Week 1

Question 1

income statement

Answer 1

shows revenues less the expenses to yield a net income/loss over a period of time

Question 2

statement of owners equity

Answer 2

shows the change in the equity of the owner over a period of time

Question 3

balance sheets

Answer 3

give the value of assets, liabilities, and owners equity at a point in time

Question 4

assets =

Answer 4

liabilities + equity

Question 5

cash flow

Answer 5

shows cash received and spent over a period of time

Question 6

business entity principle

Answer 6

each business must keep its own accounting records, unique to itself and separate from its owner

Question 7

cost principle

Answer 7

assets are to be recorded at their original purchase cost, changes in value are not recognized

Question 8

objectivity principle

Answer 8

financial statements must be prepared with independent, unbiased, and verifiable evidence

Question 9

going concern principle

Answer 9

assumes that the business will continue to operate instead of being sold/closed

Question 10

monetary unit pinciple

Answer 10

transactions are expressed in dollars and cents and we assume that the dollar is stable, any economic changes to the national currency does not affect the value of the transactions reported

Question 11

revenue recognition principle

Answer 11

revenues are recorded when they are earned, payment is not a consideration for recording the transaction

Question 12

assets

Answer 12

what the business owns

Question 13

liabilities

Answer 13

debt of the business

Question 14

owner’s equity

Answer 14

describes what is owned by the owner

Question 15

transactions

Answer 15

the exchange of one item for something else

Question 16

generally accepted accounting principles (GAAP):

Answer 16

underlying concepts adopted by the accounting profession that make up acceptable accounting practices for the preparation of financial statements

Question 17

International Financial Reporting Standards (IFRS)

Answer 17

the standards for financial reporting that came into effect January 2011 in Canada for PAEs

Question 18

Accounting Standards for PEs (ASPE)

Answer 18

rules created by the accounting standards board to govern accounting for Canadian PEs

Question 19

Purpose of GAAP

Answer 19

to ensure the usefulness of financial info for external users; info must be relevant and faithfully represented

Question 20

relevance

Answer 20

info must make a difference in the decision making process

Question 21

faithful representation

Answer 21

a quality of info that is complete, neutral, and free from error

Question 22

qualities of info that enhance the usefulness of financial info

Answer 22

comparable, verifiable, timely, understandable

Question 23

comparability

Answer 23

similarity; ability to be compared with other info

Question 24

verifiability

Answer 24

a quality of info that different users could agree was faithfully represented

Question 25

timeliness

Answer 25

info is available to decision makers to influence their decisions

Question 26

understandability

Answer 26

a quality of info that is useful to users with reasonable knowledge of accounting and business and economic activities

Question 27

4 methods used to determine $ value at which to record a transaction

Answer 27

historical cost, current cost, realizable value, present value

Question 28

historical cost

Answer 28

based on actual $ value received/paid

Question 29

current cost

Answer 29

amount of $ it would cost to acquire the liability today

Question 30

realizable value

Answer 30

reported at the amount that would be obtained by selling the asset or paying off the liability in the normal course of business

Question 31

present value

Answer 31

assets reported at the present value of future expected cash flows, after discounting to reflect time value of $ in terms of expected interest/inflation

Question 32

financial statements

Answer 32

products of accounting that report on the financial performance and condition of the organization

Question 33

fiscal year

Answer 33

a 1 yr reporting period a.k.a. accounting year

Question 34

natural business year

Answer 34

a 12 month period that ends when a company’s sales activities are at their lowest

Question 35

revenue

Answer 35

the value of assets received or receivable as a result of selling goods/services to customers