ACCT 253 - CHP 1 – INTRO EXAM STUDY QUESTIONS AND ANSWERS 2024

Define Accounting Accounting is the process of identifying, measuring, recording, and communicating an organization's economic activities to users for decision making Managerial Accounting Serves decision-making needs of internal users. Financial Accounting Focuses on external reporting to meet the needs of external users. List and Describe forms of business organization Proprietorship, partnership and corporation. Explain GAAP (Generally Accepted Accounting Principles) GAAP followed in Canada by PAEs (Publicly Accountable Enterprises) are based on IFRS (Interna- tonal Financial Reporting Standards). PEs (Private Enterprises) follow GAAP based on ASPE (Accounting Standards for Private Enterprises), a less onerous set of GAAP maintained by the AcSB (Accounting Standards Board). GAAP have qualitative characteristics and principles. GAAP Principles business entity, consistency, cost, full disclosure, going concern, matching, materiality, monetary unit, and recognition GAAP Qualitative Characteristics relevance, faithful representation, comparability, verifiability, timeliness, and understandability What are the four main financial statements? Income statement, statement of changes in equity, balance sheet, statement of cash flows How to prepare income statements? Reports financial performance by detailing revenues minus expenses = net income / loss for the period. Statement of changes in equity Shows changes during the period to each of the components of equity: share capital and retained earnings. Balance Sheet Identifies financial position at any point in time by listing assets, liabilities, and equity. Statement of Cash Flows Details the sources and uses of cash during the period based on three business activities: operating, investing and financing.