Deck 1: Business, Accounting, and You

Question 1

Target would primarily be considered a:

A) manufacturing business.
B) merchandising business.
C) service business.
D) not-for-profit business.
E) private enterprise.

Answer 1

merchandising business.

Question 2

Which type of company is best described as a separate legal entity?

A) Limited liability company
B) Proprietorship
C) Corporation
D) Partnership
E) Not-for-profit

Answer 2

Corporation

Question 3

Which of the following types of organization would probably sell goods?

A) Merchandising operation
B) Service operation
C) Not-for-profit operation
D) Manufacturing operation
E) Business operation

Answer 3

Merchandising operation

Question 4

Walmart is an example of a corporate merchandising business.

Question 5

Accounting is important because the process "keeps score" of the financial aspects of a business.

Question 6

Given the information below, place an (SP) if the statement describes a sole proprietorship, a (P) if the statement describes a partnership, and a (C) if the statement describes a corporation.

Question 7

Sears is an example of a sole proprietor.

Question 8

By definition, which type of organization has shareholders?

A) Partnerships
B) Sole proprietorships
C) Corporations
D) Limited liability companies
E) Private enterprise

Question 9

Which of the following is NOT a reason to study accounting?

A) A student will become aware of ethics in business.
B) A student will learn the language of business.
C) A student will better his or her math skills.
D) A student will learn to analyze financial information.

Question 10

To manage a business effectively, an owner or manager would benefit greatly from having some knowledge of accounting.

Question 11

The definition of the economic entity concept includes the requirement that personal assets must be combined with business assets.

Question 12

Common examples of business organizations include sole proprietorship, partnership, and corporation.
Instructions: For each business listed below, indicate the type of business organization.

Question 13

The accounting profession has several related fields. Identify and discuss the responsibilities of each field.

Question 14

Which of the following types of organizations would produce goods?

A) Merchandising operation
B) Service operation
C) Not-for-profit operation
D) Manufacturing operation
E) Government operation

Question 15

Many law and accounting firms are set up as partnerships.

Question 16

Which type of business organization is owned by its shareholders?

A) Corporation
B) Partnership
C) Limited liability company
D) Sole proprietorship
E) Not-for-profit company

Question 17

Which of the following do NOT pay taxes through their individual owners?

A) Single ownership
B) Sole proprietorship
C) Partnership
D) Corporation
E) Private ownership

Question 18

In the accounting profession there are several areas of expertise. Name the four main areas of expertise.

Question 19

What is the most difficult type of business to form?

Question 20

By taking accounting classes, the student is learning the "language of business."

Question 21

To ensure that the guidelines for right behaviour are followed, a corporation should follow:

A) ethical principles.
B) accounting law.
C) the corporate culture.
D) the leaders in their category of business.
E) the Enron rules.

Question 22

The main role of accounting is to compile reports to determine the profit made by a company over a period of time.

Question 23

International Financial Reporting Standards (IFRS) are used in every country in the world.

Question 24

The main goal of understanding the process of accounting is to help ensure that the business is:

A) profitable.
B) ethical.
C) competitive.
D) admired by the customer.
E) environmentally friendly.

Question 25

Which accounting concept or principle states that information should be free of biases and neutral?

Question 26

Canadian accounting standards for private enterprises (ASPE) continues to use:

A) present value.
B) current cost.
C) realizable value.
D) historical cost approach.
E) net present value.

Question 27

Accountants need to exercise professional judgment.

Question 28

Marcus is negotiating with friends who may buy some camping equipment in the near future. He records this information as possible sales. What principle is Marcus violating?

Question 29

When a person combines personal and business accounts, what concept or principle of accounting is being violated?

Question 30

International Financial Reporting Standards (IFRS) became effective in Canada on what date?

Question 31

Accounting principles include:

A) cost, revenue recognition, and going concern.
B) cost, revenue recognition, and timeliness.
C) cost, revenue recognition, and full disclosure.
D) cost, economic entity, and full disclosure.
E) cost, economic entity, and revenue recognition.

Question 32

Market value and historical cost (value) are the same concept.

Question 33

The goal of IFRS is to create a global set of accounting standards.

Question 34

During the life of a business entity, financial statements are prepared at arbitrary points in time. This is according to what assumption?

Question 35

Mathew owns an art supplies store. In the initial accounting records, he included his personal computer and all of his personal art supplies. Mathew is violating what principle of accounting?

A) Going concern
B) Cost
C) Reliability
D) Economic entity
E) Materiality

Question 36

Financial statements are historical reports of what has taken place financially in a business.

Question 37

IFRS and ASPE are interchangeable.

Question 38

Financial statements can help the managers of a business in making decisions regarding the business.

Question 39

What is the purpose of financial accounting information?

Question 40

A Canadian publicly traded enterprise use which reporting standard?

A) Accounting Standards for Private Enterprises.
B) International Financial Reporting Standards
C) Accounting Standards for Not-for-Profit Organizations
D) Accounting Standards for Pension Plans
E) Accounting Standards for Canadian Accounting

Question 41

Which of the following is considered an asset?

A) Accounts payable
B) Sales
C) Accounts receivable
D) Common shares
E) Notes payable

Question 42

Under IFRS, financial statements are prepared on a modified cost basis, with an emphasis on fair value, which is more useful and relevant for users' decision-making purposes. Businesses may choose one of four recording methods that best reflects their economic activities and reality.
List the four approaches.

Question 43

Revenues would have which of the following effects on the accounting equation?

A) Decrease shareholders' equity
B) Increase common shares
C) Increase liabilities
D) Increase shareholders' equity
E) Decrease assets

Question 44

The Conceptual Framework includes three constraints. Identify and explain the three constraints.

Question 45

Accountants are required to use __________ judgment in many situations.

Question 46

Which of the following is a true statement?

A) Purchasing office equipment for cash is a shift of assets.
B) Buying something on account decreases total liabilities.
C) Retained earnings do not include payments of dividends.
D) Paying off an account increases the total of assets.
E) Selling something on account increases total liabilities.

Question 47

Revenues, expenses, and dividends are all a part of:

A) assets.
B) retained earnings.
C) liabilities.
D) common shares.
E) cash.

Question 48

The fundamental accounting equation is Assets plus Liabilities equals Shareholders' Equity.

Question 49

Shareholders' equity includes retained earnings and common shares.

Question 50

If total assets remain the same and total shareholders' equity increases, liabilities will:

A) increase by the same amount.
B) decrease by the same amount.
C) remain the same.
D) increase by a different amount.
E) decrease by a different amount.

Question 51

The Conceptual Framework includes three constraints. Identify the constraints.

Question 52

Identify and explain the two underlying assumptions of the conceptual framework.

Question 53

Liabilities are those obligations that are owed to third parties.

Question 54

A transaction is a business event that does NOT have an impact on the finances of a company.

Question 55

Which of the following is a written promise to pay?

A) Accounts receivable
B) Accounts payable
C) Notes payable
D) Dividends payable
E) Notes receivable

Question 56

Liabilities represent:

A) items owned by the company.
B) future economic benefits of the company.
C) earnings kept in the business.
D) monies owed to third parties.
E) monies owed to shareholders

Question 57

Cash and accounts receivable are both a part of:

A) assets.
B) retained earnings.
C) liabilities.
D) common shares.
E) preferred shares

Question 58

Identify the accounting assumption that has been violated for each of the following situations.
a. Jeremy is preparing the financial statements for the High Tech Cleaning Company for 2013. The owners have decided to retire and close the business in early 2014. The financial statements have been prepared using historical costs.
b. Mikhail has a small tattoo business. All his cash receipts are deposited into his personal bank account. He pays his bills from either his business bank account or his personal depending on which bank account has more money.
c. Fred's Forestry business sells fir trees in both Canada and the United States. Depending on the transaction, Fred will record some transactions as Canadian and others as U.S. His financial statements have a mixture of Canadian and U.S. dollars.

Question 59

Which of the following is a False statement?

A) Revenues provide inward flows of assets.
B) Revenue is categorized as an asset.
C) Revenue is categorized as part of retained earnings.
D) Revenues are generated from the sale of goods and services.
E) Revenue is an increase in retained earnings.

Question 60

Brandon borrowed money for his business from a local bank. What accounts will be affected?

A) Cash and accounts payable
B) Cash and notes payable
C) Accounts payable and revenue
D) Accounts receivable and revenue
E) Cash and accounts receivable

Question 61

A company has $123,000 in assets and $65,000 in liabilities. Determine the amount of shareholders' equity.

Question 62

Cash, supplies, and equipment are all part of __________.

Question 63

Casey invested $5,000 into his business. How will this impact the accounting equation?

Question 64

Monies owed to a company by customers are classified as __________.

Question 65

ABC purchased office supplies on account for $50,000. How would this transaction affect ABC's accounting equation?

Question 66

The accounting equation is Assets = __________+ __________

Question 67

Monies the company will pay at a later date are classified as __________.

Question 68

Items such as revenue, expenses, and dividends are classified in the accounting equation as __________.

Question 69

Subway is famous for their subway sandwiches. At the end of 2013, Subway's total assets were $345,000, and total liabilities were $129,500. Calculate Subway's shareholders' equity.

Question 70

How would the payment of cash dividends affect the accounting equation?

Question 71

Celia buys a new machine for her shop on credit. What effect does this have on the accounting equation?

Question 72

How would the payment of expenses affect the accounting equation?

Question 73

The income statement will impact the retained earning section of the statement of financial position.
a) Will a net loss increase or decrease retained earnings?
b) Will a net profit increase or decrease retained earnings?

Question 74

ABC Company sold $34,000 worth of merchandise for cash. Explain the effect on the expanded accounting equation.

A) Total assets and total liabilities will increase.
B) Total assets and total revenue will increase.
C) Total liabilities will increase and total revenue will decrease.
D) Total assets will decrease and total liabilities will increase.

Question 75

Lauren purchased a computer on account for her business. How will this transaction affect the accounting equation?

Question 76

A business pays off a note payable. What effect does this have on the accounting equation?

Question 77

Jenny opens her business by investing $12,000. How does this affect the accounting equation?

A) Increase in assets; increase in shareholders' equity.
B) Increase in liabilities; increase in shareholders' equity.
C) Decrease in assets; increase in shareholders' equity.
D) Increase in assets; decrease in shareholders' equity.
E) The accounting equation does not change.

Question 78

Part 1.
A business sells $1,000 of product on account. Identify the effect on the accounting equation.
Part 2
A business buys $1,000 of product on account. Identify the effect on the accounting equation.

Question 79

A company purchases merchandise (inventory) for cash. What is the net result on the accounting equation?

Question 80

A business purchases a computer for cash. What effect does this have on the accounting equation?