chapter 1

Question 1

what are the two categories of users?

Answer 1

internal and external users

Question 2

what are internal users?

Answer 2

individuals working for the company, use financial statements to assess the company performance and help in the decision making process

Question 3

what are external users?

Answer 3

individuals working outside the company, can be lenders;/ banks, shareholders, interests groups

Question 4

what are the three different types of forms of organization?

Answer 4

sole proprietosrhip, parternship and corporation

Question 5

what is a sole proprietorship?

Answer 5

an unincorporated business owned by an individual, owns assets personally, dont need to file legal documentation, a lot of liability, small business, receive own income, simple to set up, full control, have to pay income taxes

Question 6

what is a partnership:?

Answer 6

similar to sole p but between two or more people, control is shared between partners, unlimited liability, taxes paid by partners, not a separate legall entity

Question 7

what is a corporation?

Answer 7

separate entity, shareholders aren’t liable for liabilities, ownership of a corporation can easily change over time so can love forever, ongoing costs

Question 8

what are the two main types of corporations in canada?

Answer 8

public and private

Question 9

what is a private corporation?

Answer 9

shares are not traded on the stock exchange, shares of company are owned by a few people, not everyone can just come and buy shares on stock exchange, lot of family owned businesses

Question 10

why do many companies start as a private corporation then go public?:

Answer 10

good way to get funding and extra cash

Question 11

what is a public corporation?

Answer 11

shares are traded in public markets, can lose control, anyone on the market can buy shares

Question 12

in a public corporation, who represents the many shareholders

Answer 12

board of directors

Question 13

what does a common lifecycle of a business follow?

Answer 13

SOLE PROPRIETOSHIP, then private corporation then public corporation

Question 14

when is it a good time to incorporate?

Answer 14

If you have proven success

Question 15

what are the disclosure requirements for public companies?

Answer 15

public companies must prepare and publish financial statements

Question 16

what are the disclosure requirements for private companies

Answer 16

not legally required to prepare financial statements but banks could ask you to

Question 17

what is an annual report (public company)

Answer 17

its where you find financial statements, management discussion and analysis, auditors report, key financial info, its published once a year

Question 18

what’s a quarterly financial statement (public company)

Answer 18

financial statements for a quarter of the year, providing users With an update on company performance so that they dont need to wait an entire year

Question 19

example of financial reporting cycle?

Answer 19

during the year, accountants will record trasnactions. once the year is done, accountants prepare the financial statements, then once February hits, the financial statements are provided to auditors who perform the audit.l end of march is where financial statements are finalized and published

Question 20

what is the GAAP?

Answer 20

accounting rules that decide how financial statements should be prepare

Question 21

what is IFRS?

Answer 21

Canadian public companies must use this to prepare their financial statements

Question 22

what is ASPE?

Answer 22

used by some Canadian private companies

Question 23

what are the three types of business activities?:

Answer 23

financing, investing and operating

Question 24

what is financing”?

Answer 24

obtaining and repaying funds to finance business operations. examples: borrowing or repaying the bank, repurchasing shares, issuing shares

Question 25

what is investing

Answer 25

purchase or sale of long term assets needed to make the company work. examples: purchasing ppe or intangible assets,

Question 26

what is operating?

Answer 26

day to day activities of the business, everything you need for your business to function. examples: ongoing expenses, and income earning activities

Question 27

what is the purpose of a balance sheet (statement of financial position)

Answer 27

to present, on a specific date, the assets owned by the company, the liabilities owed and the equity

Question 28

what are assets? (balance sheet)

Answer 28

tangible or intangible resources that will help the company

Question 29

what are liabilities? (balance sheet)

Answer 29

financial obligations or commitments

Question 30

what is equity? (balance sheet)

Answer 30

what is leftover after I sell my assets and paid off my debts

Question 31

what is the accounting equation?

Answer 31

assets= liabilities+ shareholders equity

Question 32

what is the purpose of an income statement?

Answer 32

show for a specific period of time the income generated by the business

Question 33

wat is revenue? (income statement)

Answer 33

revenues earned from selling goods and services

Question 34

what are expenses (income statemen)

Answer 34

what the company spends

Question 35

what is gross profit (income statement)

Answer 35

revenues- cost of goods sold

Question 36

what is profit or net income (income statement)

Answer 36

revenues- total expenses (bottom line of income statement)

Question 37

what are some common expenses?:

Answer 37

cost of goods sold, general and adminsurative expenses, deprecation, interest and other

Question 38

what is the purpose of statement of changes in equity?

Answer 38

looks at the transactions that impact the owners equity accounts for a specific period of time

Question 39

what are retained earnings (equity statement)

Answer 39

the portion of a company’s profits that is not distributed to its shareholders as dividends.

Question 40

two accounts of equity?

Answer 40

common shares and retained earnings

Question 41

to determine retained earnings at the end of the period?

Answer 41

begging retained earnings+ net income- dividends

Question 42

ending shares?

Answer 42

common shares at the start+ issued of shares- repurchasing shares