CHAPTER 1

Question 1

Who uses accounting information?

Answer 1

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

Question 2

Who uses Financial accounting?

Answer 2

internal and external users

Question 3

Who uses Management accounting?

Answer 3

only internal users

Question 4

What kind of business only has one owner?

Answer 4

A proprietorship (one proprietor)

Question 5

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

Answer 5

Proprietorships and Partnerships

Question 6

What kind of business has at least 2 owners?

Answer 6

A Partnership (2+ partners)

Question 7

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

Answer 7

Income is divided based on the agreed percentages of ownership

Question 8

What is an advantage of a corporation?

Answer 8

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

Question 9

In a corporation, are shareholder liable for its debt?

Answer 9

No, shareholders are not liable

Question 10

How does a proprietorship pay taxes
?

Answer 10

Partners pay their agreed percentage of taxes

Question 11

In a corporation, who pays the taxes?

Answer 11

The proprietor pays the taxes in a corporation

Question 12

What does the income statement show?

Answer 12

Net income

Question 13

What does the Statement of retained earnings show?

Answer 13

ending retained earnings

Question 14

What does the Statement of cash flow show?

Answer 14

Increase/decrease in cash

Question 15

How do you calculate net income?

Answer 15

Total income - total expenses = net income

Question 16

How do you calculate the ending retained earnings?

Answer 16

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

Question 17

How do you calculate the change in cash?

Answer 17

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

Question 18

What does the income statement contain?

Answer 18

Income (revenue and gains)
Expenses (losses)

Question 19

What does the statement of retained earnings report?

Answer 19

changes in retained earnings

Question 20

What does the balance sheet report?

Answer 20

reports the businesses financial position.

Question 21

How are assets listed?

Answer 21

In order of liquidity

Question 22

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

Answer 22

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

Question 23

What are the 3 activities of cash flows?

Answer 23

Operating activities
Investing activities
Financing activities

Question 24

Where is the net income from the income statement used?

Answer 24

The statement of retained earnings

Question 25

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

Answer 25

The balance sheet

Question 26

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

Answer 26

The balance sheet

Question 27

To be useful information what must it have?

Answer 27

Relevance Faithful representation Comparability Verifiability Timeliness Understandability

Question 28

What is the Going-Concern Assumption?

Answer 28

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

Question 29

What is the Separate-Entity Assumption?

Answer 29

Business activities must be accounted separately from the owners

Question 30

What is the Historical-Cost Assumption?

Answer 30

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

Question 31

Is the Historical-Cost Assumption always respected?

Answer 31

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

Question 32

What is the Stable Monetary-Unit Assumption?

Answer 32

Financial information must be recorded under the same currency

Question 33

What does the economic factor state

Answer 33

That the decision being made should maximize the economic benefit

Question 34

What is the legal factor based on?

Answer 34

That societies are governed by laws

Question 35

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

Answer 35

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

Question 36

What does CPA stand for?

Answer 36

Chartered Professional Accountants

Question 37

What does the ethical factor recognize?

Answer 37

That actions can be legal and profitable but not ethical

Question 38

What is the professional Behaviour Principle?

Answer 38

To display commitment to moral conduct

Question 39

What does the Integrity and Due Care Principle entail?

Answer 39

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

Question 40

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

Answer 40

Members are expected to be: Straight Forward Honest Fair Dealing

Question 41

What is the Objectivity Principle?

Answer 41

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

Question 42

What is the Professional Competence Principle?

Answer 42

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

Question 43

What is the Confidentiality Principle?

Answer 43

Members shall protect confidential information inside and outside the firm.