Lesson 2: Know Your Financial Statement

Question 1

IFRS

Answer 1

INTERNATIONAL FINANCIAL REPORTING STANDARDS

Question 2

ASPE

Answer 2

ACCOUNTING STANDARDS FOR PRIVATE ENTITIES

Question 3

Significant Difference between IFRS and ASPE

Answer 3

EMPLOYEE BENEFITS

LEASES

REVENUE

AGRICULTURE

FINANCIAL INSTRUMENTS

INVESTMENT PROPERTY

RELATED PARTY TRANSACTIONS

Question 4

Major Differences between IFRS and ASPE

Answer 4

FOREIGN EXCHANGE

INCOME TAXES

PROVISIONS

SUBSIDIARIES AND CONSOLIDATIONS

IMPAIRMENT OF NON-FINANCIAL ASSETS

JOINT ARRANGEMENTS AND ASSOCIATES

SHARE BASED PAYMENTS

Question 5

Any transactions to be recorded in the system would always impact two different areas of the financial statement. And the amount of each entry has to be equal.

Answer 5

DOUBLE ENTRY SYSTEM

Question 6

Double entry system examples

Answer 6

(1) REVENUE AND COLLECTION

WHEN BILLING OUT A CUSTOMER, THE ENTRY IS:
 DR. ACCOUNTS RECEIVABLE 100
         CR. REVENUE                          100

WHEN THE CUSTOMER MADE A PAYMENT, THE ENTRY IS:

DR. CASH                        100
          CR. ACCOUNTS RECEIVABLE            100

(2) INVOICES AND PAYMENTS

  WHEN AN INVOICE IS RECEIVED, THE ENTRY IS.

              DR. EXPENSE / JOB COST    50
                                       CR. ACCOUNTS PAYABLE                   50

   WHEN PAYMENT IS MADE. THE ENTRY IS  
             DR. ACCOUNTS PAYABLE           50
                                        CR. CASH        50

(3) LOANS AND MORTGAGES

     WHEN BORROWING FUNDS FROM THE BANK, THE ENTRY IS

                DR. CASH                      1000
                                      CR. MORTGAGE AND LOANS                 1000

Question 7

Basis of accounting recognizes all transactions based on the time when cash is exchanged hands.

Widely used in smaller businesses.

Answer 7

CASH BASIS

Question 8

Basis of accounting recognizes when revenue is earned and expenditures are consumed.

Answer 8

ACCRUAL BASIS

Question 9

Level of assurance provided by an external auditor.

Answer 9

• NOTICE TO READER / COMPILATION
• REVIEW
• AUDIT

Question 10

No assurance is provided in terms of the accuracy of the financial statements. Auditors simply compile clients’ information and produce the financial statement.

Answer 10

NOTICE TO READER / COMPILATION

Question 11

External auditors review financial statements based in inquiries only. Auditors will perform verifications through inquiries and variance analysis.

Answer 11

REVIEW

Question 12

Highest level of assurance / requires examinations of source documentation on a sample basis.

Answer 12

AUDIT

Question 13

Level of assurance required by the Bank

Answer 13

REVIEW

AUDIT

Question 14

Is is a 12-month period ending date that the company uses for accounting purposes.

Answer 14

FISCAL YEAR END

Question 15

It is a 12-month period ending date ending on the calendar year. Dec. 31

Answer 15

CALENDAR YEAR - END

Question 16

The quarter end is driven by the fiscal year-end date. For example, if the Fiscal Year End is September 30,2023, the quarterly ends on December 31, 2022, March 31, 2023, and June 30,2023

Answer 16

FISCAL QUARTER END

Question 17

The end of each month of the fiscal year.

Answer 17

MONTH END

Question 18

One worksheet that combines the balances of the accounts that shows the debt and credit are equal.

Answer 18

TRIAL BALANCE

Question 19

A record of transactions of all accounts.

Answer 19

GENERAL LEDGER (GL)

Question 20

Booking of activities that are recorded directly to the general ledger.

Answer 20

GENERAL JOURNAL ENTRIES

Question 21

A subset of the general ledger that will flow into the general ledger accounts.

Answer 21

SUBLEDGER

Question 22

Flow of information (GENERAL)

Answer 22

JOURNAL ENTRIES

SUBLEDGER

GENERAL LEDGER

 TRIAL BALANCE

    FINANCIAL REPORT

Question 23

Captures a company’s asset and liabilities position at a given time.

Answer 23

BALANCE SHEET

Question 24

Key sections of a Balance Sheet

Answer 24

ASSET

LIABILITIES

EQUITY

Question 25

Ownership or control over something that can provide short term and / or long term future benefit.

Answer 25

ASSET

Question 26

Benefits that be consider asset

Answer 26

IMMEDIATE LIQUIDITY (CASH AND DEPOSITS) THE RIGHT TO FUTURE CASHFLOW (ACCOUNTS RECEIVABLE, INVENTORY) INTANGIBLE RIGHTS (PATENT AND TRADEMARKS) LONG TERM ESTABLISH (BUILDING, LAND, EQUIPMENT, VEHICLE)

Question 27

Obligations that will be settled immediately or in the future with economic benefit or specific performances.

Answer 27

LIABILITIES

Question 28

Ways to settle liabilities

Answer 28

CASH (ACCOUNTS PAYABLE, BANK INDEBTEDNESS, SHORT TERM LINE OF CREDIT ) SPECIFIC FUTURE PERFORMANCE (DEPOSIT) FUTURE CASH FLOW (LONG TERM DEBT, MORTGAGE, CAPITAL LEASE)

Question 29

Represents the net stake that a shareholder has in the company. Total assets - total liabilities = total equity (deficit) Represents the cumulation of wealth (deficit) in this company. Each year, equity is increase by net profit or reduced by net loss generated from operations.

Answer 29

EQUITY

Question 30

It captures the profit and loss positions of the company during a given period. Revenue. Cost of good sold / Direct cost Gross margin Overhead costs Other income / expense Income taxes Net income / loss Review sample income statement

Answer 30

INCOME STATEMENT

Question 31

Regular types of notes disclosures.

Answer 31

FIXED ASSETS SCHEDULE SHARE CAPITAL NATURE OF BUSINESS ACCOUNTING POLICIES MAJOR DEBT / LOAN DETAILS RELATED PARTY TRANSACTIONS CONTINGENCIES SUBSEQUENT EVENT

Question 32

A continuity schedule that shows the costs and amortization of the assets.

Answer 32

FIXED ASSETS SCHEDULE

Question 33

Original share capital contribution to the company.

Answer 33

SHARE CAPITAL

Question 34

Usually a high level of business activities and incorporation date / location.

Answer 34

NATURE OF BUSINESS

Question 35

Choice of key accounting policies.

Answer 35

ACCOUNTING POLICIES

Question 36

A list of loans and the key terms including expiry date, interest date, and security.

Answer 36

MAJOR DEBT / LOAN DETAILS

Question 37

Any transactions that involve non-arms length parties.

Answer 37

RELATED PARTY TRANSACTIONS

Question 38

Potential risks and lawsuits.

Answer 38

CONTINGENCIES

Question 39

Any major events that occurred during the year - end and the report issuance date.

Answer 39

SUBSEQUENT EVENT

Question 40

It captures all the costs spent on a job including general condition, labour, material, contract, misc

Answer 40

JOB COST REPORT

Question 41

Monthly review include

Answer 41

PAST MONTH JOB COST DETAILS - REVISION OF CODING MAY OCCUR PAST MONTH BILLING - REVIEW OUTSTANDING RECEIPTS' STATUS FROM CUSTOMERS COMMITMENT REPORT - REVIEW COST UP TO DATE AND COMMITMENT BALANCE BUDGET REVIEW - REVIEW CHANGE ORDERS TO ENSURE ACCOUNTING RECORDS AND OPERATIONAL SYSTEMS' RECORDS ARE CONSISTENT. OVERHEAD REVIEW - FOR ALL OVERHEAD ITEMS ON INCOME STATEMENT, PROJECT MANAGER IS TO PROVIDE EXPLANATIONS ON WHY THEY ARE NOT RECOVERABLE

Question 42

A set of accounting standards that govern how particular types of transactions and events should be reported in financial statement. Developed by International Accounting Standards Board

Answer 42

IFRS

Question 43

Made-in- Canada standards

Answer 43

ASPE