Unit 1

Question 1

Accounting

Answer 1

The process of identifying, measuring, recording, communicating a organizations financial activity to it’s users

Question 2

Internal users

Answer 2

plan, organize and operate the economic activies of an organization.

Question 3

managerial accounting

Answer 3

provides financial information thatserves the decision making needs of internal users

Question 4

financial accounting

Answer 4

provides financial information that serves the needs of external users.

Question 5

external users

Answer 5

Investors, creditors, labour unions, customers. Users who do not work for the company.

Question 6

organization

Answer 6

a group of individuals who come together to achieve mutual goals and objectives

Question 7

business organization

Answer 7

provides a service or sells a product for profit

Question 8

non-business organization

Answer 8

exists to meet various societal needs and it does not have the goal of earning a profit

Question 9

proprietorship

Answer 9

a business owned by one person. Business and owner are not a seperate legal entity. Unlimited liability

Question 10

partnership

Answer 10

a business owned by 2+ individuals. Not a seperate legal entity. Unlimited liability

Question 11

corporation

Answer 11

a business owned by 2+ individuals who are shareholders. Share holders own shares. Seperate legal entity. Limited liability. Corporation managed by a board of directors which is elected by shareholders

Question 12

shares

Answer 12

units of ownership in a corporation

Question 13

common shares

Answer 13

when there is only 1 type of share in a corporation.

Question 14

board of directors

Answer 14

manages a corporation, but does not participate in day-to-day. Hires officers of corporation for this.

Question 15

hire officers of a corporation

Answer 15

President, VP finance, VP marketing, VP production

Question 16

PE (private enterprise)

Answer 16

corporation whose shares are not available for public sale

Question 17

PAE (publicly accountable enterprise

Answer 17

corporation whose shares are available for public sale

Question 18

goal of accounting

Answer 18

that information provided to users is useful

Question 19

GAAP (Generally Accepting Accounting Principles)

Answer 19

ethics that guide accountants to report information that is relevant and faithfully represents a business’s financial activitiesé 6 characteristics, 9 principles

Question 20

characteristics of GAAP

Answer 20

1. relevancy, 2. faithful representation, 3. comparability, 4. verifiability, 5. timeliness, 6. understandability

Question 21

Relevancy

Answer 21

characteristic of GAAP. Information is relevant to decision making process

Question 22

faithful representation

Answer 22

characterstic of GAAP. Information is complete, neutral and error free. Does not omit information.

Question 23

verifiable

Answer 23

characterstic of GAAP. others could confirm information faithfully represents the financial activity of organization.

Question 24

comparability

Answer 24

characterstic of GAAP. All information uses similar accounting practices

Question 25

timeliness

Answer 25

characterstic of GAAP. Information is provided in time to be useful.

Question 26

understandability

Answer 26

characterstic of GAAP. information is clear and easy to understand

Question 27

business entity

Answer 27

GAAP principle. Each entity keeps seperate financial records.

Question 28

consistency

Answer 28

GAAP principle. A business uses the same accounting procedures and policies from period to period.

Question 29

cost

Answer 29

GAAP principle. Economic transaction are recorded at actual original cost (the historic cost principle)

Question 30

full disclosure

Answer 30

GAAP principle. accounting information communicates all information needed for users to make financial decisions.

Question 31

going concern

Answer 31

GAAP principle. assumes a business will continue to exist in the forseeable future.

Question 32

matching

Answer 32

GAAP principle. Financial transactions are recorded in the period in which they occur/or were realized

Question 33

materiality

Answer 33

GAAP principle. requires businesses to use proper accounting procedures only for items that will affect decisions made by users. Ex. stapler an asset or expense.

Question 34

monetary unit

Answer 34

GAAP principle. financial transactions are recorded in a stable unit of money

Question 35

recognition

Answer 35

GAAP principle. revenue is reported in period it is earned; expense reported in period it is incurred. Not necessarily when cash is received or payed.

Question 36

IFRS

Answer 36

Internation Financial Reporting Standards. for PAEs. GAAP based on this. Issued by IASB

Question 37

IASB

Answer 37

International Accounting Standards Board.. Global. Tries to regulate accounting standards through a process of open and transparent discussions among corporations, financial institutions, and accounting firms around the world.

Question 38

ASPE

Answer 38

Accounting Standards for Private Entreprise. less arduous that IFRS. based on GAAP

Question 39

AcSB

Answer 39

Canadian Accounting Standards Board. Governs accounting standards in Canada. Developped ASPE

Question 40

financial statements

Answer 40

Income Statement; Statement Changes in Equity; Balance Sheet; Statement of Cash Flow (SCF); Notes

Question 41

Income Statement

Answer 41

Revenues less expenses equals a net income or net loss.

Question 42

revenue

Answer 42

services or product are exchanged for an asset

Question 43

expenses

Answer 43

the assets used in the process to obtain revenues

Question 44

statement changes in equity

Answer 44

shows how share capitol, retained earnings change during a period

Question 45

Issuing of shares

Answer 45

when share holders buy shares

Question 46

retained earnings

Answer 46

accumulation of all net incomes of a business over it's life.

Question 47

Dividends

Answer 47

distribution of retained earnings to share holders. How much they get depends on how many shares they own.

Question 48

Balance Sheet

Answer 48

shows assets, liabilities, equity, for a business at a given point in time. shows the accounting equation and double-entry accounting

Question 49

assets

Answer 49

economic resources that can have future benefits. Can be financed through liability or equity.

Question 50

liaibility

Answer 50

obligation to pay for an asset in the future

Question 51

Statements of Cash Flow (SCF)

Answer 51

for a period of time. Details the inflow and outflow of cash for operating activities; financing activities; investing activities

Question 52

Notes

Answer 52

accompany financial statements. Give additional detail.

Question 53

Operating Activities

Answer 53

the day-to-day activities to generate net income

Question 54

Investing activities

Answer 54

buying assets in order to create more revenue

Question 55

financing activities

Answer 55

raises money to invest in assets

Question 56

accounting equation

Answer 56

Assets = Liabilities + Equity

Question 57

financial transaction

Answer 57

an economical echange recorded through source documentation.

Question 58

double-entry accounting

Answer 58

with each financial transaction there is a change on each side of the accounting equation. This is double-entry accounting.

Question 59

fiscal year

Answer 59

end of a 12 month period

Question 60

annual financial statements

Answer 60

produced at year-end (end of 12 month fiscal year)

Question 61

interim financial statements

Answer 61

may be produced at interim (ex. every 3 months) especially for corporations.