Deck 1: The Financial Statements

Question 1

The owners' equity of proprietorships and partnerships is different.

Answer 1

True

Question 2

There are many different stakeholders in Canadian Tire Corporation.Explain why the same information may not be suitable or appropriate for all stakeholders.

Answer 2

Different stakeholders make different decisions that require different information.For example,lenders want to know whether the company will be able to repay its loans but the Canada Revenue Agency (CRA)wants to know the amount of taxes that should be paid for the current year.Much of the information that the lenders would request,such as who are the company's major customers and the amounts they owe the company,would be of no interest to CRA.CRA is simply interested in compliance with the income tax act.

Question 3

Since they are both the same activities,the terms "accounting" and "bookkeeping" are synonymous and can be used interchangeably.

Answer 3

False

Question 4

Canadian Tire is a publicly owned corporation.How does it differ from a privately owned corporation?

Question 5

Accounting is called an information system since it measures business activities,processes data into reports,and communicates results to decision makers.

Question 6

From a legal perspective,sole proprietors,partners and shareholders are personally liable for the debts of their businesses they invest in.

Question 7

What is a not-for-profit organization?

Question 8

Accounting standards for accountants in Canada are established by:

A) the Canadian Institute of Chartered Professional Accountants
B) the Society of Management Accountants of Canada
C) the Certified General Accountants Association of Canada
D) the International Accounting Standards Board

Question 9

Think about the impact accounting has on our economy and our nation.Name some external groups interested in reviewing a company's financial statements.

Question 10

From an accounting viewpoint,a proprietorship is a distinct and separate entity from the proprietor.

Question 11

Which of the following persons or groups have the ultimate control of a corporation?

A) the chief executive officer
B) the board of directors
C) the audit committee
D) the shareholders

Question 12

Financial statements are:

A) reports issued by outside consultants who are hired to analyze key operations of the business
B) reports created by management that states it is responsible for the acts of the corporation
C) standard documents that tell us how well a business is performing and where it stands in financial terms
D) standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms

Question 13

Management accounting is prepared primarily for external users.

Question 14

Accounting is often referred to as "the language of business." Why is accounting described this way? How is accounting different from bookkeeping?

Question 15

One benefit of organizing a business as a proprietorship is that the proprietor is not required to pay income tax on the business' earnings.

Question 16

There are several types of decision makers who use accounting information.List five of these users of accounting information and give an example of a decision each would make.

Question 17

The three forms of business organizations are sole proprietorships,partnerships,and non-profit organizations.

Question 18

The accounting equation can be stated as:

A) Assets + Liabilities = Shareholders' equity
B) Assets = Liabilities + Shareholders' equity
C) Assets = Liabilities - Shareholders' equity
D) Assets + Shareholders' equity = Liabilities

Question 19

Financial accounting information is prepared exclusively for external users.

Question 20

What are the three forms of business organizations? How do they differ?

Question 21

Which of the following financial statements would a potential investor most likely use to evaluate a company's financial performance for the current period?

A) balance sheet
B) income statement
C) cash flow statement
D) retained earnings statement

Question 22

If assets increase $120,000 during a given period and liabilities decrease $25,000 during the same period,shareholders' equity must:

A) increase $95,000
B) decrease $145,000
C) decrease $95,000
D) increase $145,000

Question 23

Expenses are:

A) increases in assets resulting from operations
B) increases in retained earnings resulting from operations
C) increases in liabilities resulting from purchasing assets
D) decreases in retained earnings resulting from operations

Question 24

The balance sheet is sometimes also called the:

A) statement of operations
B) statement of cash position
C) statement of financial position
D) statement of income and expense

Question 25

How do revenues for a period relate to the beginning and ending balances in retained earnings?

A) Revenues will increase the beginning balance of retained earnings for the period.
B) Revenues will decrease the beginning balance of retained earnings for the period.
C) Revenues less expenses will either increase or decrease the beginning balance of retained earnings for the period.
D) Revenues less expenses will either increase or decrease the ending balance of retained earnings for the period.

Question 26

If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period,assets must:

A) decrease $145,000
B) increase $145,000
C) increase $95,000
D) decrease $95,000

Question 27

Dividends:

A) always affect net income
B) are distributions to shareholders of assets (usually cash) generated by net income
C) are expenses
D) must be paid to shareholders when the company earns a profit

Question 28

An investor wishes to assess a company's financial position at the end of the period.Which financial statement would the investor probably examine?

A) the cash flow statement
B) the income statement
C) the balance sheet
D) the statement of retained earnings

Question 29

The cash flow statement is divided into three categories relating to cash flows from operating,investing,and:

A) management planning activities
B) financing activities
C) strategic positioning activities
D) marketing activities

Question 30

Claims held by the shareholders (owners)of a corporation are referred to as:

A) retained earnings
B) share capital
C) share capital minus retained earnings
D) share capital plus retained earnings

Question 31

Which of the following best describes a liability?

A) Liabilities are a form of share capital.
B) Liabilities are future economic benefits to which a company is entitled.
C) Liabilities are accounts receivable of the company.
D) Liabilities are economic obligations to creditors to be paid at some future date by the company.

Question 32

Assets appear on the:

A) balance sheet
B) income statement
C) retained earnings statement
D) cash flow statement

Question 33

To determine a company's gross margin for the period,an investor would look on the:

A) balance sheet
B) cash flow statement
C) income statement
D) statement of retained earnings

Question 34

On January 1,2017,total assets for Liftoff Technologies were $125,000; on December 31,2017,total assets were $145,000.On January 1,2017,total liabilities were $110,000; on December 31,2017,total liabilities were $115,000.What are the amount of the change and the direction of the change in Liftoff Technologies shareholders' equity for 2017?

A) decrease of $15,000
B) increase of $15,000
C) increase of $30,000
D) decrease of $30,000

Question 35

The owners' interest in the assets of a corporation is known as:

A) assets
B) shareholders' equity
C) expenses
D) revenues

Question 36

Retained earnings appear on which of the following financial statements?

A) statement of retained earnings, cash flow statement, and income statement, but not the balance sheet
B) statement of retained earnings and balance sheet, but not the income statement or cash flow statement
C) statement of retained earnings, cash flow statement, and balance sheet, but not the income statement
D) statement of retained earnings and cash flow statement, but not the income statement or balance sheet

Question 37

Shareholders' equity for Raisin Corporation on January 1,2017 and December 31,2017 were $60,000 and $75,000,respectively.Assets on January 1,2017 and December 31,2017 were $115,000 and $105,000,respectively.Liabilities on January 1,2017 were $55,000.What is the amount of liabilities on December 31,2017?

A) $40,000
B) $15,000
C) $30,000
D) $55,000

Question 38

Revenues are:

A) increases in liabilities resulting from delivering goods or services to customers
B) increases in retained earnings resulting from delivering goods or services to customers
C) decreases in assets resulting from delivering goods or services to customers
D) decreases in retained earnings resulting from delivering goods or services to customers

Question 39

Dividends appear on the:

A) retained earnings statement
B) income statement
C) balance sheet
D) both the retained earnings statement and the income statement

Question 40

Receivables are classified as:

A) increases in earnings
B) assets
C) decreases in earnings
D) liabilities

Question 41

Net income is:

A) deducted from beginning retained earnings on the retained earnings statement
B) added to beginning retained earnings on the retained earnings statement
C) added to assets on the balance sheet
D) deducted from net sales on the income statement

Question 42

Common shares appear on the:

A) balance sheet
B) income statement
C) cash flow statement
D) retained earnings statement

Question 43

Operating expenses appear on the income statement:

A) directly after gross margin
B) directly after cost of goods sold
C) directly after revenue
D) do not appear on the income statement

Question 44

Notes receivable due in 60 days would be classified as a:

A) non-current asset on the balance sheet
B) current asset on the balance sheet
C) current liability on the balance sheet
D) non-current liability on the balance sheet

Question 45

What is the proper order for the cash flow statement?

A) financing activities, investing activities, and operating activities
B) operating activities, investing activities, and financing activities
C) operating activities, financing activities, and investing activities
D) investing activities, financing activities, and operating activities

Question 46

Cost of goods sold is:

A) added to sales on the income statement
B) deducted from sales on the balance sheet
C) deducted from sales on the income statement
D) added to sales on the retained earnings statement

Question 47

Common shares is a component of:

A) total assets
B) total liabilities
C) share capital
D) retained earnings

Question 48

Losses are reported on the:

A) income statement
B) balance sheet
C) cash flow statement
D) statement of retained earnings

Question 49

The repayment of a note payable would be classified as a(n):

A) investing activity on a cash flow statement
B) financing activity on a cash flow statement
C) operating activity on a cash flow statement
D) current asset on the balance sheet

Question 50

The ending balance in retained earnings appears on the:

A) balance sheet only
B) balance sheet and statement of retained earnings
C) statement of retained earnings only
D) income statement

Question 51

The date of the income statement:

A) covers one day in time
B) covers a period of time, usually for an accounting period
C) is not dated
D) may cover a period of time or only one day in time, like a snapshot photograph

Question 52

Gains and losses appear on which of the financial statements listed below?

A) the balance sheet
B) the income statement
C) the retained earnings statement
D) the cash flow statement

Question 53

Cash dividends:

A) decrease revenue on the income statement
B) increase expenses on the income statement
C) decrease retained earnings on the retained earnings statement
D) decrease operating activities on the cash flow statement

Question 54

The issuance of shares for cash would be classified as a(n):

A) investing activity on a cash flow statement
B) financing activity on a cash flow statement
C) operating activity on a cash flow statement
D) current asset on the balance sheet

Question 55

The balance sheet contains information about:

A) liabilities, equity, and expenses
B) assets, revenues, and liabilities
C) assets, liabilities, and equity
D) revenues, expenses, and equity

Question 56

Cash received from the issuance of share capital would appear:

A) as an operating activity on the cash flow statement
B) would not appear on a cash flow statement
C) as an investing activity on the cash flow statement
D) as a financing activity on the cash flow statement

Question 57

The main source of cash for a business normally arises from:

A) current assets
B) operating activities
C) financing activities
D) investing activities

Question 58

Which financial statement is based on the accounting equation?

A) statement of retained earnings
B) income statement
C) cash flow statement
D) balance sheet

Question 59

Suppose The Fruit Group buys a kiwi for $.10 and sells the kiwi for $.50.The cost of goods sold would be:

A) $.10
B) $.40
C) $.50
D) $.05

Question 60

Income taxes owed to the federal government would be classified as a:

A) current asset on the balance sheet
B) current liability on the balance sheet
C) non-current asset on the balance sheet
D) financing activity on the cash flow statement

Question 61

The amount of net income shown on the income statement also appears on the:

A) balance sheet
B) statement of assets
C) statement of financial position
D) statement of retained earnings

Question 62

Which of the following financial statements provides a "snapshot photo" of one moment in time?

A) balance sheet
B) income statement
C) statement of retained earnings
D) cash flow statement

Question 63

Which of the following financial statements shows the net increase or decrease in cash during the period?

A) balance sheet
B) income statement
C) statement of retained earnings
D) cash flow statement

Question 64

Cash would appear on the:

A) income statement with the revenues
B) retained earnings statement with the net income
C) balance sheet with the current assets
D) balance sheet with the current liabilities

Question 65

Assets are generally divided into:

A) current assets and solvent assets
B) current assets and reliable assets
C) non-current assets and solvent assets
D) current assets and non-current assets

Question 66

When a repurchase of shares is done by a company it:

A) increases the amount of owners' equity
B) decreases the amount of owners' equity
C) decreases the amount of total liabilities
D) increases the amount of total liabilities

Question 67

Which of the following statements should be prepared before the balance sheet is prepared?

A) statement of retained earnings
B) cash flow statement
C) statement of financial position
D) income statement

Question 68

The statement that presents a summary of the revenues and expenses of an entity is called the:

A) balance sheet
B) cash flow statement
C) statement of retained earnings
D) income statement

Question 69

The payment of the chief financial officer's salary would appear:

A) on the cash flow statement with the operating activities
B) on the balance sheet with the current liabilities
C) on the income statement with the revenues
D) on the income statement as part of cost of goods sold

Question 70

Depreciation is normally associated with which asset on the balance sheet?

A) land
B) accounts receivable
C) inventory
D) equipment

Question 71

Current assets are assets expected to be converted to cash,sold,or consumed:

A) within the next 12 months or within the business's normal operating cycle if less than a year
B) within the next 12 months or within the business's normal operating cycle if longer than a year
C) within the next 6 months
D) within the next 24 months

Question 72

The income statement presents a summary of the:

A) revenues and expenses of an entity for a specific time period
B) assets and liabilities of an entity
C) cash inflows and outflows of an entity
D) changes that occurred in the shareholders' equity of an entity

Question 73

All of the following are considered standard financial statements except the:

A) statement of earnings
B) statement of assets
C) statement of retained earnings
D) cash flow statement

Question 74

Decreases in shareholders' equity result from:

A) owner investments
B) a net loss during the period
C) a net income during the period
D) owner investments and a net loss during the period

Question 75

When accounting for cash collected from customers,the transaction would appear on the cash flow statement as a(an):

A) operating activity
B) financing activity
C) investing activity
D) activity that would not appear on the cash flow statement

Question 76

Increases in shareholders' equity arise from:

A) investments by the owner
B) payment of dividends
C) net income earned during the period
D) both investments by the owner and net income earned during the period

Question 77

Purchases and sales of non-current assets are examples of:

A) investing activities
B) dividend activities
C) financing activities
D) operating activities

Question 78

Cash spent to purchase a new building would appear on the cash flow statement as:

A) a financing activity
B) an operating activity
C) an investing activity
D) a dividend activity

Question 79

Equipment would appear on the:

A) income statement with the revenues
B) balance sheet with the non-current assets
C) balance sheet with the current assets
D) income statement with the operating expenses

Question 80

Accounts payable would appear on the:

A) income statement with the expenses
B) retained earnings statement with the dividends
C) balance sheet with the current assets
D) balance sheet with the current liabilities