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ACCT 1220 > CHAPTER 1 > Flashcards

CHAPTER 1 Flashcards

1
Q

Who uses accounting information?

A

Managers
Investors and Creditors
Government and Regulatory Bodies
Individuals
Non-Profit Organizations

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2
Q

Who uses Financial accounting?

A

internal and external users

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3
Q

Who uses Management accounting?

A

only internal users

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4
Q

What kind of business only has one owner?

A

A proprietorship (one proprietor)

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5
Q

In which kind of business is the owner personally liable for its debts?

A

Proprietorships and Partnerships

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6
Q

What kind of business has at least 2 owners?

A

A Partnership (2+ partners)

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7
Q

In a partnership, how is the income divided among partners?

A

Income is divided based on the agreed percentages of ownership

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8
Q

What is an advantage of a corporation?

A

Being able to raise sums by issuing shares to the public.

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9
Q

In a corporation, are shareholder liable for its debt?

A

No, shareholders are not liable

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10
Q

How does a proprietorship pay taxes
?

A

Partners pay their agreed percentage of taxes

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11
Q

In a corporation, who pays the taxes?

A

The proprietor pays the taxes in a corporation

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12
Q

What does the income statement show?

A

Net income

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13
Q

What does the Statement of retained earnings show?

A

ending retained earnings

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14
Q

What does the Statement of cash flow show?

A

Increase/decrease in cash

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15
Q

How do you calculate net income?

A

Total income - total expenses = net income

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16
Q

How do you calculate the ending retained earnings?

A

Beginning retained earnings + net income + other comprehensive income - dividends = ending retained earnings
BRE+NI-D=ERE

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17
Q

How do you calculate the change in cash?

A

Operating cash flows +/- investing cash flows +/- financial cash flows = change in cash

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18
Q

What does the income statement contain?

A

Income (revenue and gains)
Expenses (losses)

19
Q

What does the statement of retained earnings report?

A

changes in retained earnings

20
Q

What does the balance sheet report?

A

reports the businesses financial position.

21
Q

How are assets listed?

A

In order of liquidity

22
Q

In what order are the components of the balance sheet listed?

A

1- Current assests
2- Non-current assets
3- Current liabilities
4- Non-current liabilities
5- Shareholders equity

23
Q

What are the 3 activities of cash flows?

A

Operating activities
Investing activities
Financing activities

24
Q

Where is the net income from the income statement used?

A

The statement of retained earnings

25
Q

Where is the ending retained earnings from the statement of retained earnings used

A

The balance sheet

26
Q

Where is the cash balance from the statement of cash flows used

A

The balance sheet

27
Q

To be useful information what must it have?

A

Relevance
Faithful representation
Comparability
Verifiability
Timeliness
Understandability

28
Q

What is the Going-Concern Assumption?

A

An entity is expected to continue operating normally for the foreseeable future

29
Q

What is the Separate-Entity Assumption?

A

Business activities must be accounted separately from the owners

30
Q

What is the Historical-Cost Assumption?

A

Assets are recorded at the actual cost on the date of purchase

31
Q

Is the Historical-Cost Assumption always respected?

A

It has been discarded more and more and now assets are recorded with their fair value / the amount at which they can sell the asset

32
Q

What is the Stable Monetary-Unit Assumption?

A

Financial information must be recorded under the same currency

33
Q

What does the economic factor state

A

That the decision being made should maximize the economic benefit

34
Q

What is the legal factor based on?

A

That societies are governed by laws

35
Q

What should you do if dealing with laws from two different countries?

A

It is best to abide the laws of the most restrictive country when dealing with other countries

36
Q

What does CPA stand for?

A

Chartered Professional Accountants

37
Q

What does the ethical factor recognize?

A

That actions can be legal and profitable but not ethical

38
Q

What is the professional Behaviour Principle?

A

To display commitment to moral conduct

39
Q

What does the Integrity and Due Care Principle entail?

A

That members shall perform professional services with integrity and due care.

40
Q

What are employees expected to be in professional relationships according to the Integrity and Due Care Principle?

A

Members are expected to be:
Straight Forward
Honest
Fair Dealing

41
Q

What is the Objectivity Principle?

A

A members shall not allow professional judgment to be compromised by bias, conflict of interest or undue influence

42
Q

What is the Professional Competence Principle?

A

Members must maintain their skill by keeping themselves informed of development in their field

43
Q

What is the Confidentiality Principle?

A

Members shall protect confidential information inside and outside the firm.

ACCT 1220 (3 decks)

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