chapter 1

Question 1

Accounting consists of three basic activities

Answer 1

identification / recording / communication

Question 2

Internal Users

Answer 2

Finance/ Marketing / Management/ Human Resources

Question 3

External Users

Answer 3

Investors/ Creditors/ Investors

Question 4

Monetary unit assumption

Answer 4

requires that companies include in the accounting records only transaction data that can be expressed in terms of money

Question 5

Economic entity assumption

Answer 5

requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

Question 6

forms of business ownership

Answer 6

1. Proprietorship : owned by one person/ owner is often manager or operator/ Owner receives any profits, suffers any losses, and is personally liable for all debts
2. Partnership : Owned by two or more persons/ often reteil and service-type businesses/ Generally unlimited personal liability/ Partnership agreement
3. Corporation : Ownership divided into shares/ separate legal entity organised under corporation law/ limited liability

Question 7

income statement

Answer 7

report the profitability of the company’s operations over a specific period of time

Question 8

retained earnings statement

Answer 8

report the changes in retained earnings for a specific period of time

Question 9

statement of financial position

Answer 9

reports the assets, liabilities, and equity at a specific date

Question 10

statement of cash flow

Answer 10

information on the cash receipts and payments for a specific period of time

Question 11

comprehensive income statement

Answer 11

other comprehensive income items are not part of net income

Question 12

IFRS is considered to be more principles-based and less rules-based than GAAP

Answer 12

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