Deck 1: Accounting in Business

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

External users include creditors,shareholders,suppliers,and lawyers.

Question 5

Internal controls include procedures to protect assets and prevent fraud.

Question 6

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

Question 7

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

Question 8

A partnership is a business owned by two or more people.

Question 9

Ownership of a corporation is divided into units called shares.

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

Accounting information is only relevant for people in business.

Question 15

"Bookkeeping" is another term for "accounting".

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

The professional designation "CGA" stands for "Chartered General Accountant".

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

Private accountants work for several employers.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

Ethics and laws often differ.

Question 41

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

Question 42

Equity is increased by owner investments,net income and withdrawals.

Question 43

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

Question 44

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

Question 45

A loss arises when revenues are higher than expenses.

Question 46

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

Question 47

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 48

Withdrawals represent distributions from a corporation to its owners.

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

The equity in a partnership belongs to one owner.

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

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

Question 62

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 63

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

Question 64

Business transactions are exchanges of economic consideration between two parties.

Question 65

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

Question 66

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

Question 67

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

Question 68

The purchase of supplies for cash impacts both the investing and financing sides of the accounting equation.

Question 69

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

Question 70

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

Question 71

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

Question 72

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 73

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

Question 74

Liabilities represent non-owner financing.

Question 75

Business events do not affect the accounting equation.

Question 76

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

Question 77

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

Question 78

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

Question 79

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

Question 80

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