Question 1

Which of the following best describes the primary objective of financial reporting?

Accepted Answer

To provide information that is useful for making investment, credit, and other resource allocation decisions.

Question 2

Canada Goose Holdings Inc. records its assets and liabilities at a specific point in time. Which financial statement provides this information?

Accepted Answer

Balance Sheet

Question 3

Which of the following is NOT a qualitative characteristic of useful accounting information?

Accepted Answer

Profitability

Question 4

A company purchases equipment for $50,000 cash. Which accounts are affected and how?

Accepted Answer

Equipment increases by $$50,000; Cash decreases by 50$$,000

Question 5

Which of the following best describes the expanded accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner's\ Equity + (Revenues - Expenses - Drawings)$$

Question 6

Which of the following is an example of an external user of accounting information?

Accepted Answer

Investor

Question 7

A company recognizes revenue when it satisfies a performance obligation. This is an example of which accounting principle?

Accepted Answer

Revenue Recognition Principle

Question 8

Which of the following transactions would increase owner's equity?

Accepted Answer

Earning a profit from business operations

Question 9

Which of the following best describes the purpose of the cash flow statement?

Accepted Answer

To report the cash receipts and cash payments for a specific period of time

Question 10

If a company has total assets of $$500,000 and total liabilities of 350$$,000, what is the owner's equity?

Accepted Answer

$$150,000$$

Question 11

Which of the following is a key difference between a corporation and a partnership?

Accepted Answer

A corporation has limited liability for its owners; a partnership does not.

Question 12

Which of the following best illustrates the matching principle?

Accepted Answer

Recording wage expenses in the same period as the related sales revenue

Question 13

Which of the following is NOT considered an asset?

Accepted Answer

Accounts payable

Question 14

A company receives $10,000 cash from a customer for services to be performed next month. How should this be recorded?

Accepted Answer

Increase Cash; Increase Unearned Revenue (a liability)

Question 15

Which of the following is an example of the historical cost principle?

Accepted Answer

Recording land at the price paid for it, even if its market value increases

Question 16

Which of the following best describes the going concern assumption?

Accepted Answer

The business will continue operating for the foreseeable future

Question 17

Which of the following is a qualitative characteristic that enhances the usefulness of financial information?

Accepted Answer

Verifiability

Question 18

If a company’s revenues are $$200,000 and expenses are 150$$,000, what is the profit (net income)?

Accepted Answer

$$50,000$$

Question 19

Which of the following is an ethical consideration for accountants when preparing financial statements?

Accepted Answer

Ensuring information is faithfully represented and free from bias

Question 20

Which of the following best describes the purpose of the statement of owner's equity?

Accepted Answer

To report the changes in owner's equity for a specific period

Accounting and the Business Environment: Foundations of Financial Accounting

Study Guide - Practice Questions