BU 127 FINAL EXAM QUESTIONS AND ANSWERS LATEST 2025
Statement of financial position - Answers reports the financial position (assets, liabilities, and
shareholders' equity) of an accounting entity at a point in time
Accounting entity - Answers the organization for which financial data are to be collected
Liabilities - Answers the entity's obligations that result from past business events
Shareholders' equity - Answers the amount of financing provided by owners of the business as
well as earnings over time
Contributed capital - Answers the investment of cash and other assets in the business by the
owners
Retained earnings - Answers amount of earnings reinvested in the business (thus not
distributed to shareholders in the form of dividends)
Statement of comprehensive income - Answers reports the change in shareholders' equity
during a period from business activities, excluding exchanges with shareholders
Statement of earnings - Answers reports the revenues and expenses of the accounting period
International Financial Reporting Standards - Answers guidelines for the measurement rules
used to develop the information in financial statements
Securities and Exchange Commission - Answers the US government agency that determines the
financial statements that public companies must provide to shareholders and the measurement
rules that they must use in producing those statements
Ontario securities commission - Answers the most influential Canadian regulator of the flow of
financial information provided by publicly traded companies in Canada
Accounting standards board - Answers the private sector body given the primary responsibility
to set the detailed rules that become accepted accounting standards
Relevance - Answers can influence a decision it has predictive and/or confirmatory value
Material amounts - Answers are amount that are large enough to influence a user's decision
Faithful representation - Answers suggests that information provided in the financial
statements must reflect the substance of the underlying transactions which may differ from
their legal form
Comparability - Answers accounting information across businesses is enhanced when similar
accounting methods have been applied
Verifiable - Answers if independent accountants can agree on the nature and amount of a
, transaction
Timely - Answers information enhances the information's ability to predict future values and to
confirm past values
Understandability - Answers the quality of information that enables users to comprehend its
meanings
Cost constraint - Answers suggests that information should be produced only if the perceived
benefits of increased decision usefulness exceed the expectation costs of providing that
information
Separate entity assumption - Answers states that each business must be accounted for
separately from the activities of its owners
Unit of measure assumption - Answers states that accounting information should be measured
and reported in the national monetary unit
Continuity assumption - Answers states that businesses are assumed to continue to operate
into the foreseeable future
Historical cost principle - Answers requires assets to be recorded at the historical cash-
equivalent cost, which in cash paid plus the current monetary value of all non-cash
considerations also given on the date of the exchange
Operating cycle - Answers is the time it takes for a company to pay cash to suppliers, sell goods
and services to customers, and collect cash from customers
Cash basis accounting - Answers records revenue when cash is received and expenses when
cash is paid
Accrual basis accounting - Answers records revenues when earned and expenses when incurred,
regardless of the timing of cash receipts or payments
Revenue principle - Answers states that revenues are recognized when the significant risks and
rewards of ownership are transferred to the buyer, it is probable that future economic benefits
will flow to the entity, and the benefits and the costs associated with the transaction can be
measured reliably
Matching principle - Answers requires that expenses be recorded when incurred in earning
revenue
Referred revenues - Answers previously recorded liabilities that need to be adjusted at the end
of the accounting period to reflect the amount of revenues earned: liability (-) revenue (+)
Accrued revenues - Answers previously unrecorded revenues that need to be recorded at the
end of the accounting period to reflect the amount earned and its related receivable account:
Statement of financial position - Answers reports the financial position (assets, liabilities, and
shareholders' equity) of an accounting entity at a point in time
Accounting entity - Answers the organization for which financial data are to be collected
Liabilities - Answers the entity's obligations that result from past business events
Shareholders' equity - Answers the amount of financing provided by owners of the business as
well as earnings over time
Contributed capital - Answers the investment of cash and other assets in the business by the
owners
Retained earnings - Answers amount of earnings reinvested in the business (thus not
distributed to shareholders in the form of dividends)
Statement of comprehensive income - Answers reports the change in shareholders' equity
during a period from business activities, excluding exchanges with shareholders
Statement of earnings - Answers reports the revenues and expenses of the accounting period
International Financial Reporting Standards - Answers guidelines for the measurement rules
used to develop the information in financial statements
Securities and Exchange Commission - Answers the US government agency that determines the
financial statements that public companies must provide to shareholders and the measurement
rules that they must use in producing those statements
Ontario securities commission - Answers the most influential Canadian regulator of the flow of
financial information provided by publicly traded companies in Canada
Accounting standards board - Answers the private sector body given the primary responsibility
to set the detailed rules that become accepted accounting standards
Relevance - Answers can influence a decision it has predictive and/or confirmatory value
Material amounts - Answers are amount that are large enough to influence a user's decision
Faithful representation - Answers suggests that information provided in the financial
statements must reflect the substance of the underlying transactions which may differ from
their legal form
Comparability - Answers accounting information across businesses is enhanced when similar
accounting methods have been applied
Verifiable - Answers if independent accountants can agree on the nature and amount of a
, transaction
Timely - Answers information enhances the information's ability to predict future values and to
confirm past values
Understandability - Answers the quality of information that enables users to comprehend its
meanings
Cost constraint - Answers suggests that information should be produced only if the perceived
benefits of increased decision usefulness exceed the expectation costs of providing that
information
Separate entity assumption - Answers states that each business must be accounted for
separately from the activities of its owners
Unit of measure assumption - Answers states that accounting information should be measured
and reported in the national monetary unit
Continuity assumption - Answers states that businesses are assumed to continue to operate
into the foreseeable future
Historical cost principle - Answers requires assets to be recorded at the historical cash-
equivalent cost, which in cash paid plus the current monetary value of all non-cash
considerations also given on the date of the exchange
Operating cycle - Answers is the time it takes for a company to pay cash to suppliers, sell goods
and services to customers, and collect cash from customers
Cash basis accounting - Answers records revenue when cash is received and expenses when
cash is paid
Accrual basis accounting - Answers records revenues when earned and expenses when incurred,
regardless of the timing of cash receipts or payments
Revenue principle - Answers states that revenues are recognized when the significant risks and
rewards of ownership are transferred to the buyer, it is probable that future economic benefits
will flow to the entity, and the benefits and the costs associated with the transaction can be
measured reliably
Matching principle - Answers requires that expenses be recorded when incurred in earning
revenue
Referred revenues - Answers previously recorded liabilities that need to be adjusted at the end
of the accounting period to reflect the amount of revenues earned: liability (-) revenue (+)
Accrued revenues - Answers previously unrecorded revenues that need to be recorded at the
end of the accounting period to reflect the amount earned and its related receivable account:
