Question 1

Which one of the following is most likely organized as a public corporation?

Accepted Answer

International Tire Inc. is more likely to be organized as a public corporation as it is a larger company that sells products to the public, compared to the other options that are likely to be private businesses or government organizations.

Question 2

You have decided to spend $75 on a "Guide to Caribbean Cruises" before booking your winter cruise holiday.This is an example of which of the following principles?

Accepted Answer

This decision reflects the cost/benefit trade-off principle because the person has weighed the cost of the guidebook against the potential benefits of making an informed decision when booking their winter cruise holiday.

Question 3

The cost-benefit trade-off is best summarized as:

Accepted Answer

The cost-benefit trade-off refers to the idea that before taking any action, it is best to weigh the benefits of that action against the costs associated with it. This allows individuals or organizations to make informed decisions and determine whether the benefits of the action outweigh the costs. Measuring costs and benefits solely in dollars (choice B) is a common way of quantifying these values, but not the only one. Recording all necessary costs to obtain the desired benefits (choice C) is important, but does not capture the trade-off aspect of the concept. Finally, ensuring that costs are always equal to benefits (choice D) is not the goal - rather, the goal is to determine whether the benefits justify the costs or not.

Question 4

Which of the following is the most attractive feature of a proprietorship?

Accepted Answer

Proprietorships are easy and inexpensive to set up, which is why they are a popular choice for small businesses.

Question 5

The CICA is the governing organization of chartered accountants in Canada.What is the most likely form of organization of the CICA?

Accepted Answer

The CICA is a not-for-profit organization, as its main purpose is to represent and regulate the accounting profession in Canada rather than to generate profits for shareholders or owners.

Question 6

Which of the following users would rely on management accounting information?

Accepted Answer

Management accounting information is primarily used by managers within an organization to aid in decision-making and planning. Taxation authorities, lenders, and investors may rely on financial accounting information, which is focused on reporting an organization's financial performance to external stakeholders.

Question 7

What are the owners of a corporation called?

Accepted Answer

The owners of a corporation are called shareholders, as they own shares of the company which give them certain rights, such as the right to vote on important decisions and the right to receive a portion of the profits in the form of dividends. Auditors are professionals who audit the company's financial statements, stakeholders are individuals or groups who have a vested interest in the success of the company (such as employees, customers, and suppliers), and managers are individuals who are responsible for running the day-to-day operations of the company.

Question 8

Why is it impossible for a single accounting report to be appropriate for all situations?

Accepted Answer

The diverse accounting environment in which entities operate leads to different reporting requirements and needs for different users. Different industries, countries, and even companies may have varying regulations and standards that affect the content and format of their accounting reports. Therefore, a single accounting report cannot be appropriate for all situations.

Question 9

Which type of organization files a business tax return?

Accepted Answer

Only a corporation files a business tax return. Proprietorships and partnerships do not file separate tax returns, as the income of these businesses is reported on the owner's personal tax return. Government entities do not file business tax returns, as they are tax-exempt.

Question 10

Which of the following is the most important feature of a corporation?

Accepted Answer

Limited liability is the most important feature of a corporation because it shields the shareholders from personal liability for the debts and actions of the corporation. This means that the shareholders' personal assets are protected, and they can only lose the amount of money they have invested in the corporation.

Question 11

James and Nicholas are roommates at university and plan to run a painting business for the summer.Which is the most likely form of organization of their business?

Accepted Answer

James and Nicholas are two individuals who are planning to run a business together. Hence, the most likely form of organization for their business is a partnership. A proprietorship would be suitable if only one of them will own and run the business, while a corporation is more complex and involves many shareholders. An income trust is not a form of organization, but rather a type of investment vehicle.

Question 12

Which of the following statements about private corporations is true?

Accepted Answer

Private corporations are not publicly traded, and their shares are not available for sale to the general public unless the shareholders agree. They may have multiple shareholders, but they are not required to disclose their financial information to the public like public corporations. Proprietorships are different from private corporations in that they are owned by a single individual and do not have separate legal status.

Question 13

What type of organization trades its shares on the Toronto Stock Exchange?

Accepted Answer

Public corporations are the type of organizations that trade their shares on the Toronto Stock Exchange. These are companies that have issued shares to the public and are therefore owned by many different shareholders.

Question 14

What are the four key components of the accounting environment?

Accepted Answer

Entities, constraints, stakeholders, and environmental factors are the four key components of the accounting environment.

Question 15

An unincorporated entity operated by two or more people is what form of business?

Accepted Answer

An unincorporated entity operated by two or more people is traditionally known as a partnership.

Question 16

Which of the following statements about users of financial accounting information is true?

Accepted Answer

Users of financial accounting information are typically external parties such as investors, creditors, analysts, and regulatory agencies who rely on the information to make decisions about the entity. Preparers of financial statements are typically internal employees who compile the financial information for presentation to external users. These external users do not have direct access to the information and rely on the financial statements to provide an accurate representation of the entity's financial performance and position.

Question 17

A new shareholder of a small company is concerned about being able to adequately monitor their investment and has asked management to provide them with weekly financial statements.From the company's point of view this would violate which of the following concepts?

Accepted Answer

The request for weekly financial statements would involve additional costs for the company for the preparation and dissemination of the statements. The company would need to weigh the cost/benefit trade-off of fulfilling this request. It does not violate privacy or IFRS, and reliability is not directly related to this situation.

Question 18

Financial accounting would be used to make which of the following decisions?

Accepted Answer

Financial accounting provides information on the financial health and performance of a company that would be useful for investors in deciding whether to invest in the company or not. Decisions such as expansion and pricing would require managerial accounting information while determining successful products would require both financial and managerial accounting information.

Question 19

After completing an accounting course Jessica decided to offer her services as a bookkeeper to friends and neighbours.What is the most likely form of organization of her business?

Accepted Answer

Since Jessica is offering her services on her own to her friends and neighbors, it is most likely that she will set up a proprietorship, which is the simplest form of business organization that is owned and operated by a single individual. In a proprietorship, the owner is responsible for all the assets and liabilities of the business.

Question 20

Which of the following types of organization includes all of the business's income in the owner's personal tax return?

Accepted Answer

A proprietorship is a type of business where the owner is the sole proprietor and therefore all the business's income is included in the owner's personal tax return. This is because the business and the proprietor are considered the same entity for tax purposes. Income trusts are not organizations, but rather a type of investment vehicle. Private and public corporations have a separate legal identity from their owners and pay taxes separately.

Quiz 1: The Accounting Environment: What Is Accounting and Why Is It Done