Chapter 16

Question 1

Accounting?

Answer 1

Process of analyzing, collecting and recording financial information.

Question 2

Managerial Accounting?

Answer 2

Reports for internal use by company.

Question 3

Financial Accounting?

Answer 3

Reports used externally by those outside the company, i.e. investors and government.

Question 4

What was the GAAP?

Answer 4

Generally Accepted Accounting Principles. Standard accounting rules and practices used in Canada until January 2011.

Question 5

What is the IFRS

Answer 5

International Financial Reporting Standards. Globally accepted accounting practices that replaced the GAAP January 1st 2011 for public enterprises and willing private enterprises.

Question 6

What is the ASPE?

Answer 6

Accounting Standards for Private Enterprise. GAAP replacement for private industries that didn’t adopt IFRS.

Question 7

What is an Annual Report?

Answer 7

Yearly document that describes a company’s financial status, activities of the last year and future prospects.

Question 8

Assets

Answer 8

What a company owns that has value.

Question 9

Liabilities

Answer 9

Debt

Question 10

Owner’s Equity

Answer 10

Assets minus Liabilities.

Question 11

Double Entry Book Keeping

Answer 11

Method of accounting where each entry is recorded twice to maintain balance.

Question 12

Accounting Equation

Answer 12

Assets = Liabilities + Owner’s Equity.

Question 13

Current Assets

Answer 13

Possessions of the company that can be converted to cash within the year.

Question 14

Liquidity

Answer 14

Rate at which assets can turn into cash

Question 15

Capital Assets

Answer 15

Long term assets used for more than a year i.e. buildings, printers.

Question 16

Amortization/Depreciation

Answer 16

is the paying off of debt with a fixed repayment schedule in regular installments over a period of time for intangible goods while depreciation is for tangible goods.

Question 17

Intangible Assets

Answer 17

Non physical assets i.e. ideas, patents, copyrights

Question 18

Goodwill

Answer 18

Value paid for a company greater than its net tangible assets.

Question 19

Current Liabilities

Answer 19

Debt that needs to be payed off within the year.

Question 20

Long-Term Liabilities

Answer 20

Debt that will take more than a year to pay off.

Question 21

Retrained Earnings

Answer 21

Revenue that is reinvested in the business or used to pay debt instead of being given to shareholders.

Question 22

Income Statement

Answer 22

Summarizes company’s financial activity over a certain period of time.

Question 23

Income

Answer 23

Total earnings (Revenue + any other earnings)

Question 24

Gross Sales

Answer 24

Total dollar amount of company’s sales

Question 25

Net Sales

Answer 25

Gross Sales - discounts, returns and allowances

Question 26

Expenses

Answer 26

Cost of making money

Question 27

Cost of Goods Sold

Answer 27

Total expense of buying/ producing company's good or services.

Question 28

Gross Profit

Answer 28

Net Sales - COGS

Question 29

Operating Expenses

Answer 29

Expenses of running a business not directly related to producing/ buying products

Question 30

Net Profit

Answer 30

Net Revenue - Net Expenses > 0

Question 31

Net Loss

Answer 31

Net Revenue - Net Expenses < 0

Question 32

Statement of Cash Flow

Answer 32

Financial Statement that summarizes input and output of cash during a certain period, usually a year.