Ch 1

Question 1

Which of the following statements about users of accounting information is incorrect?
A) Management is an internal user
B) Taxing authorities are external users
C) Present creditors are external users
D) Regulatory authorities are internal users

Answer 1

D) Regulatory authorities are actually external users

Question 2

The three types of business organization forms are:

Answer 2

Proprietorship’s, partnerships, and corporations

Question 3

Which of the following statements about International Financial Reporting Standards (IFRS) is correct?
A) All canadian enterprise must follow IFRS
B) Under IFRS, companies that operate in more than one country must produce separate financial statements for each of those countries
C) All canadian publicly accountable enterprises must use IFRS
D) Canadian private enterprises are not allowed to use IFRS. They must use ASPE.

Answer 3

C - All Canadian publicly accountable enterprises must use IFRS

Question 4

What is the Going Concern Assumption?

Answer 4

The going Concern assumption is the assumption that the reporting entity will continue to operate in the future

Question 5

When should an event be recognized in the accounting records?

Answer 5

An event should be recognized in the accounting records if there is a change in assets, liabilities, or owner’s equity and the change can be measured in monetary terms

Question 6

Performing services on account will have the following effects on the components of the basic accounting equation?
A) Increase assets and decrease owner’s equity
B) Increase assets and increase owner’s equity
C) Increase assets and increase liabilities
D) Increase liabilities and increase owner’s equity

Answer 6

B) Increase assets and increase owner’s equity

Question 7

Bing company pays $700 for store rent for the month. The basic analysis of this transaction on the accounting records is:
A) The asset Cash is increased by $700; expense Rent Expense is increased by $700
B) Asset Cash is decreased by 700; expense Rent Expense is increase by 700
C) Asset Cash is decreased by 700; liability Rent Payable is increased by 700
D) Asset Cash is increased by 700; liability Rent Payable is decreased by 700

Answer 7

B) Asset cash is increased, Rent expense is increased

Question 8

What is included on the Balance Sheet?

Answer 8

Assets 
    Cash
    Accounts receivable
    Supplies
    Equipment
Liabilities and Owner's Equity
    Liabilities
        Accounts payable
    Owner's equity
        Owner, capital

Question 9

What is included on the Income Statement?

Answer 9

Revenues
    Service revenue
Expenses
    Rent expense
    Salaries expense
       Total expenses
Profit

Question 10

Which statement does the Profit from the Income Statement go and where?

Answer 10

Statement of Owner’s Equity

Owner, capital, sept 1, 2017
Add: Investments
Profit

Question 11

What is the proper order to prepare financial statements?

Answer 11

1. Income Summary
2. Statement of owner’s equity
3. Balance sheet
4. Cash flow statement

Question 12

For the Income Statement, Statement of Owner’s Equity, and Cash Flow Statement and Balance Sheet: Which report information for a period of time and which shows information at a point in time?

Answer 12

IS, SoOE, CFS all are for a period of time.

Balance sheet is for a point in time

Question 13

December 31st, Bruske Company has assets of $12,500; revenues of $10,000; expenses of $5,500; beginning owner’s capital of $8000; drawings of $1500. What are the liabilities?

A) $1500
B) $2500
C) $500
D) $3500

Answer 13

A) $1500