Accounting Principles 7th Canadian Edition
Volume 1 By Jerry J. Weygandt-Test bank
Chapter (1 to 9)
,Content: _
CHAPTER 1: ACCOUNTING IN ACTION CHAPTER LEARNING
OBJECTIVES
CHAPTER 2: THE RECORDING PROCESS CHAPTER LEARNING
OBJECTIVES
CHAPTER 3: ADJUSTING THE ACCOUNTS CHAPTER STUDY
OBJECTIVES
CHAPTER 4: COMPLETION OF THE ACCOUNTING CYCLE CHAPTER
STUDY OBJECTIVES
CHAPTER 5: ACCOUNTING FOR MERCHANDISING OPERATIONS
CHAPTER STUDY OBJECTIVES
CHAPTER 6: INVENTORY COSTING CHAPTER STUDY OBJECTIVES
CHAPTER 7: INTERNAL CONTROL AND CASH CHAPTER STUDY
OBJECTIVES
CHAPTER 8: ACCOUNTING FOR RECEIVABLES CHAPTER STUDY
OBJECTIVES
CHAPTER 9: LONG-LIVED ASSETS CHAPTER STUDY OBJECTIVES
, 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 economic events of an organization to a wide variety of interested
users. Good accounting is important to people both inside and outside the organization.
Internal users, such as management, use accounting information to plan, control, and
evaluate business operations. External users include investors and creditors, among
others. Accounting data are used by investors (owners or potential owners) to decide
whether to buy, hold, or sell their financial interests. Creditors (suppliers and bankers)
evaluate the risks of granting credit or lending money based on the accounting information.
The objective of financial reporting is to provide useful information to investors and
creditors to make these decisions. Users need information about the business’s ability to
earn a profit and generate cash. For our economic 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 are proprietorships, partnerships, and corporations.
Proprietorships and partnerships are not separate legal entities but are separate entities
for accounting purposes; income taxes are paid by the owners and owners have unlimited
liability. Corporations are separate legal entities as well as separate entities for accounting
purposes; income taxes are paid by the corporation and owners of the corporation have
limited liability.
3. Explain the building blocks of accounting: ethics and the concepts
included in the conceptual framework. Generally accepted accounting principles are a
common set of guidelines that are used to prepare and report accounting information. The
conceptual framework outlines some of the body of theory used by accountants to fulfill
their goal of providing useful accounting information to users. Ethical behaviour is
fundamental to fulfilling the objective of financial accounting. The reporting entity concept
requires the business activities of each reporting entity to be kept separate from the
activities of its owner and other economic entities. The going concern assumption
presumes that a business will continue operations for enough time to use its assets for
their intended purpose and to fulfill its commitments. The periodicity concept requires
businesses to divide up economic activities into distinct periods of time. Qualitative
, characteristics include fundamental and enhancing characteristics that help to ensure
accounting information is useful.
Only events that cause changes in assets, liabilities, or owner’s equity are recorded.
Recognition is the process of recording items and measurement is the process of
determining cost concept states that assets should be recorded at their historical (original)
cost. Fair value may be a more appropriate measure for certain types of assets. Generally
fair value is the amount the asset could be sold for in the market. The monetary unit
concept requires that only transactions that can be expressed as an amount of money be
included in the accounting records, and it assumes that the monetary unit is stable.
The revenue recognition principle requires companies to recognize revenue when a
performance obligation(s) is satisfied. The matching concept requires that costs be
recognized as expenses in the same period as revenue is recognized when there is a direct
association between the cost incurred and revenue recognized.
In Canada, there are two sets of standards for profit-oriented businesses. Publicly
accountable enterprises must follow International Financial Reporting Standards (IFRS)
and private enterprises have the choice of following IFRS or Accounting Standards for
Private Enterprises (ASPE).
4. Describe the components of the financial statements and explain the
accounting equation. Assets, liabilities, and owner’s equity are reported in the balance
sheet. Assets are present economic resources controlled by the business as a result of
past events that are capable of producing economic benefits. Liabilities are present
obligations of a business to transfer an economic resource as a result of past events.
Owner’s equity is the owner’s claim on the company’s assets and is equal to total assets
minus total liabilities. The balance sheet is based on the accounting equation: Assets =
Liabilities + Owner’s equity.
The Income statement reports the profit or loss for a specified period of time. Profit is equal
to revenues minus expenses. Revenues are the increases in assets, or decreases in
liabilities, that result from business activities that are undertaken to earn profit. Expenses
are the cost of assets consumed or services used in a company’s business activities. They
are decreases in assets or increases in liabilities, excluding withdrawals made by the
owners, and result in a decrease to owner’s equity.
The Statement of owner’s equity summarizes the changes in owner’s equity during the
period. Owner’s equity is increased by investments by the owner and profits. It is
decreased by drawings and losses. Investments are contributions of cash or other assets
by owners. Drawings are withdrawals of cash or other assets from the business for the
Volume 1 By Jerry J. Weygandt-Test bank
Chapter (1 to 9)
,Content: _
CHAPTER 1: ACCOUNTING IN ACTION CHAPTER LEARNING
OBJECTIVES
CHAPTER 2: THE RECORDING PROCESS CHAPTER LEARNING
OBJECTIVES
CHAPTER 3: ADJUSTING THE ACCOUNTS CHAPTER STUDY
OBJECTIVES
CHAPTER 4: COMPLETION OF THE ACCOUNTING CYCLE CHAPTER
STUDY OBJECTIVES
CHAPTER 5: ACCOUNTING FOR MERCHANDISING OPERATIONS
CHAPTER STUDY OBJECTIVES
CHAPTER 6: INVENTORY COSTING CHAPTER STUDY OBJECTIVES
CHAPTER 7: INTERNAL CONTROL AND CASH CHAPTER STUDY
OBJECTIVES
CHAPTER 8: ACCOUNTING FOR RECEIVABLES CHAPTER STUDY
OBJECTIVES
CHAPTER 9: LONG-LIVED ASSETS CHAPTER STUDY OBJECTIVES
, 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 economic events of an organization to a wide variety of interested
users. Good accounting is important to people both inside and outside the organization.
Internal users, such as management, use accounting information to plan, control, and
evaluate business operations. External users include investors and creditors, among
others. Accounting data are used by investors (owners or potential owners) to decide
whether to buy, hold, or sell their financial interests. Creditors (suppliers and bankers)
evaluate the risks of granting credit or lending money based on the accounting information.
The objective of financial reporting is to provide useful information to investors and
creditors to make these decisions. Users need information about the business’s ability to
earn a profit and generate cash. For our economic 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 are proprietorships, partnerships, and corporations.
Proprietorships and partnerships are not separate legal entities but are separate entities
for accounting purposes; income taxes are paid by the owners and owners have unlimited
liability. Corporations are separate legal entities as well as separate entities for accounting
purposes; income taxes are paid by the corporation and owners of the corporation have
limited liability.
3. Explain the building blocks of accounting: ethics and the concepts
included in the conceptual framework. Generally accepted accounting principles are a
common set of guidelines that are used to prepare and report accounting information. The
conceptual framework outlines some of the body of theory used by accountants to fulfill
their goal of providing useful accounting information to users. Ethical behaviour is
fundamental to fulfilling the objective of financial accounting. The reporting entity concept
requires the business activities of each reporting entity to be kept separate from the
activities of its owner and other economic entities. The going concern assumption
presumes that a business will continue operations for enough time to use its assets for
their intended purpose and to fulfill its commitments. The periodicity concept requires
businesses to divide up economic activities into distinct periods of time. Qualitative
, characteristics include fundamental and enhancing characteristics that help to ensure
accounting information is useful.
Only events that cause changes in assets, liabilities, or owner’s equity are recorded.
Recognition is the process of recording items and measurement is the process of
determining cost concept states that assets should be recorded at their historical (original)
cost. Fair value may be a more appropriate measure for certain types of assets. Generally
fair value is the amount the asset could be sold for in the market. The monetary unit
concept requires that only transactions that can be expressed as an amount of money be
included in the accounting records, and it assumes that the monetary unit is stable.
The revenue recognition principle requires companies to recognize revenue when a
performance obligation(s) is satisfied. The matching concept requires that costs be
recognized as expenses in the same period as revenue is recognized when there is a direct
association between the cost incurred and revenue recognized.
In Canada, there are two sets of standards for profit-oriented businesses. Publicly
accountable enterprises must follow International Financial Reporting Standards (IFRS)
and private enterprises have the choice of following IFRS or Accounting Standards for
Private Enterprises (ASPE).
4. Describe the components of the financial statements and explain the
accounting equation. Assets, liabilities, and owner’s equity are reported in the balance
sheet. Assets are present economic resources controlled by the business as a result of
past events that are capable of producing economic benefits. Liabilities are present
obligations of a business to transfer an economic resource as a result of past events.
Owner’s equity is the owner’s claim on the company’s assets and is equal to total assets
minus total liabilities. The balance sheet is based on the accounting equation: Assets =
Liabilities + Owner’s equity.
The Income statement reports the profit or loss for a specified period of time. Profit is equal
to revenues minus expenses. Revenues are the increases in assets, or decreases in
liabilities, that result from business activities that are undertaken to earn profit. Expenses
are the cost of assets consumed or services used in a company’s business activities. They
are decreases in assets or increases in liabilities, excluding withdrawals made by the
owners, and result in a decrease to owner’s equity.
The Statement of owner’s equity summarizes the changes in owner’s equity during the
period. Owner’s equity is increased by investments by the owner and profits. It is
decreased by drawings and losses. Investments are contributions of cash or other assets
by owners. Drawings are withdrawals of cash or other assets from the business for the
