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ACCTG 211 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Describe accounting

A

accounting identifies and records the economic events of an organization and communicates this information to interested users

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2
Q

What are the two broad categories of users

A
  1. Internal (Managers, employees, etc.)
  2. External (Investors, creditors, CRA, customers, etc)
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3
Q

Describe financial accounting

A
  • Preparing financial accounting statements for external users
  • has rigid rules and is done from a historical perspective
  • aggregates information and uses quantitative information
  • public companies
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4
Q

Describe managerial accounting

A
  • internal users
  • flexible format
  • looks at the future perspective
  • detailed information
  • quantitative and qualitative information
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5
Q

What are the 3 legal forms of businesses

A

Sole proprietorship, partnership, and incorporated

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6
Q

Describe a sole proprietorship

A

owned by one person

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7
Q

Describe a partnership

A

owned by more than one person but not incorporated

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8
Q

Describe an incorporated form of business

A
  • separate legal entity having ownership held by shareholders
  • may be public or private corporation
  • may be a for profit or a not for profit organization
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9
Q

What are the 3 types of business activities

A

Operating, Investing, and financing

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10
Q

Describe operating (type of business activity)

A
  • the main day to day activities of the business
  • usually current assets and current liabilities (Cash, A/R, A/P, etc.)
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11
Q

Describe Investing (type of business activity)

A
  • Obtaining the resources or assets needed to operate the business for the long term
  • usually long term assets (investments or property, plant and equipment)
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12
Q

Describe Financing (type of business activity)

A
  • Obtaining (and repaying) funds to finance the operations of the business
  • usually long term liabilities or shareholders/owners equity are related to financing (debt or equity)
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13
Q

What 4 things go into financial statements

A
  • Balance sheet
  • Income statement
  • Statement of cash flow
  • Statement of retained earnings (or statement of changes in equity for public companies using IFRS)
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14
Q

Describe a Balance sheet (which is also called Statement of financial position)

A
  • things Owned and Owed
  • Includes assets, liabilities, and shareholders equity
  • assets: resources owned by a business (like cash, equipment, money owed to you, etc.)
  • Liabilities: obligations of he business (things you owe)
  • Shareholders equity: share capital (shares that have been purchased) and retained earnings (income that you are owed)
  • is at a point in time**
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15
Q

Describe the formula relating to the balance sheet (not on formula sheet*)

A

Assets = Liabilities + Shareholders’ Equity

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16
Q

What time period does a balance sheet pertain to

A
  • Balance sheet is at a point in time
    –> put “As at __date__”
17
Q

Describe the income statement (also called statement of Earnings)

A
  • Includes revenues and expenses
  • Revenues: arise form the sale of a product or service
  • Exenses: costs of assets consumed or services used to generate revenues
  • Net income (loss) = Revenue - expenses
  • for a period of time
  • measures gains and losses
18
Q

What time period does an income statement pertain to

A
  • for a period of time like month, quarter, year, etc.
19
Q

What formula has to do with the income statement

A

Net income (loss) = Revenues - expenses

20
Q

Describe the statement of retained earnings

A
  • this is for ASPE companies (those not publicly traded)
  • shows the changes in retained earnings for the period –> looks at net income from a period of time, and dividends paid to shareholders
  • retained earnings (the account) is the cumulative net income (less losses) that is retained in the business (not distributed to shareholders)
  • is for a period of time
21
Q

What time period does the statement of retained earnings pertain to

A
  • is for a period of time
22
Q

what type of companies prepare a statement of retained earnings

A
  • companies that are not publicly traded (an ASPE company)
23
Q

How do you get the retained earnings, closing balance

A

retained earnings, opening balance + net earnings/loss = retained earnings, closing balance

24
Q

Describe the statement of changes in equity

A
  • for IFRS companies (publicly traded companies)
  • shows the changes in each component of shareholders’ equity for the period
  • share capital: amounts contributed by shareholders, each class of shares is shown in a separate column (may have common and preferred classes of shares)
  • retained earnings/ deficit
  • for a period of time
25
Q

What type of company is the statement of changes in equity for

A
  • for IFRS companies (publicly traded companies)
26
Q

What time period does the statement of changes in equity pertain to

A
  • for a period of time
27
Q

Describe the statement of cash flows

A
  • details all cash inflows and outflows
  • looks at operating activities (transactions that create revenues and expenses), investing activties (acquiring the resources that are needed to run the business), financing activities (collecting the necessary funds to support the business)
  • is for a period of time
  • shows net increase or decrease in cash for the period
28
Q

What period of time does the statement of cash flows pertain to

A
  • this is detailed for a period of time
29
Q

Describe the Generally accepted accounting principles (GAAP)

A
  • rules and rpactices for the preparation of financial statements
  • are different for publicly traded and private corporations
  • publicly traded corporations use international financial reporting standards (IFRS)
  • private corporations may use IFRS or Accounting standards for private enterprises (ASPE)
  • proprietorships and partnerships do not have TO use UFRS or ASPE if their statements are prepared for internal users only. If prepared for CRA or another external user they will need to minimally use ASPE
30
Q

Kenzie corporation opened a chequing bank account at her local bank and deposited $100, what statement would you find the bank account with $100

A

This would be on the balance sheet because this is something that the company owns
–> this would be an asset

31
Q

Kenzie corporation deposited $100 in her bank account which was for 100 shares of the corporation - what statement would you find the account: common shares with the $100

A

This would be in the balance sheet as this is something the company owes
–> it would be part of the shareholders equity

32
Q

Kenzie corporation - kenzie loans the company $50 000 - what statement would you find the account: loan payable with the $50 000

A

This would be on the balance sheet as this is something the company owes - this would be a liability

33
Q

Kenzie corporation - Kenzie signed a lease and paid rent of $3500 for the current month - what statement would you find the account: rent expense with the $3500

A

This would be on the income statement as this is something being spent or used up - this would be an expense

34
Q

Kenzie corporation - what statement would you find the account: leasehold improvements, and furniture and fixtures with the $40 000

A

This would be on the balance sheet as this is something the company owns - this would be an asset (a long term asset of the business) - it is good for a number of years therefore it is not an expense, and expense would only be good for a period of time

35
Q

SLIDE 22 LECTURE 1

A

ACCTG 211 (5 decks)

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