Chapter 1

Question 1

What does GAAP stand for?

Answer 1

Generally Accepted Accounting Principals

Question 2

Are personal and business kept together or separate?

Answer 2

Separate

Question 3

What are the elements that make up a balance sheet?

Answer 3

Assets (on left side)

Liabilities and owners equity (capital) (on right side)

Question 4

What is sole proprietorship?

Answer 4

A business that has one owner

Question 5

What is a partnership?

Answer 5

A form of business ownership that has at least 2 owners (partners)

Question 6

What is a corporation?

Answer 6

A business owned by shareholders

Question 7

What is an advantage of sole proprietorship?

Answer 7

The owner makes all the decisions for the business

Question 8

What is a disadvantage of sole proprietorship?

Answer 8

If the business cannot pay it’s obligations (liabilities), the owner must pay them

Question 9

What is an advantage of a partnership?

Answer 9

The partners can share decision-making and the risks of the business

Question 10

What is an advantage of a corporation?

Answer 10

The shareholders are not personally liable for the corporation’s debts

Question 11

What is a disadvantage of a partnership?

Answer 11

The partners’ personal assets could be lost if the partnership cannot meet its obligations

Question 12

What is a disadvantage of a corporation?

Answer 12

Usually do not have input into the business decisions

Question 13

What are the responsibilities of bookkeepers?

Answer 13

General accounting work
Perform some summarizing and analyzing of accounting information
Supervise accounting clerks

Question 14

List the functions of accounting

Answer 14

Analyzing: what happened & how business is affected
Recording: putting info in the accounting system
Classifying: grouping same activities together
Summarizing: creating totals by category and/or date
Reporting: issuing reports that tell the results of the previous functions
Interpreting: examining the reports to determine how the pieces of info relate

Question 15

What does IFRS stand for?

Answer 15

International financial reporting standards

Question 16

What’s the difference between bookkeeping and accounting?

Answer 16

BK: recording function of the accounting process (enters accounting info in the company’s books)
ACC: takes that info & prepares financial reports used to analyze the company’s financial position

Question 17

What does “on account” mean?

Answer 17

Buy now, pay later

Accounts payable/liability

Question 18

What are the various types of accountants in Canada?

Answer 18

Public accountants
Private (managerial) accountants
Non-profit (governmental) accountants

Question 19

What is the purpose of the accounting equation

Answer 19

To provide a basis for understanding the accounting system of a business

Question 20

Define capital

Answer 20

Another term for the owners current investment, or equity, in the business’ assets

Question 21

What is the purpose of a balance sheet?

Answer 21

It is a formal report that presents the info from the ENDING BALANCES of both sides of the accounting equation

Question 22

When does a company earn revenue?

Answer 22

When they give the client their bill

Question 23

What 2 assets do revenue go to?

Answer 23

Accounts receivable and cash

Question 24

Define expenses

Answer 24

The costs the company incurs in carrying on operations in its efforts to create revenue

Question 25

When do withdrawals take place?

Answer 25

To pay living or other personal expenses that do not relate to the business

Question 26

Define an income statement

Answer 26

An accounting report that shows business results in terms of revenue and expenses. Shows net income/loss.

Question 27

What is shown in a statement of owners equity

Answer 27

Shows what changes occurred in capital with net income/loss and withdrawals