Deck 1: Accounting in Business

Question 1

Accounting information is only relevant for people in business

Answer 1

False

Question 2

Limited liability is a key consideration as to why corporations can raise resources fromshareholders.

Answer 2

True

Question 3

Ownership of a corporation is divided into units called shares

Answer 3

True

Question 4

Internal controls include procedures to protect assets and prevent fraud

Question 5

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

Question 6

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

Question 7

"Bookkeeping" is another term for "accounting"

Question 8

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

Question 9

A partnership is a business owned by two or more people

Question 10

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

Question 11

Managerial accounting is an area of accounting that provides internal reports to assistthe decision-making needs of internal users.

Question 12

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

Question 13

External users include creditors, shareholders, suppliers, and lawyers

Question 14

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

Question 15

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

Question 16

The primary objective of accounting is to help people make better decisions

Question 17

Career opportunities in accounting include auditing, forensic accounting, and taxplanning.

Question 18

Accounting is an information system that identifies, measures, records and 1)communicates relevant information that faithfully represents an organization's economic activities.

Question 19

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

Question 20

Internal users include creditors, shareholders, internal auditors and managers

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

Ethics and laws often differ

Question 31

The Canadian accounting profession was recently united and grants the CharteredProfessional Accountant (CPA)designation.

Question 32

To perform public accounting tasks, accountant must be licenced by their professional bodies in the province within which they work.

Question 33

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

Question 34

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 35

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

Question 36

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

Question 37

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

Question 38

Private accountants work for several employers

Question 39

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

Question 40

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

Question 41

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

Question 42

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 43

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

Question 44

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

Question 45

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 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

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

Question 62

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

Question 63

Net income is equal to the change in equity due to operating activities over a period oftime.

Question 64

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 65

Equity is increased by owner investments, net income and withdrawals

Question 66

A loss arises when revenues are higher than expenses

Question 67

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

Question 68

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

Question 69

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

Question 70

Withdrawals represent distributions from a corporation to its owners

Question 71

A characteristic of liabilities is their capacity to reduce future assets

Question 72

The equity in a partnership belongs to one owner

Question 73

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

Question 74

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

Question 75

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

Question 76

Business transactions are exchanges of economic consideration between two parties

Question 77

Liabilities represent non-owner financing

Question 78

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

Question 79

Dividends represent distributions of profits to the partners of a business

Question 80

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