Acct 2121 CHPT 1

Question 1

Uses of Accounting

Answer 1

Accounting identifies and records the economic events of an organization and communicates to interested users

Question 2

Users of Accounting

Answer 2

Internal and External

Question 3

Who are Internal Users ?

Answer 3

Inside or work for company
Such as: company officers, mangers in finance, and marketing

Question 4

Who are External Users ?

Answer 4

So not work for company
Such as: Investors, customers, Regulators

Question 5

3 Forms of Business Organization?

Answer 5

Proprietorship,Partnership, Corporations

Question 6

what is a Proprietorship?

Answer 6

Owned by one person, easy to set up, unlimited liability

Question 7

what is a Partnership?

Answer 7

owned by multiple people, formalized in a written agreement, unlimited liability

Question 8

what is a Corporation?

Answer 8

Separate legal entity owned by shareholders, limited liability, indefinite life

Question 9

what is Generally Accepted Accounting Principles (GAAP)?

Answer 9

Rules and practices for the preparation of financial statements

Question 10

publicly-traded corporations use ?

Answer 10

International Financial Reporting Standards (IFRS)

Question 11

Private corporations use?

Answer 11

Accounting Standards for private Enterprise (ASPE)

Question 12

Three types of Business Activities?

Answer 12

Financing, Investing, Operating

Question 13

What are Financing Activities?

Answer 13

Obtaining funds to finance the operations of the business
Such As: Selling or repurchasing shares (equity financing) Borrowing money or repaying loans (debt financing)

Question 14

What are Investing Activities?

Answer 14

Purchase or sale of long-lived assets needed to operate the company
Such As: Purchase or sale of long lived assets, purchase or sale of investments

Question 15

What are Operating Activities?

Answer 15

The main day-to-day activities of the business
Such As: sources of income, expenses

Question 16

Order of Financial Statements

Answer 16

Statement of income, statement of changes in equity, Statement of financial position, Statement of cash flows

Question 17

Net Income = ?

Answer 17

Revenues- Expenses

Question 18

What is Statement of income?

Answer 18

Reports revenues and expenses for a specific period of time

Question 19

What are Revenues?

Answer 19

Arise from the sale of products or services, Result in an inflow of assets.
Such As: sales, service Revenue, rent revenue

Question 20

What are Expenses?

Answer 20

Costs of assets consumed or services used to generate revenues
Such as: Salaries, Depreciation, Insurance, Etc

Question 21

What is a Statement of Change in Equity?

Answer 21

Shows the change in each component of Shareholders’ equity for the period

Question 22

What is Share Ownership?

Answer 22

Amounts contributed by shareholders, may include common and preferred Share classes

Question 23

What is Retained earnings/ deficit

Answer 23

Net income retained in the corporation less any dividends paid to shareholders

Question 24

What is a Statement of financial position?

Answer 24

shows the assets, liabilities and shareholders’ equity at a specific point in time

Question 25

what are Assets?

Answer 25

Resources owned or controlled by a business

Question 26

What are Liabilities?

Answer 26

Claims of lenders and other creditors

Question 27

what are Shareholders’ equity

Answer 27

Claims of shareholders

Question 28

Accounting Equation?

Answer 28

Assets= Liabilities + Shareholders’ Equity

Question 29

What is a statement of Cash Flows?

Answer 29

Reports the effect on cash related to the company’s Financial Activities, Shows net increase or decrease in cash for the period

Question 30

What is contained in a Annual report?

Answer 30

Financial statements, Management discussion and analysis, Auditor’s report, Notes to financial statements