Question 1

The partnership form of business organization

Accepted Answer

Partnership is a common form of organization for service-type businesses, where two or more individuals share the ownership and responsibilities of the business. It is not a separate legal entity and does not enjoy unlimited life or limited liability.

Question 2

The monetary unit concept requires a Canadian company reporting in Canada to use

Accepted Answer

The monetary unit concept requires a company to use a common unit of measure for all business transactions, and in the case of a Canadian company reporting in Canada, the Canadian dollar is the logical choice. This concept is necessary for accurate and meaningful financial statements. Choice A and D are incorrect, as the monetary unit concept is directly related to business transactions and is useful in measuring economic events. Choice B is incorrect, as the monetary unit concept is a reliable measure of economic activities.

Question 3

Recognition in accounting means

Accepted Answer

Recognition in accounting refers to the process of recording a transaction in the accounting records, which means the event or transaction is recognized and recorded in the financial statements. Choice A refers to the distinction between assets and liabilities, which is related to the classification of items in the financial statements. Choice B refers to distinguishing between revenues (income) and expenses, which is also related to the classification of items in the financial statements. Finally, choice C refers to the initial valuation of items (assets, liabilities, etc.) at fair value, which is an important aspect of accounting but not directly relevant to recognition.

Question 4

GAAP stands for

Accepted Answer

GAAP stands for Generally Accepted Accounting Principles, which are a set of guidelines, rules, and standards for financial accounting and reporting in the United States. These principles are used to ensure consistency and accuracy in financial reporting and to provide a framework for interpreting financial statements.

Question 5

The going concern assumption

Accepted Answer

The going concern assumption assumes the company will continue to operate in the foreseeable future. This is an important assumption in financial reporting as it allows for the proper valuation and presentation of assets and liabilities on the balance sheet. Option A is incorrect as it is the opposite of the going concern assumption. Option C is irrelevant to the going concern assumption, and option D is not accurate as net worth is not necessarily the most appropriate value at which to record assets.

Question 6

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

Accepted Answer

Discussing the ethical dilemma with co-workers in a casual setting like the lunchroom may not result in a thorough analysis and could potentially create confidentiality issues. It is important to follow a structured approach and consider relevant ethical frameworks, laws, and policies as well as the perspectives of all stakeholders involved. Therefore, option D is not a recommended step in analyzing ethical dilemmas.

Question 7

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

Accepted Answer

The reporting entity concept requires that the activities of a business be kept distinct from those of its owner(s) in financial reporting. This means that a business's financial statements should only report on the financial activities of the business itself, rather than including the personal financial activities of the owner or owners.

Question 8

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

Accepted Answer

Public corporations typically have their shares listed on stock exchanges, allowing them to be bought and sold by individual investors. Proprietorships and partnerships are not typically incorporated and do not have shares. Private corporations may issue shares, but they are not publicly traded on exchanges like the Toronto Stock Exchange.

Question 9

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

Accepted Answer

The answer of Which of the following is true regarding...

Question 10

The International Accounting Standards Board

Accepted Answer

The International Accounting Standards Board works to reduce differences in accounting practices across countries by promoting the use and adoption of international accounting standards. It is committed to developing a single set of high-quality, global accounting standards that would be helpful in facilitating cross-border investment and trade.

Question 11

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

Accepted Answer

ASPE allows private corporations to provide less information on their financial statements because users of these statements have the ability to obtain additional information directly from the corporation if required. Unlike public corporations, private corporations do not have a legal obligation to disclose certain information to the public.

Question 12

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

Accepted Answer

The answer of Canadian Accounting Standards allow a choice of...

Question 13

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?

Accepted Answer

The reporting entity concept dictates that the business's financial records should be kept separate from the owner's personal financial activities. Mel's decision not to record the car purchase in the business's books aligns with this concept.

Question 14

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?

Accepted Answer

Emily's actions violated the reporting entity concept, which requires that the financial statements only include transactions related to the business entity and not personal transactions of the owner. Using a company credit card to pay for personal expenses, such as a day at the spa, is a violation of this concept. The going concern assumption, monetary unit concept, and historical cost measurement method are not relevant to this situation.

Question 15

Which of the following is NOT a characteristic of the corporate form of business organization?

Accepted Answer

Unlimited liability is a characteristic of the sole proprietorship and partnership forms of business organization, not the corporate form. The other three options are characteristics of the corporate form of business organization.

Question 16

The historical cost measurement method requires that when assets are acquired, they be recorded at

Accepted Answer

The historical cost measurement method requires that assets be recorded at the amount paid for them. This is because the historical cost of an asset represents the actual expenditure incurred to acquire it, and is considered a more objective and reliable basis for measurement than appraisal value or list price, which may be subject to manipulation or estimation errors. The amount the asset could be sold for is not relevant to historical cost accounting, as it reflects the market value of the asset at a point in time after it has been acquired, and may be affected by various factors such as supply and demand, depreciation, obsolescence, and changes in economic conditions.

Question 17

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

Accepted Answer

Since Judy and Marilyn are agreeing to split revenues and expenses evenly, the most appropriate business organization for them would be a partnership. A partnership is a business owned by two or more individuals who share profits and losses equally.

Question 18

Which of the following would violate the reporting entity concept?

Accepted Answer

The reporting entity concept requires that financial statements only report on the specific entity in question, not the personal assets of its owners. Therefore, reporting the owner's personal sailboat as an asset on the balance sheet would violate this concept.

Question 19

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

Accepted Answer

Unlimited personal liability for shareholders is not an advantage of the corporate form of business organization. This means that the shareholders are not personally responsible for the debts and liabilities of the corporation beyond their initial investment. The advantages of the corporate form are limited liability, transferability of ownership, and unlimited life, meaning that the corporation can continue to exist even if shareholders come and go.

Question 20

Generally accepted accounting principles are

Accepted Answer

Generally accepted accounting principles (GAAP) are standards adopted by the accounting profession that indicate how to report economic events. They include guidelines for financial reporting, measurement and disclosure, and are used by companies to prepare their financial statements in a consistent manner that facilitates comparability between different companies.

Quiz 1: Accounting in Action