Deck 1: Accounting in Action

Question 1

One of the main advantages of a corporation is the limit of liability for the shareholders of the company.

Answer 1

True

Question 2

A corporation may only be formed under the federal legislation.

Answer 2

False

Question 3

One of the disadvantages of a proprietorship is that there is unlimited liability for the owner.

Answer 3

True

Question 4

Ethics are critical in the preparation of accounting information.

Question 5

Employees are an example of an external user.

Question 6

The main objective of financial statements is to provide useful information to management.

Question 7

A corporation may be formed under either the provincial legislation or the federal legislation.

Question 8

In a proprietorship, there may be 2 or more owners.

Question 9

Accounting is the information system that identifies, records, and communicates the economic events of an organization to a wide variety of interested users.

Question 10

A corporation's ownership is divided into transferable shares.

Question 11

An advantage of the corporation is that the shares of the corporation are easily transferable.

Question 12

A partnership must have at least 2 people in the partnership.

Question 13

Under the proprietorship form of business organization, no distinction is made between the business as an economic unit and its owner.

Question 14

In a partnership, all of the partners will generally have unlimited liability for the debts of the partnerships.

Question 15

A working knowledge of accounting can be useful to doctors or lawyers.

Question 16

Accounting information is used only by external users with a direct financial interest in a company.

Question 17

A corporation is only subject to the federal laws of corporations.

Question 18

In a situation with an ethical consideration, there is only one ethical course of action which can be followed.

Question 19

Creditors are an example of an internal user of accounting information.

Question 20

Only the accountants should be concerned with ethics when the financial statements are being prepared.

Question 21

Liabilities are the resources owned by a business that are expected to provide future services or benefits.

Question 22

The economic entity concept requires that an entity's business activities be combined with the activities of its owner for financial reporting purposes.

Question 23

A private company is one that issues shares to the public.

Question 24

A balance sheet reports the assets, liabilities, and owner's equity at a specific date.

Question 25

A balance sheet presents the revenues and expenses, and the resulting profit or loss for a specific period of time.

Question 26

Accounts payable is the asset created when a company sells services or products to customers who promise to pay cash in the future.

Question 27

Assets are current obligations, arising from past events, to make a future payment or to provide services.

Question 28

In Canada, the main standard setting board is the Accounting Standards Board.

Question 29

Owner's claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

Question 30

Expenses are the costs of assets that are consumed or services used in the ordinary business activities.

Question 31

An income statement will give the answer to the question - "where did all the cash get used during this month?"

Question 32

Publicly Traded Corporations can choose to report under either ASPE or IFRS.

Question 33

Companies incorporated under provincial legislation report under ASPE and companies incorporated under federal legislation report under IFRS.

Question 34

Both IFRS and ASPE are considered "principles-based" as opposed to "rules-based" standards.

Question 35

GAAP stands for Generally Accepted Accounting Principles.

Question 36

A cash flow statement is organized into three categories, operating, financing and investing activities of the company.

Question 37

Profit results when a company's expenses are higher than its revenues.

Question 38

An obligation to pay cash to a supplier in the future is called accounts payable.

Question 39

The going concern assumption is the assumption that a company will continue to operate in the foreseeable future.

Question 40

The owner's claim on the assets of the company is known as owner's equity.

Question 41

Revenues decrease owner's equity and expenses increase owner's equity.

Question 42

Which of the following would NOT be considered an internal user of accounting data for the ABC Company?

A) President of the company
B) Production manager
C) Merchandise inventory clerk
D) President of the employees' labour union

Question 43

Sometimes Canadian companies will report their results in U.S. dollars.

Question 44

Recognition is the process of recording a transaction in the accounting records.

Question 45

All of the following are steps used to analyze ethical dilemmas EXCEPT

A) using the organization's code of ethics to identify ethical situations.
B) using personal ethics to identify ethical situations.
C) identifying potential stakeholders.
D) discussing the ethical dilemma with co-workers.

Question 46

An external user could be

A) employees.
B) management.
C) Canada Revenue Agency.
D) the human resource director.

Question 47

The proprietorship form of business organization

A) must have at least three owners in most provinces.
B) represents the largest number of businesses in Canada.
C) combines the records of the business with the personal records of the owner.
D) is characterized by a legal distinction between the business as an economic unit and the owner.

Question 48

The partnership form of business organization

A) is a separate legal entity.
B) is a common form of organization for service-type businesses.
C) enjoys an unlimited life.
D) has limited liability.

Question 49

Which of the following is NOT an advantage of the corporate form of business organization?

A) limited liability of shareholders
B) transferability of ownership
C) unlimited personal liability for shareholders
D) unlimited life

Question 50

Which of the following is true regarding the corporate form of business organization?

A) Corporations are the most prevalent form of business organization.
B) Corporate businesses are generally smaller in size than partnerships and proprietor-ships.
C) The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
D) Corporations are separate legal entities organized exclusively under federal law.

Question 51

A business organized as a corporation

A) is not a separate legal entity in most provinces.
B) requires that shareholders be personally liable for the debts of the business.
C) is owned by its shareholders.
D) terminates when one of its original shareholders dies.

Question 52

The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods.

Question 53

Judy and Marilyn met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a(n)

A) non profit organization.
B) partnership.
C) corporation.
D) proprietorship.

Question 54

An external user would NOT include

A) A creditor of the company.
B) Canada Revenue Agency.
C) An employee.
D) The company's bank.

Question 55

A Balance Sheet can also be called a Statement of Financial Position.

Question 56

The monetary unit assumption assumes that all transactions will take place in Canadian dollars.

Question 57

Cost value is the amount of the consideration that would be agreed upon in an arm's-length transaction between knowledgeable, willing parties who are under no compulsion to act.

Question 58

Which of the following forms of business organizations typically have their shares listed on the Toronto Stock Exchange?

A) Proprietorships
B) Private companies
C) Public companies
D) Partnerships

Question 59

Measurement is the process of determining the amount that should be recognized.

Question 60

The main objective of the financial statements is

A) to show the profit of a company.
B) to allow customers to determine whether a company will honour its product warranties.
C) to provide useful information to investors and creditors to make decisions about a business.
D) to determine how many employees the company can afford to hire each year.

Question 61

Which of the following would best be described as an ownership claim on a company's assets?

A) expenses
B) account receivable from the owner
C) owner's equity
D) liabilities

Question 62

GAAP stands for

A) Generally Accepted Auditing Procedures.
B) Generally Accepted Accounting Principles.
C) Generally Accepted Auditing Principles.
D) Generally Accepted Accounting Procedures.

Question 63

The common characteristic possessed by all assets is

A) long life.
B) great monetary value.
C) tangible nature.
D) future economic benefit.

Question 64

Bing Company has total liabilities of $10,000 and total assets of $15,000. Based on this information, Bing Company's owner's equity must be

A) $10,000.
B) $ 0.
C) $5,000.
D) $15,000.

Question 65

Emily Hogan recently opened a new business. The business has been very successful and as a reward for all her hard work Emily spent a day at the local spa. Emily paid for the spa using a company credit card and charged the amount to the expense account called Repairs and Maintenance expense. Emily's actions violated which of the following?

A) The going concern assumption
B) The monetary unit assumption
C) The cost principle
D) The economic entity concept

Question 66

Withdrawal of cash from a business by the owner for personal reasons will NOT affect which financial statement?

A) Balance Sheet
B) Income Statement
C) Statement of Owner's Equity
D) Cash Flow Statement

Question 67

Canadian Accounting Standards allow a choice of whether or not to use International Financial Reporting Standards for which type of company?

A) Public companies
B) Only small private companies
C) Banks
D) All private companies in Canada

Question 68

The accounting equation, for a proprietorship, may be expressed as

A) Assets = Liabilities + Shareholders' Equity.
B) Assets - Liabilities = Partners' Equity.
C) Assets = Liabilities + Owner's Equity.
D) all of these.

Question 69

The accounting equation, for a corporation, is best expressed as

A) Assets = Liabilities + Shareholders' Equity.
B) Assets - Liabilities = Partner's Equity.
C) Assets = Liabilities + Owner's Equity.
D) all of these.

Question 70

The going concern assumption

A) states that a company will not operate long enough to utilize assets and fulfill obligations.
B) assumes the company will continue to operate in the foreseeable future.
C) is inconsistent with the cost principle.
D) states that net worth is the most appropriate value at which to record assets.

Question 71

An account receivable is recorded in the accounting records as a(n)

A) liability.
B) expense.
C) asset.
D) revenue.

Question 72

Which of the following is true when considering the accounting equation?

A) An increase in an asset must always equal a decrease in a liability.
B) For every transaction an asset and a liability must be affected.
C) An increase in a liability must equal a decrease in owner's equity.
D) An increase in an asset may result in a decrease in another asset.

Question 73

ASPE requires less information on the financial statements of private companies than IFRS requires because

A) private companies are smaller than public companies.
B) users of private company financial statements have the ability to obtain additional information from the company if required.
C) public companies have their information available on the internet.
D) public companies may report in different foreign currencies.

Question 74

Generally accepted accounting principles are

A) income tax regulations.
B) standards that indicate how to report economic events.
C) theories that are based on physical laws of the universe.
D) principles that have been proven correct by academic researchers.

Question 75

Which of the following would violate the economic entity concept?

A) reporting amounts owed to the company's suppliers as a liability on the balance sheet.
B) reporting equipment owned and used in the business as an asset in the balance sheet.
C) reporting withdrawals by the owner as a drawing in the statement of owner's equity.
D) reporting the owner's personal sailboat as an asset on the balance sheet.

Question 76

Liabilities

A) are future economic benefits.
B) are current or long term obligations arising from past events.
C) possess service potential.
D) are things of value used by the business in its operation.

Question 77

Evan Guanzon owns and operates Guanzon's Pizza Express. Evan should record the cost of wages paid to store employees as a (an)

A) revenue.
B) expense.
C) liability.
D) asset.

Question 78

Mel Green is the proprietor (owner) of Green's, a retailer of athletic apparel. When recording the financial transactions of Green's, Mel does not record an entry for a car he purchased for personal use. Mel took out a personal loan to pay for the car. What accounting assumption guides Mel's behaviour in this situation?

A) going concern assumption
B) economic entity concept
C) time period assumption
D) monetary unit assumption

Question 79

The International Accounting Standards Board

A) works to reduce differences in accounting practices across countries.
B) promotes unique accounting applications.
C) works to increase differences in accounting practices across countries.
D) only operates in countries which speak English.

Question 80

Which of the following principles or assumptions requires that the activities of a business be kept distinct from those of its owner(s)?

A) economic entity concept
B) going concern assumption
C) monetary unit assumption
D) cost principle