TEST BANK for Accounting Principles, Volume 1, 9th Canadian Edition by Jerry J. Weygandt,
Donald E. Kieso and Paul D. Kimmel
L
TEST BANK for
Accounting Principles,
Volume 1, 9th Canadian
Edition by Jerry J.
Weygandt, Donald E.
Kieso and Paul D.
Kimmel
Test Bank Page 1
, TEST BANK for Accounting Principles, Volume 1, 9th Canadian Edition by Jerry J. Weygandt,
Donald E. Kieso and Paul D. Kimmel
CHAPTER 1
ACCOUNTING IN ACTION
CHAPTER LEARNING OBJECTIVES
1. Identify the use and users of accounting and the objective of financial
reporting. Accounting is the information system that identifies, records, and
communicates the economicevents of an organization to a wide variety of
interestedusers. Good accounting is important to people both insideand outside the
organization. Internal users, such as management,use accounting information to
plan, control,and evaluate business operations. External users includeinvestors and
creditors, among others. Accounting dataare used by investors (owners or potential
owners) todecide whether to buy, hold, or sell their financial interests.Creditors
(suppliers and bankers) evaluate the risksof granting credit or lending money based
on the accountinginformation. The objective of financial reporting is toprovide useful
information to investors and creditors tomake these decisions. Users need
information about thebusiness’s ability to earn a profit and generate cash. For
oureconomic system to function smoothly, reliable and ethical accounting and
financial reporting are critical.
2. Compare the different forms of business organization.The most common
examples of business organization areproprietorships, partnerships, and
corporations. Proprietorshipsand partnerships are not separate legal entitiesbut are
separate entities for accounting purposes; incometaxes are paid by the owners and
Test Bank Page 2
, TEST BANK for Accounting Principles, Volume 1, 9th Canadian Edition by Jerry J. Weygandt,
Donald E. Kieso and Paul D. Kimmel
owners have unlimitedliability. Corporations are separate legal entities as well
asseparate entities for accounting purposes; income taxesare paid by the
corporation and owners of the corporationhave limited liability.
3. Explain the building blocks of accounting: ethics and theconcepts
included in the conceptual framework. Generallyaccepted accounting
principles are a common set of guidelinesthat are used to prepare and report
accounting information. The conceptual framework outlines some of thebody of
theory used by accountants to fulfill their goal ofproviding useful accounting
information to users. Ethicalbehaviour is fundamental to fulfilling the objective of
financial accounting. The reporting entity concept requiresthe business activities of
each reporting entity to be keptseparate from the activities of its owner and other
economic entities. The going concern assumption presumes that abusiness will
continue operations for enough time to useits assets for their intended purpose and
to fulfill its commitments. The periodicity concept requires businesses todivide up
economic activities into distinct periods of time.Qualitative characteristics include
fundamental andenhancing characteristics that help to ensure
accountinginformation is useful.
Only events that cause changes in the business’s economic resources or changes to
the claims on those resources are recorded. Recognition is the process ofrecording
items and measurement is the process of determiningthe amount that should be
Test Bank Page 3
, lOMoAR cPSD| 32793396
Test Bank for Accounting Principles, Eighth Canadian Edition
recognized. The historical cost concept states that assets should be recorded at
theirhistorical (original) cost. Fair value may be a more appropriatemeasure for
certain types of resources. Generally, fairvalue is the amount the resource could be
sold for in the market. The monetary unit concept requires that only
transactionsthat can be expressed as an amount of money beincluded in the
accounting records, and it assumes thatthe monetary unit is stable.
The revenue recognition principle requires companiesto recognize revenue when a
performance obligation(s) is satisfied. The matching concept requires that costs
berecognized as expenses in the same period as revenue isrecognized when there
is a direct association between thecost incurred and revenue recognized.
In Canada, there are two sets of standards for profit-orientedbusinesses. Publicly
accountable enterprisesmust follow International Financial Reporting
Standards(IFRS) and private enterprises have the choice of followingIFRS or
Accounting Standards for Private Enterprises(ASPE).
4. Describe the components of the financial statements andexplain the
accounting equation. Assets, liabilities, andowner’s equity are reported in the
balance sheet. Assets arepresent economic resources controlled by the business as
aresult of past events and have the potential to produce economic benefits.
Liabilities are present obligations of abusiness to transfer an economic resource as a
result ofpast events. Owner’s equity is the owner’s claim on thecompany’s assets
and is equal to total assets minus total liabilities. The balance sheet is based on the
accountingequation: Assets = Liabilities + Owner’s equity.
The Income statement reports the profit or loss for a specified period of time. Profit
is equal to revenues minusexpenses. Revenues are the increases in assets, or
decreasesin liabilities, that result from business activities that areundertaken to
Gedownload door Rai Irfan ()
Donald E. Kieso and Paul D. Kimmel
L
TEST BANK for
Accounting Principles,
Volume 1, 9th Canadian
Edition by Jerry J.
Weygandt, Donald E.
Kieso and Paul D.
Kimmel
Test Bank Page 1
, TEST BANK for Accounting Principles, Volume 1, 9th Canadian Edition by Jerry J. Weygandt,
Donald E. Kieso and Paul D. Kimmel
CHAPTER 1
ACCOUNTING IN ACTION
CHAPTER LEARNING OBJECTIVES
1. Identify the use and users of accounting and the objective of financial
reporting. Accounting is the information system that identifies, records, and
communicates the economicevents of an organization to a wide variety of
interestedusers. Good accounting is important to people both insideand outside the
organization. Internal users, such as management,use accounting information to
plan, control,and evaluate business operations. External users includeinvestors and
creditors, among others. Accounting dataare used by investors (owners or potential
owners) todecide whether to buy, hold, or sell their financial interests.Creditors
(suppliers and bankers) evaluate the risksof granting credit or lending money based
on the accountinginformation. The objective of financial reporting is toprovide useful
information to investors and creditors tomake these decisions. Users need
information about thebusiness’s ability to earn a profit and generate cash. For
oureconomic system to function smoothly, reliable and ethical accounting and
financial reporting are critical.
2. Compare the different forms of business organization.The most common
examples of business organization areproprietorships, partnerships, and
corporations. Proprietorshipsand partnerships are not separate legal entitiesbut are
separate entities for accounting purposes; incometaxes are paid by the owners and
Test Bank Page 2
, TEST BANK for Accounting Principles, Volume 1, 9th Canadian Edition by Jerry J. Weygandt,
Donald E. Kieso and Paul D. Kimmel
owners have unlimitedliability. Corporations are separate legal entities as well
asseparate entities for accounting purposes; income taxesare paid by the
corporation and owners of the corporationhave limited liability.
3. Explain the building blocks of accounting: ethics and theconcepts
included in the conceptual framework. Generallyaccepted accounting
principles are a common set of guidelinesthat are used to prepare and report
accounting information. The conceptual framework outlines some of thebody of
theory used by accountants to fulfill their goal ofproviding useful accounting
information to users. Ethicalbehaviour is fundamental to fulfilling the objective of
financial accounting. The reporting entity concept requiresthe business activities of
each reporting entity to be keptseparate from the activities of its owner and other
economic entities. The going concern assumption presumes that abusiness will
continue operations for enough time to useits assets for their intended purpose and
to fulfill its commitments. The periodicity concept requires businesses todivide up
economic activities into distinct periods of time.Qualitative characteristics include
fundamental andenhancing characteristics that help to ensure
accountinginformation is useful.
Only events that cause changes in the business’s economic resources or changes to
the claims on those resources are recorded. Recognition is the process ofrecording
items and measurement is the process of determiningthe amount that should be
Test Bank Page 3
, lOMoAR cPSD| 32793396
Test Bank for Accounting Principles, Eighth Canadian Edition
recognized. The historical cost concept states that assets should be recorded at
theirhistorical (original) cost. Fair value may be a more appropriatemeasure for
certain types of resources. Generally, fairvalue is the amount the resource could be
sold for in the market. The monetary unit concept requires that only
transactionsthat can be expressed as an amount of money beincluded in the
accounting records, and it assumes thatthe monetary unit is stable.
The revenue recognition principle requires companiesto recognize revenue when a
performance obligation(s) is satisfied. The matching concept requires that costs
berecognized as expenses in the same period as revenue isrecognized when there
is a direct association between thecost incurred and revenue recognized.
In Canada, there are two sets of standards for profit-orientedbusinesses. Publicly
accountable enterprisesmust follow International Financial Reporting
Standards(IFRS) and private enterprises have the choice of followingIFRS or
Accounting Standards for Private Enterprises(ASPE).
4. Describe the components of the financial statements andexplain the
accounting equation. Assets, liabilities, andowner’s equity are reported in the
balance sheet. Assets arepresent economic resources controlled by the business as
aresult of past events and have the potential to produce economic benefits.
Liabilities are present obligations of abusiness to transfer an economic resource as a
result ofpast events. Owner’s equity is the owner’s claim on thecompany’s assets
and is equal to total assets minus total liabilities. The balance sheet is based on the
accountingequation: Assets = Liabilities + Owner’s equity.
The Income statement reports the profit or loss for a specified period of time. Profit
is equal to revenues minusexpenses. Revenues are the increases in assets, or
decreasesin liabilities, that result from business activities that areundertaken to
Gedownload door Rai Irfan ()
