TEST BANK
FINANCIAL ACCOUNTING
8TH CANADIAN EDITION
CHAPTER NO. 01: FINANCIAL STATEMENTS AND BUSINESS DECISIONS
1) Accounting is a system that collects and processes financial information about an
organization and reports that information to decision makers.
⊚ true
⊚ false
ANSWER: TRUE
2) External users of accounting information include the managers who plan, organize,
and run a business.
⊚ true
⊚ false
ANSWER: FALSE
3) In accounting and reporting for a business entity, the accounting and reporting for
the business must be kept separate from other economic affairs of its owners.
⊚ true
⊚ false
ANSWER: TRUE
4) Accounting communicates financial information about a business to both internal
and external users.
⊚ true
⊚ false
ANSWER: TRUE
,5) A statement of financial position should be dated for a period (such as "For the year
ended December 31, 20X1"), whereas a statement of earnings should be dated at a
point in time (such as "At December 31, 20X1").
⊚ true
⊚ false
ANSWER: FALSE
6) Expenses are the cost of assets consumed or services used in the process of
generating revenue.
⊚ true
⊚ false
ANSWER: TRUE
7) Generally speaking, a financially successful business will have positive cash flows
from operating activities.
⊚ true
⊚ false
ANSWER: TRUE
8) The issuance of additional common shares is a financing activity that generates
positive cash flow to the firm.
⊚ true
⊚ false
ANSWER: TRUE
,9) Borrowing money and issuing shares are examples of financing activities
⊚ true
⊚ false
ANSWER: TRUE
10) Total assets are $60,000, total liabilities, $30,000, and share capital is $20,000;
therefore, retained earnings is $5,000.
⊚ true
⊚ false
ANSWER: FALSE
11) Investing activities involve collecting the necessary funds to operate the business.
⊚ true
⊚ false
ANSWER: FALSE
12) The purchase of equipment is an example of a financing activity.
⊚ true
⊚ false
ANSWER: FALSE
13) The reasons for a decrease in cash can be determined by examining the statement
of earnings.
⊚ true
⊚ false
ANSWER: FALSE
, 14) Economic resources that are owned by a business are called shareholders' equity.
⊚ true
⊚ false
ANSWER: FALSE
15) The accounting model for the statement of financial position is: Assets + Liabilities -
Shareholders' Equity.
⊚ true
⊚ false
ANSWER: FALSE
16) Assets are resources owned by a business that provide current services or benefits
to the business.
⊚ true
⊚ false
ANSWER: FALSE
17) Profit is the excess of total revenues over total expenses incurred to generate
revenue during a specific period.
⊚ true
⊚ false
ANSWER: TRUE
18) The financial statements prepared by a corporation include a statement of financial
position, statement of earnings, statement of cash flows, and statement of money.
⊚ true
⊚ false
ANSWER: FALSE
FINANCIAL ACCOUNTING
8TH CANADIAN EDITION
CHAPTER NO. 01: FINANCIAL STATEMENTS AND BUSINESS DECISIONS
1) Accounting is a system that collects and processes financial information about an
organization and reports that information to decision makers.
⊚ true
⊚ false
ANSWER: TRUE
2) External users of accounting information include the managers who plan, organize,
and run a business.
⊚ true
⊚ false
ANSWER: FALSE
3) In accounting and reporting for a business entity, the accounting and reporting for
the business must be kept separate from other economic affairs of its owners.
⊚ true
⊚ false
ANSWER: TRUE
4) Accounting communicates financial information about a business to both internal
and external users.
⊚ true
⊚ false
ANSWER: TRUE
,5) A statement of financial position should be dated for a period (such as "For the year
ended December 31, 20X1"), whereas a statement of earnings should be dated at a
point in time (such as "At December 31, 20X1").
⊚ true
⊚ false
ANSWER: FALSE
6) Expenses are the cost of assets consumed or services used in the process of
generating revenue.
⊚ true
⊚ false
ANSWER: TRUE
7) Generally speaking, a financially successful business will have positive cash flows
from operating activities.
⊚ true
⊚ false
ANSWER: TRUE
8) The issuance of additional common shares is a financing activity that generates
positive cash flow to the firm.
⊚ true
⊚ false
ANSWER: TRUE
,9) Borrowing money and issuing shares are examples of financing activities
⊚ true
⊚ false
ANSWER: TRUE
10) Total assets are $60,000, total liabilities, $30,000, and share capital is $20,000;
therefore, retained earnings is $5,000.
⊚ true
⊚ false
ANSWER: FALSE
11) Investing activities involve collecting the necessary funds to operate the business.
⊚ true
⊚ false
ANSWER: FALSE
12) The purchase of equipment is an example of a financing activity.
⊚ true
⊚ false
ANSWER: FALSE
13) The reasons for a decrease in cash can be determined by examining the statement
of earnings.
⊚ true
⊚ false
ANSWER: FALSE
, 14) Economic resources that are owned by a business are called shareholders' equity.
⊚ true
⊚ false
ANSWER: FALSE
15) The accounting model for the statement of financial position is: Assets + Liabilities -
Shareholders' Equity.
⊚ true
⊚ false
ANSWER: FALSE
16) Assets are resources owned by a business that provide current services or benefits
to the business.
⊚ true
⊚ false
ANSWER: FALSE
17) Profit is the excess of total revenues over total expenses incurred to generate
revenue during a specific period.
⊚ true
⊚ false
ANSWER: TRUE
18) The financial statements prepared by a corporation include a statement of financial
position, statement of earnings, statement of cash flows, and statement of money.
⊚ true
⊚ false
ANSWER: FALSE
