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Gr 11 Financial Accounting > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

What is accounting?

A

A system of dealing with the financial data of a business so as to provide useful information to decision makers

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2
Q

What are the 5 activities involved in accounting?

A

1) Gathering Information
2) Collecting and preparing records
3) Rearranging, summarizing and classifying information
4) Preparing information reports and summaries
5) Establishing internal controls

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3
Q

What are transactions?

A

Events that occur during the operation of a business and result in a financial change

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4
Q

What are records?

A

Represent evidence of an event that happened in the past

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5
Q

What does it mean by “rearranging, summarizing and classifying information?”

A

Converting data into a usable form

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6
Q

What are internal controls? Why are they important?

A

Internal controls promote honesty, integrity and accuracy in financial records

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7
Q

What is the difference between data and information?

A

Data: raw, unorganized facts that need to be processed
Information: data that is processed, organized & presented to make it useful

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8
Q

What are the 2 types of users of accounting information? Describe each.

A

Internal users: People who work in the business
External users: People who work outside of the business who use accounting information

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9
Q

What are 3 examples of internal users?

A
  • Owner
  • Employees
  • Managers of different departments
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10
Q

What are 3 examples of external users?

A
  • Government
  • Potential investors & investors
  • Banks & other creditors
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11
Q

What are 3 reasons why you should study accounting?

A
  • Helps organize personal finances (budgeting, financial planning, etc.)
  • Helps when owning your own business (banking, taxing, etc.)
  • Become an accounting professional
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12
Q

Define “business.”

A

An organization that produces and sells goods/services to satisfy the needs, wants and demands of customers for the purpose of making a profit.

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13
Q

What is a service business?

A

Sells services instead of tangible goods (hair salons, law firms, consulting services, etc.)

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14
Q

What is a merchandising business?

A

Buys finished goods and resells them to the public at a higher price to make a profit (clothing brands, books stores, supermarkets, etc.)

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15
Q

What is a manufacturing business?

A

Creates goods from raw materials/parts and sells them to make a profit (furniture factory, textile manufacturing, metal fabrication, etc.)

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16
Q

What is a producing business?

A

Extracts/grows raw goods on a farm (mining gold, farming, vineyards, etc.)

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17
Q

What is a non-profit organization?

A

Organized for a purpose other than making profit (charities, hospitals, labour unions, etc.)

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18
Q

What are the 3 main legal forms of business ownership?

A
  • Sole proprietorship
  • Partnership
  • Corporation
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19
Q

Describe sole proprietorship

A

A single individual (sole proprietor) owns and operates the business

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20
Q

Partnership

A

2 or more individuals own and operate the business

21
Q

Corporation

A

Ownership of the company is represented by shares/stocks, and the owners are referred to as shareholders or stockholders. Individuals can invest in a portion/unit of the company (shares), giving them certain rights and benefits within the company

22
Q

Shareholders elect a board of directors who…

A

run the company and make decisions that determine the direction of the company

23
Q

What does “unlimited liability” mean?

A

The owner(s) is/are personally responsible for all business debts. Personal assets (e.g. car) can be used to satisfy these debts, because these is no distinction between personal & business assets

24
Q

Which two forms of businesses does unlimited liability exist in?

A
  • Sole proprietorship
  • Partnership
25
Q

Why do owners of corporations have limited liability?

A

Shareholders are only liable for the amount they have invested in the company. Their personal assets beyond the value of their investments is generally protected.

26
Q

Partnerships can involve active partners and/or silent partners. What is the difference between the two?

A
  • Silent partners: invest money in the business
  • Active partners: involved in the day-to-day activities of the business.
27
Q

What is mutual agency?

A

When 1 partner can enter into agreements that is binding for all partners

28
Q

Why do shareholders buy shares?

A

To get returns

29
Q

What are the 3 types of accounting activities?

A
  • Daily activities
  • Periodic activities
  • Miscellaneous activities
29
Q

What is a return? How are returns earned?

A

Return → money earned from an investment

Returns can be earned through
- Dividends (money from the company’s profit)
- Capital gains (when stocks are sold for a higher price than they were originally bought at)

30
Q

What were the 3 types of accounting professionals in Canada before 2012?

A
  • CA (Chartered Accountant)
  • CGA (Certified General Accountant)
  • CMA (Certified Management Accountant)
31
Q

These 3 designations merged together under a single designation, which is known as…

A

CPA (Chartered Professional Accountant)

32
Q

Which of the 3 accounting designations is/are recognized internationally? Which one(s) are only recognized in Canada?

A

CA - recognized internationally (requires the most education and experience)
CGA and CMA - recognized in Canada

33
Q

Why were the 3 merged together? How many provincial & national accounting associations began negotiating this solution?

A

To avoid confusion and provide consistency and simplicity of oversight to the accounting industry, 40

34
Q

What is the difference between accounting clerks and accountants?

A
  • Accounting clerks primarily deal with clerical duties (e.g. paperwork, answering phone calls, etc.)
  • Accountants are responsible for interpreting and analyzing financial statements/records, as well as managing the steps of the Accounting Cycle to provide financial information for decision-making
35
Q

Define order of liquidity

A

Order of assets by how easily they can be converted into cash

36
Q

What are supplies?

A

Items purchased for use within the business office and used up within 1 year

37
Q

How are long-term assets listed on a balance sheet?

A

Maturity order (when they’re due)

38
Q

Define patent and copyright

A

Patent: Protects inventions from being made/sold by others
Copyright: Protects creative works

39
Q

Define owner’s equity (residual equity)

A

Portion of a company’s assets that the owner can claim

40
Q

Who has a claim to the assets of a business? What happens when a company goes bankrupt?

A

Assets are liquidated to pay creditors. Remaining money goes to the owner.

41
Q

What is GAAP?

A

Generally Accepted Accounting Principles → set or principles, procedures and guidelines that accountants in the US and Canada follow for consistency + honesty

42
Q

What does IFRS stand for? Why was GAAP replaced by IFRS?

A

International Financial Reporting Standards (used globally by 100+ countries)
IFRS replaced GAAP → allowed users to understand the finances of different countries and compare companies around the world

43
Q

What are the 4 main accounting principles?

A
  • Business entity concept
  • Cost principle
  • Revaluation model
  • Continuing concern concept
44
Q

Define business entity concept

A

Businesses should be considered a separate entity. Financial data of a business should be kept separate from owner’s personal finances

E.g. if the owner puts his/her personal asset on the business’s balance sheets, it would misrepresent the business’s total assets

45
Q

Define cost principle

A

Assets should be recorded at its historical (original) cost when bought by the company

46
Q

Define the revaluation model

A

Allows accountants to record assets at their market value rather than historic value (accountant will choose based on which one most accurately represents the company’s financial position)

47
Q

Define the continuing concern concept

A

Assume that company is financially stable enough to meet its obligations (pay off debts) and continue its business for the foreseeable future UNLESS clear evidence of the contrary (e.g. if it will be bankrupt within a year)

Gr 11 Financial Accounting (7 decks)

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