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ACCT 217 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is accounting

A

a record of all economic events of an organization

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2
Q

What should accounting be

A

Transparent, reliable, and accurate financial reporting

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3
Q

Internal users

A

Manage organizatinos (profit.non profit/governmental orgs_

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4
Q

Examples of internal users

A

managers
directors in finance mktg hr

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5
Q

What info is more detailed, info for internal users or external users?

A

internal users! the info is used to make decisions requried to run the compan

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6
Q

what makes internal users special

A

they are able to access accounting information readily, external users only recieve info when ever it is made publically avialable PERIODICALLY

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7
Q

External users

A

Users of accounting information that are not involved in managing the organization and do not have access to accounting information other than that which is publicly available, including investors, lenders, and other creditors.

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8
Q

MAIN EX of external users+what they do with accounting info

A

investors (owners)= choose to buy hold or sell ownership interest

Creditors (lenders)= use accoutning info to evaluate risk of lending money or selling on creedit

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9
Q

INVESTORS ARE ALSO KNOWN AS

A

SHAREHOLDORS

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10
Q

CREDITORS ARE OFTEN KNOWN AS

A

LENDERS OR DEBTHOLDERS

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11
Q

Other examples of external users

A

1) non management employees (any union that represents them)
2) potentnail employees (looking for job prospects)
3) taxing orgs (cra)
4) regulatory orgs (checking if ocmpany is up to standard)
5) customers

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12
Q

Ethics

A
  • Accounting info should be up to standards, legal, responsible, and you must consider the organizations’ interests, they should protect users
  • “Accounting Code of Ethical Conduct”- every large org will have this code of conduct
  • Unethical Conduct: Management portrays a better performance on the financial statement to get more stakeholders or the managers want higher bonuses, maybe they can portray worse financial performance to reduce the leverage of labour unions or maybe to reduce tax payments]
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13
Q

4 types of data analytics

EIES

A

Descriptive
Diagnostic
Predictive
Prescriptive

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14
Q

Descriptive Data Analytics

A

What happened?

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15
Q

Diagnostic Data Analytics

A

Why did it happen

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16
Q

Prescsriptive

A

What should we do to fix this

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17
Q

Predictive

A

What is likely to happen

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18
Q

Proprietorships

A

business owned by one person, known as a proprietor

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19
Q

pros of proprietorship

A

simple to set up, total control, small amount of money to start business

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20
Q

cons of propreitorship

A

UNLIMITED LIABILITY, owner bears all loss,

no legal disctinction betwen business and owner, so life of proprietorship is limited to the life of owner

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21
Q

how is a proprietorship business income reported?

A

on the owners personal income tax return

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22
Q

Reporting Entity Concept

A

economic activity of a specific company must be kept separate and distinct from all owners other economic activities

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23
Q

basic example of reporting entity concept

A

keeping the records of a proprietorship separate!

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24
Q

why should we have reporting entity concept

A

because of ethics and representing ONLY businesses’ activities- easier to judge

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25
Q

What is a partnership

A

business with 1+ person; like proprietorship but not rlly

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26
Q

Why are partnerships formed?

A

because one person does not have enough money/ different skills/resources

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27
Q

Why are partnerships more complex than proprietorships

A

need to make agreement that lays out the rules

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28
Q

who has liability in partnerships

A

ALL partners have unlimited liability for all debts of the partnership (Even if they did not create the debts themselves)

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29
Q

Where is the business income reported from a partnership

A

on each partners’ personal income tax return

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30
Q

examples of partnerships

A

lawyers doctors architects practices

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31
Q

what is corporation

A

SEPARATE LEGAL ENTITY owned by shareholders, most costly and most complex business entity

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32
Q

synonym of stock

A

shares

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33
Q

Characteristics of a Corporation

A

1) indefinite life (exists regardless who owns its shares)
2)easy to sell shares and transfer
3) shareholders have limited liability (less risk)

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34
Q

When can shareholders have unlimited liability

A

IF THEY provided personal guarantees to lenders for the debts of a corporation, which would mean their liability would extend beyond the amount of their investment

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35
Q

Why do corporations raise money easier

A

1) indefinitie life
2) easy to transfer ownership via shares
3) limited liability

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36
Q

Who is treated better with income taxation

A

CORPORTATIONS

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37
Q

existing wise

Proprietorships + partnerships > Corporations

but

A

money wise
Proprietorships + partnerships < Corporations

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38
Q

When is a corporation public

A

-Shares are publically traded on stock excange
- required to make financial statements avaiable to the public quarterly and annually (ON SEDAR)

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39
Q

Private corporation

A

-issue shares but are not traded publically
- EX: MCCAIN FOODS, JIM PATTISON GROUP
- CANT RAISE MONEY AS EASILY
-dont need to publish their papers

40
Q

Verb: to create a corporation

A

Incorporate

41
Q

GAAP (Generally Accepted Accounting Principiles)

A

broad policies and practices as well as rules and procedures about how to record and report economic events.

42
Q

GAAP- Public corps must use —-

A

IFRS Standards (International Financial Reporting Standard)

43
Q

GAAP- Private corps can choose between — —

A

IFRS (intl financial reporting standards) or ASPE (Acct standards for private enterprise)

44
Q

Why do PRIVATE companies CHOOSE IFRS

A

1) want to access public debt or equity markets in the future
2) wants to be able to compare fiancial resutls w/ compeititon who use IFRS
3) has foreign subsidiaries & wants common standard

45
Q

PUBLIC EQUITY MARKETS???

A

THESE ARE STOCKS

46
Q

privately owned but not private corproations

A

Propreitorships and Partnerships

47
Q

What gaap principles do proprietroships and partnerships use

A

ASPE when need be

48
Q

Fo rinternal accounting standards, do private/public corps stick to any standards

A

DONT HAVE TO

49
Q

3 types of economic activity

A

1) financing
2) investing
3) operating

50
Q

What do the 3 economic activites result in

A

Cash inflow
Cash Outflow

51
Q

Financing Activities

A

ALL ACTIVITES RELATED TO: DEBT financing [LOANS] or EQUITY Financing [Selling/buying stock]

ex:
-borrowing or repaying cash from (to) lenders,
-and issuing or reacquiring shares or paying dividends to investors.

52
Q

Investing Activites

A

purchasing long lived assets (land building equipment)

ourchasing or selling shares or debt OF OTHER COMPANIES

53
Q

Operating Activities

A

day to day operations, including cash flows erlated to revenue and expenses

54
Q

What are shareholders called

A

Investors

55
Q

Types of Share capital

A

common share= reprenting shareholders ownership of a company

56
Q

If funds are borrowed, how much claim do shareholders have on the assets of a corp?

A

ONly residual claim!

means that if a company stops operating, all the debt needs to be repaid before shareholders get any returns on their capital

57
Q

Dividends

A

payments distributing a protion of company income to shareholders

58
Q

Fiscal year

A

accounting time period tha tis one year in length

59
Q

Fiscal year ending in Jan 31 2022 is called

A

2021

60
Q

When you repurchase company shares is it inflow or outflow?

A

outflow of cash

61
Q

What are the people that a company borrows money from called

A

CREDITORS/LENDERS

62
Q

Liabilities

A

Amounts OWED to creditors, must be repaid with interest

63
Q

Types of liabilities

A

1) Operating lne of credit: pre arranged bank loan for a max amount allowing company to withdraw more money then it has
2) Bank loan payable (note payable) [SHORT TERM LOAN]
3) Long term debt ( mortgages payable, bonds payable, finance lease obligations)

64
Q

When a company draws on operating line of credit it is caleld

A

BANK INDEBTEDNESS

65
Q

— payable?

A

LIABILTIY!! YOU OWE THIS

66
Q

Long term debt synonym

A

NON CURRENT DEBT OR NON CURREN TLIABILITIES

67
Q

Paying interest on borrowed funds and paying dividens to shareholders is what activity

A

EITHER FINANCING OR OPERATING

but interest will be used as operating activity, dividens as financing activity

68
Q

investing activities

A

purchasing/selling long lived assets a company needs

buying furniture equipment computers vehicles

OR

ourchasing or selling shares or debt OF OTHER COMPANIES

69
Q

asset

A

resources a company owns or controls; asset provides future economic benefits that can be short- or long-lived

70
Q

What is the general name of assets

A

propert, plant, equipment; capital assets; fixed assets

71
Q

intangible assets

A

goodwill and intandible assets

goodwill (when a company buys another company when paying a price that is higher than the value of the purchased company’s net identifiable assets)

72
Q

Goodwill menaing

A

BRAND VALUE that people respect

73
Q

Intangible assets

A

dont have physical substance
COPYRIGHT TRADEMARK PATENTS

74
Q

what sort of cash flow is investing

A

OUTFLOW

75
Q

TWO TYPES OF INVESTMENT ACTIVITIES

A

relating to long term assets ; ORRRR in other compaies debt and shares

76
Q

income

A

either an increase in asset or decrease in liability

from sale of aproduct or service

77
Q

gains comes from

A

interest and dividendsr

(things that are not a commanies principal operation)

78
Q

revenue comes from

A

sales of goods or services

79
Q

Account recievable

A

ASSET! this is the right to recieve money in the furtre (owed money)

80
Q

short term assets generally come from — activity

A

operating

81
Q

ex of short term assett

A

supplies (short term asset used in day to day operations lIKE CLEANING SUPPLIES -» THESE ARE NOTTTT SOLD TO CUSTOMERS)

82
Q

What are short terms assets that are stored to sell to customers called

A

Inventori

83
Q

inventory vs supplies

A

inventory= for sale to customers
supplies= for day to day use

84
Q

cost of inventory sold is

A

COST OF GOODS SOLD

85
Q

expenses

A

decrease economic resouces

86
Q

interest expense synonnym

A

finance cost (Cost of using debt)

87
Q

accounts payable

A

the money you have to pay

88
Q

interest payable

A

unpaid liability amount owed to crediots

89
Q

salaries payable

A

unpaid salary owed t oemployees

90
Q

Deferred tax liabilities are another example of a liability. They result from differences in how items are recorded for accounting and tax purposes.

A

Deferred tax liabilities are another example of a liability. They result from differences in how items are recorded for accounting and tax purposes.

91
Q

When revenue - expenses = +#

A

Net income or net earning or profit

92
Q

Revenue - expenses = -#

A

net loss

93
Q

what is th eflow of business activiites

A

financing, investing, operating

94
Q

Issuing a share is cash inflow

A

WORD

95
Q

SUPPLIES ARE AN

A

ASSET NOT EXPENSE

ACCT 217 (62 decks)

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