Deck 1: Accounting in Action

Question 1

A corporation may only be formed under the federal legislation.

Answer 1

False

Question 2

A corporation is only subject to the federal laws of corporations.

Answer 2

False

Question 3

An advantage of the corporation is that the shares of the corporation are easily transferable.

Answer 3

True

Question 4

A corporation's ownership is divided into transferable shares.

Question 5

Employees are an example of an external user.

Question 6

Owners of a corporation are responsible for reporting the business profits on their personal income taxes.

Question 7

In a proprietorship, there may be two or more owners.

Question 8

Only the accountants should be concerned with ethics when the financial statements are being prepared.

Question 9

Accounting information is used only by external users with a direct financial interest in a company.

Question 10

A corporation may be formed under either the provincial legislation or the federal legislation.

Question 11

Creditors are an example of an internal user of accounting information.

Question 12

Accounting is the information system that identifies, records, and communicates the economic events of an organization to a wide variety of interested users.

Question 13

In a partnership, all of the partners will generally have unlimited liability for the debts of the partnerships.

Question 14

One of the disadvantages of a proprietorship is that there is unlimited liability for the owner.

Question 15

Ethics are critical in the preparation of accounting information.

Question 16

A working knowledge of accounting can be useful to doctors or lawyers.

Question 17

Under the proprietorship form of business organization, no distinction is made between the business as an economic unit and its owner.

Question 18

A partnership must have at least two people in the partnership.

Question 19

The main objective of financial statements is to provide useful information to management.

Question 20

One of the main advantages of a corporation is the limit of liability for the shareholders of the company.

Question 21

Assets are present obligations, arising from past events, to make a future payment or to provide services.

Question 22

Liabilities are the resources controlled by a business that are expected to provide future economic benefits.

Question 23

The cost and fair value of an asset are the same at the time of acquisition and in all subsequent periods.

Question 24

The monetary unit concept prevents some relevant information from being recorded in the accounting records.

Question 25

Corporations incorporated under provincial legislation report under ASPE and corporations incorporated under federal legislation report under IFRS.

Question 26

The reporting entity concept requires that an entity's business activities be combined with the activities of its owner for financial reporting purposes.

Question 27

A private company is one that issues shares to the public.

Question 28

An obligation to pay cash to a supplier in the future is called accounts payable.

Question 29

The going concern assumption is the assumption that a company will NOT be successful in the foreseeable future.

Question 30

In Canada, the main standard setting board is the Accounting Standards Board.

Question 31

Accounts payable is the asset created when a company sells services or products to customers who promise to pay cash in the future.

Question 32

The monetary unit concept assumes that all transactions will take place in Canadian dollars.

Question 33

Recognition is the process of recording a transaction in the accounting records.

Question 34

Measurement is the process of determining the amount that should be recognized.

Question 35

The going concern assumption is the assumption that a company will continue to operate in the foreseeable future.

Question 36

GAAP stands for Generally Accepted Accounting Principles.

Question 37

In a situation with an ethical consideration, there is only one ethical course of action which can be followed.

Question 38

Fair value measurements are always more relevant to users of the financial statements.

Question 39

Both IFRS and ASPE are considered "principles-based" as opposed to "rules-based" standards.

Question 40

Publicly Traded Corporations can choose to report under either ASPE or IFRS.

Question 41

Owner's claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

Question 42

An Income statement will give the answer to the question - "where did all the cash get used during this month?"

Question 43

Purchasing supplies on credit will result in an increase in assets and an increase in liabilities.

Question 44

A balance sheet presents the revenues and expenses, and the resulting profit or loss for a specific period of time.

Question 45

Expenses are the costs of assets that are consumed or services used in ordinary business activities.

Question 46

An accounting transaction occurs events in a business cause changes in the business's economic resources or changes to the claims on those resources.

Question 47

Profit results when a company's expenses are higher than its revenues.

Question 48

Which of the following would NOT be considered an external user of accounting data for the ABC Company?

A) Bank of Montreal
B) Canada Revenue Agency
C) employees
D) customers

Question 49

The owner's claim on the assets of the company is known as owner's equity.

Question 50

An external user could be

A) employees.
B) management.
C) Canada Revenue Agency.
D) the human resource director.

Question 51

Which of the following would NOT be considered an internal user of accounting data for the ABC Company?

A) president of the company
B) production manager
C) merchandise inventory clerk
D) president of the employees' labour union

Question 52

The main objective of the financial statements is

A) to show the profit of a company.
B) to allow customers to determine whether a company will honour its product warranties.
C) to provide useful information to investors and creditors to make decisions about a business.
D) to determine how many employees the company can afford to hire each year.

Question 53

An external user would NOT include

A) a creditor of the company.
B) Canada Revenue Agency.
C) an employee.
D) the company's bank.

Question 54

The proprietorship form of business organization

A) must have at least three owners in most provinces.
B) is characterized by having a limited life.
C) combines the records of the business with the personal records of the owner.
D) is characterized by a legal distinction between the business as an economic unit and the owner.

Question 55

A Balance sheet can also be called a Statement of financial position.

Question 56

A Cash flow statement is organized into three categories, operating, financing and investing activities of the company.

Question 57

Revenues decrease owner's equity and expenses increase owner's equity.

Question 58

A business organized as a corporation

A) is not a separate legal entity in most provinces.
B) requires that shareholders be personally liable for the debts of the business.
C) is owned by its shareholders.
D) terminates when one of its original shareholders dies.

Question 59

A balance sheet reports the assets, liabilities, and owner's equity at a specific date.

Question 60

Which of the following would be considered an internal user of accounting data for the ABC Company?

A) president of the company
B) production manager
C) merchandise inventory clerk
D) all of the above

Question 61

The partnership form of business organization

A) is a separate legal entity.
B) is a common form of organization for service-type businesses.
C) enjoys an unlimited life.
D) has limited liability.

Question 62

The monetary unit concept requires a Canadian company reporting in Canada to usea) unrelated to business transactions.
B) a poor measure of economic activities.
C) the Canadian dollar as the common unit of measure for all Canadian business transactions.
D) useless in measuring an economic event.

Question 63

Recognition in accounting means

A) recognizing the difference between assets and liabilities.
B) recognizing the difference between income and expenses.
C) recognizing that initially transactions are recorded at fair value.
D) the process of recording a transaction in the accounting records.

Question 64

GAAP stands for

A) Generally Accepted Auditing Procedures.
B) Generally Accepted Accounting Principles.
C) Generally Accepted Auditing Principles.
D) Generally Accepted Accounting Procedures.

Question 65

The going concern assumption

A) states that a company will not operate long enough to utilize assets and fulfill obligations.
B) assumes the company will continue to operate in the foreseeable future.
C) is inconsistent with the historical cost measurement method.
D) states that net worth is the most appropriate value at which to record assets.

Question 66

All of the following are steps used to analyze ethical dilemmas EXCEPT

A) using the organization's code of ethics to identify ethical situations.
B) using personal ethics to identify ethical situations.
C) identifying potential stakeholders.
D) discussing the ethical dilemma with co-workers in the lunchroom.

Question 67

Which of the following requires that the activities of a business be kept distinct from those of its owner(s)?

A) reporting entity concept
B) going concern assumption
C) monetary unit concept
D) cost principle

Question 68

Which of the following forms of business organizations typically have their shares listed on the Toronto Stock Exchange?

A) proprietorships
B) private corporations
C) public corporations
D) partnerships

Question 69

Which of the following is true regarding the corporate form of business organization?

A) Corporations can only have one owner..
B) Corporate businesses are generally smaller in size than partnerships and proprietorships.
C) The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
D) Corporations are separate legal entities organized exclusively under federal law.

Question 70

The International Accounting Standards Board

A) works to reduce differences in accounting practices across countries.
B) promotes unique accounting applications.
C) works to increase differences in accounting practices across countries.
D) only operates in countries which speak English.

Question 71

ASPE requires less information on the financial statements of private corporations than IFRS requires because

A) private corporations are smaller than public corporations.
B) users of private corporation financial statements have the ability to obtain additional information from the corporation if required.
C) public corporations have their information available on the internet.
D) public corporations may report in different foreign currencies.

Question 72

Canadian Accounting Standards allow a choice of whether or not to use International Financial Reporting Standards for which type of company?

A) public corporations
B) only small private corporations
C) banks
D) all private corporations in Canada

Question 73

Mel Green is the proprietor (owner) of Green's, a retailer of athletic apparel. When recording the financial transactions of Green's, Mel does not record an entry for a car he purchased for personal use. Mel took out a personal loan to pay for the car. What accounting assumption guides Mel's behaviour in this situation?

A) going concern assumption
B) reporting entity concept
C) periodicity concept
D) monetary unit concept

Question 74

Emily Hogan recently opened a new business. The business has been very successful and as a reward for all her hard work Emily spent a day at the local spa. Emily paid for the spa using a company credit card and charged the amount to the expense account called Repairs and Maintenance expense. Emily's actions violated which of the following?

A) the going concern assumption
B) the monetary unit concept
C) the historical cost measurement method
D) the reporting entity concept

Question 75

Which of the following is NOT a characteristic of the corporate form of business organization?

A) shares are transferable
B) unlimited liability
C) separate legal entity
D) responsible for paying its own income taxes

Question 76

The historical cost measurement method requires that when assets are acquired, they be recorded at

A) appraisal value.
B) the amount paid.
C) the amount the asset could be sold for.
D) list price.

Question 77

Judy and Marilyn met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a

A) not-for-profit organization.
B) partnership.
C) corporation.
D) proprietorship.

Question 78

Which of the following would violate the reporting entity concept?

A) reporting amounts owed to the company's suppliers as a liability on the balance sheet
B) reporting equipment owned and used in the business as an asset in the balance sheet
C) reporting withdrawals by the owner as a drawing in the Statement of owner's equity
D) reporting the owner's personal sailboat as an asset on the balance sheet

Question 79

Which of the following is NOT an advantage of the corporate form of business organization?

A) limited liability of shareholders
B) transferability of ownership
C) unlimited personal liability for shareholders
D) unlimited life

Question 80

Generally accepted accounting principles are

A) income tax regulations.
B) standards that indicate how to report economic events.
C) theories that are based on physical laws of the universe.
D) principles that have been proven correct by academic researchers.