments
B)Financial section
C)Independent auditors' report
D)Management's discussion and analysis

Question 44

The change in retained earnings can be calculated as follows:

A)Net income - dividends
B)Net income + dividends
C)Net income - interest
D)Net income + interest

Question 45

Which of the following statements is true?

A)The market value and the book value of a company's shareholders' equity are usually the same.
B)The market value is usually less than the book value of a company's shareholders' equity.
C)The market value is usually more than the book value of a company's shareholders' equity.
D)The value of the shareholders' equity on the balance sheet is based on the value of the company's shares in the market.

Question 46

Liabilities that have been incurred but are not yet due, are called:

A)Accrued liabilities
B)Current liabilities
C)Long-term liabilities
D)Noncurrent liabilities

Question 47

The starting point in the operating activities section of the cash flow statement is:

A)Sales revenue
B)Retained earnings
C)Beginning cash balance
D)Net income

Question 48

The retained earnings account is:

A)Reduced by net income earned and increased by dividends declared during the period.
B)Reduced by both net income earned and dividends declared during the period.
C)Increased by both net income earned and dividends declared during the period.
D)Increased by net income earned and decreased by any dividends declared in the period.

Question 49

Dividends are paid when approved by the:

A)Board of directors
B)Management
C)Shareholders
D)Creditors

Question 50

Which of the following are the two components of Shareholders' equity?

A)Dividends and retained earnings
B)Share capital and retained earnings
C)Share capital and net income
D)Net income and dividends

Question 51

If a company operates in more than one significant segment they must disclose segmented information in the notes of the financial statements.What is the purpose of the segmented information?

A)To aid competitors in understanding the business.
B)To aid the user in assessing the overall risk of the company.
C)To aid in the preparation of consolidated financial statements.
D)To aid the user in assessing the liquidity of the company.

Question 52

In which section of the annual report does management comment on the company and its operating results?

A)Report to the shareholders
B)Management's discussion and analysis
C)Corporate profile
D)Selected financial data

Question 53

The portion of a 10 year loan that is payable within this operating cycle is classified as:

A)interest expense
B)current liability
C)long term liability
D)note payable

Question 54

When the financial statements do not present fairly the financial position, results of operations, or cash flows of an entity in conformity with generally accepted accounting principles, the auditor should issue an):

A)Unqualified opinion
B)Disclaimer of opinion
C)Disqualified opinion
D)Adverse opinion

Question 55

On the statement of cash flows, the repayment of long-term obligations would be considered:

A)A financing activity
B)An investing activity
C)An operating activity
D)A reduction in a liability

Question 56

Which of the following is a section found in the statement of cash flows?

A)Cash from lending activities
B)Cash from shareholder activities
C)Cash from financing activities
D)Cash from borrowing activities

Question 57

When the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of an entity in conformity with generally accepted accounting principles, the auditor should issue an):

A)Adverse opinion
B)Explanatory language opinion
C)Qualified opinion
D)Clean opinion

Question 58

The following are all types of professional accountants in Canada except?

A)CA -Chartered Accountants
B)CGA - Certified General Accountants
C)CFA - Chartered Financial Accountants
D)CMA - Certified Management Accountants

Question 59

Which of the following is the most common type of audit opinion?

A)Fair opinion
B)Adverse opinion
C)Unqualified opinion
D)Qualified opinion

Question 60

The following information is not found on the income statement:

A)EPS
B)Amortization expense
C)Future income taxes
D)Cost of goods sold