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Accounting > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

The process of identifying, measuring, recording, and communicating an organization’s economic activities to users.

A

ACCOUNTING

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2
Q

Users who work for the organization and are responsible for planning, organizing, and operating the entity.

A

INTERNAL USERS

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3
Q

Users who do not work for the organization and include investors, creditors, labour unions, and customers.

A

EXTERNAL USERS

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4
Q

The area of accounting that serves the decision-making needs of internal users.

A

MANAGERIAL ACCOUNTING

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5
Q

The area of accounting that focuses on external reporting and meeting the needs of external users.

A

FINANCIAL ACCOUNTING

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6
Q

A group of individuals who come together to pursue a common set of goals and objectives (e.g., business & non-business)

A

ORGANIZATION

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7
Q

A type of organization that sells products and/or services for profit.

A

BUSINESS ORGANIZATION

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8
Q

A type of organization that exists to meet various societal needs and does not have profit as a goal (e.g., charity or hospital)

A

NON-BUSINESS ORGANIZATION

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9
Q

A business owned by one person and is not a separate legal entity from the owner.

A

PROPRIETORSHIP

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10
Q

Two characteristics of a proprietorship

A

UNLIMITED LIABILITY & SAME LEGAL ENTITY

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11
Q

One characteristic of a sole proprietorship that means if the business could not pay its debts, the owner would be responsible even if the business’s debts were greater than the owner’s personal resources.

A

UNLIMITED LIABILITY

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12
Q

A business owned by two or more individuals, is not a separate legal entity, and its owners are typically subject to unlimited liability.

A

PARTNERSHIP

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13
Q

A business owned by one or more owners, AKA shareholders.

A

CORPORATION

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14
Q

Units of ownership in a corporation

A

SHARES OR STOCKS

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15
Q

A corporation that holds its shares privately and does not sell them publicly.

A

PRIVATE ENTERPRISE (PE)

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16
Q

A corporation that sells its shares publicly, typically on a stock exchange.

A

PUBLICALLY ACCOUNTABLE ENTERPRISE (PAE)

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17
Q

The owners or shareholders of a corporation are not responsible for the corporation’s debts, meaning that the most they can lose is what they invested in the corporation.

A

LIMITED LIABILITY

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18
Q

A set of principles and assumptions that guide the preparation of financial statements, and that have gained wide-spread acceptance among users and practitioners.

A

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

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19
Q

SIX QUALITATIVE CHARACTERISTICS OF GAAP

A

Relevance, faithful representation, comparability, verifiability, timeliness, and understandability

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20
Q

Accounting principle that requires that each economic entity maintain separate records.

A

BUSINESS ENTITY

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21
Q

Accounting principle that requires a business to use the same accounting policies and procedures from period to period.

A

CONSISTENCY

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22
Q

Accounting principle that requires each economic transaction be based on the actual original cost (also known as historical cost principle).

A

COST

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23
Q

Accounting principle that requires accounting information communicate sufficient information to allow users to make knowledgeable decisions. Example: A business is applying to the bank for a $1,000,000 loan. The business is being sued for $20,000,000 and it is certain that it will lose. The business must tell the bank about the lawsuit even though the lawsuit has not yet been finalized.

A

FULL DISCLOSURE

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24
Q

Accounting principle that assumes a business will continue for the foreseeable future.

A

GOING CONCERN

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25
Q

Accounting principle that requires financial transactions be reported in the period in which they occurred/were realized. Example: Supplies were purchased March 15 for $700. They will be recorded as an asset on March 15 and then expensed as they are used

A

MATCHING

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26
Q

Accounting principle that requires a business to apply proper accounting only for items that would affect decisions made by users (e.g., Example: The business purchases a stapler for $5 today. Technically, the stapler will last several years so should be recorded as an asset. However, the business will record the $5 as an expense instead because depreciating a $5 item will not impact the decisions of financial information)

A

MATERIALITY

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27
Q

Accounting principle that requires financial information be communicated in stable units of money (e.g., Land was purchased in 1940 for $5,000 Canadian. It is maintained in the accounting records at $5,000 Canadian and is not adjusted.)

A

MONETARY UNIT

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28
Q

Accounting principle that requires revenues be recorded when earned and expenses be recorded when incurred, which is not necessarily when cash is received (in the case of revenues) or paid (in the case of expenses) (e.g., A sale occurred on March 5. The customer received the product on March 5 but will pay for it on April 5. The business records the sale on March 5 when the sale occurred even though the cash is not received until April 5.)

A

RECOGNITION

29
Q

What evaluates the performance of an entity, measures its progress, and communicates info to external users?

A

FINANCIAL STATEMENTS

30
Q

Financial statement that communicates information about a business’s financial performance by summarizingrevenueslessexpensesover a period of time.

A

INCOME STATEMENT

31
Q

Created when a business provides products or services to a customer in exchange for assets

A

REVENUES

32
Q

The assets that have been used up or the obligations incurred in the course of earning revenues.

A

EXPENSES

33
Q

Financial statement that provides information about how the balances in Share capital and Retained earnings changed during the period.

A

STATEMENT OF CHANGES IN EQUITY

34
Q

Represents how much shareholders have invested

A

SHARE CAPITAL

35
Q

When a corporation sells its shares to shareholders.

A

ISSUING SHARES

36
Q

The sum of all net incomes earned by a corporation over its life, less any distributions of these net incomes to shareholders

A

RETAINED EARNINGS

37
Q

Distributions of net income to shareholders.

A

DIVIDENDS

38
Q

Financial statement that shows a business’s assets, liabilities, and equity at a point in time (aka statement of financial position)

A

BALANCE SHEET

39
Q

Economic resources that provide future benefits to the business. Examples include cash, accounts receivable, prepaid expenses, equipment, and trucks

A

ASSETS

40
Q

Coins and currency, usually held in a bank account, and is a financial resource with future benefit because of its purchasing power.

A

CASH

41
Q

Represents amounts to be collected in cash in the future for goods sold or services provided to customers on credit.

A

ACCOUNTS RECEIVABLE

42
Q

Assets that are paid in cash in advance and have benefits that apply over future periods.

A

PREPAID EXPENSES

43
Q

An obligation to pay an asset in the future.

A

LIABILITY

44
Q

Obligations to pay a creditor for goods purchased or services rendered.

A

ACCOUNTS PAYABLE

45
Q

Represents an advance payment of cash from a customer for services or products to be provided in the future.

A

UNEARNED REVENUE

46
Q

Represents the net assets owned by the owners (shareholders) and consists of share capital and retained earnings

A

EQUITY

47
Q

Explains how the balance in cash changed over a period of time by detailing the sources (inflows) and uses (outflows) of cash by type of activity: operating, investing, and financing, as these are the three types of activities a business engages in.

A

STATEMENT OF CASH FLOW (SCF)

48
Q

A set of less onerous GAAP-based standards developed by the Canadian Accounting Standards Board (AcSB).

A

Accounting Standards for Private Enterprises (ASPE)

49
Q

The body that governs accounting standards in Canada.

A

Canadian Accounting Standards Board (AcSB).

50
Q

Information that possesses the quality of ______ has the ability to make a difference in the decision-making process.

A

RELEVANCE

51
Q

Information that possesses the quality of ________ is complete, neutral, and free from error.

A

FAITHFUL REPRESENTATION

52
Q

Information that possesses the quality of __________ tells users that businesses utilize similar accounting practices.

A

COMPARABILITY

53
Q

Information that possesses the quality of _______ means that others are able to confirm that the information faithfully represents the economic activities of the business.

A

VERIFIABILITY

54
Q

Information that possesses the quality of __________ is available to decision makers in time to be useful.

A

TIMELINESS

55
Q

Information that possesses the quality of ____________ is clear and concise

A

UNDERSTANDABILITY

56
Q

The organization that issues the IFRS.

A

International Accounting Standards Board (IASB)

57
Q

When revenues are greater than expenses

A

NET INCOME

58
Q

When expenses are greater than revenue

A

NET LOSS

59
Q

Someone who owns the right to receive payment from an individual or business.

A

CREDITOR

60
Q

Assets minus liabilities

A

NET ASSETS

61
Q

When assets are financed through liabilities

A

DEBT

62
Q

The day-to-day processes involved in selling products and/or services to generate net income.

A

OPERATING ACTIVITIES

63
Q

The buying of assets needed to generate revenues.

A

INVESTING ACTIVITIIES

64
Q

The raising of money needed to invest in assets.

A

FINANCING ACTIVITIES

65
Q

Shows that the total assets of a business must always equal the total claims against those assets by creditors and owners.

A

ACCOUNTING EQUATION (ASSETS = LIABILITIES + EQUITY)

66
Q

Economic exchange

A

FINANCIAL TRANSACTION

67
Q

The 12-month period that financial statements are prepared at the end of.

A

FISCAL YEAR

68
Q

Time period when accounting reports are prepared at the end of each 12-month period

A

YEAR END

69
Q

When financial statements are prepared around every three months

A

INTERIM FINANCIAL STATEMENTS

Accounting (11 decks)

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