Question 1

Which of the following would not be considered an internal user of accounting data for XYZ Inc.?

Accepted Answer

A) The company president 
B) Production manager 
C) Merchandise inventory clerk 
D) Receptionist of the employees' labour union

Question 2

The concept that economic activity which can be identified with a particular company must be kept separate and distinct from the owner(s) and from all other economic entities is known as:

Accepted Answer

A) the separation concept. 
B) the reporting entity concept. 
C) the economic concept. 
D) the business organization concept.

Question 3

Any deficiency in cash from operating activities must be made up by issuing shares.

Accepted Answer

A) True 
 B)False

Question 4

Liabilities:

Accepted Answer

A) are future economic benefits. 
B) are debts and obligations. 
C) possess service potential. 
D) are things of value owned by a business.

Question 5

Use the following information for questions 
Tam's Car Repair Shop Ltd. started the year with total assets of $70,000 and total liabilities of $40,000. During the year, the business recorded $100,000 in car repair revenues, $65,000 in expenses, and paid dividends of $5,000.
-Shareholders' equity at the end of the year was:

Accepted Answer

A) $60,000. 
B) $65,000. 
C) $70,000. 
D) $75,000.

Question 6

Payments to shareholders are called:

Accepted Answer

A) expenses. 
B) liabilities. 
C) dividends. 
D) shares.

Question 7

If total liabilities decreased by $14,000 during a period of time and shareholders' equity increased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n):

Accepted Answer

A) $14,000 increase. 
B) $20,000 increase. 
C) $8,000 decrease. 
D) $8,000 increase.

Question 8

The statement of financial position is always the first statement prepared and presented.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following would not be considered an external user of accounting data?

Accepted Answer

A) Canada Revenue Agency 
B) Management 
C) Creditors 
D) Customers

Exam 1: The Purpose and Use of Financial Statements