Question 1

Which of the following best describes the primary purpose of accounting in a business environment?

Accepted Answer

To identify, measure, and communicate financial information to assist users in making economic decisions.

Question 2

Which of the following is NOT a typical user of financial accounting information?

Accepted Answer

Customers' employees

Question 3

Which statement best distinguishes financial accounting from management accounting?

Accepted Answer

Financial accounting provides information for external decision makers, while management accounting provides information for internal decision makers.

Question 4

Which of the following is a key responsibility of professional accountants according to the professional code of conduct?

Accepted Answer

Maintaining confidentiality and acting with integrity.

Question 5

Which of the following is NOT a characteristic of a sole proprietorship?

Accepted Answer

The business has unlimited life.

Question 6

Which accounting principle requires that financial information be based on actual cost incurred in business transactions?

Accepted Answer

Historical cost principle

Question 7

A company has assets of $$120,000 and liabilities of 45$$,000. What is the owner's equity?

Accepted Answer

$75,000

Question 8

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

Accepted Answer

The owner invests additional cash into the business.

Question 9

If a business provides services to a client on account, which accounts are affected?

Accepted Answer

Accounts Receivable increases; Revenue increases.

Question 10

Which of the following best describes the accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner's\ Equity$$

Question 11

A business purchases office supplies for $2,000 on credit. What is the immediate effect on the accounting equation?

Accepted Answer

Assets increase by $$2,000; Liabilities increase by 2$$,000.

Question 12

Which of the following is NOT considered an asset?

Accepted Answer

Accounts Payable

Question 13

Which financial statement shows the financial position of a business at a specific point in time?

Accepted Answer

Balance Sheet

Question 14

Which of the following is the correct order of preparing financial statements?

Accepted Answer

Income Statement, Statement of Owner's Equity, Balance Sheet, Statement of Cash Flows

Question 15

Under which accounting standard are publicly accountable enterprises in Canada required to report?

Accepted Answer

International Financial Reporting Standards (IFRS)

Question 16

Which of the following best describes the relationship between the income statement and the statement of owner's equity?

Accepted Answer

The net income from the income statement is used to calculate the ending owner's equity.

Question 17

A business owner withdraws $5,000 cash for personal use. What is the effect on the accounting equation?

Accepted Answer

Assets decrease by $$5,000; Owner's equity decreases by 5$$,000.

Question 18

Which of the following is a key difference between IFRS and ASPE?

Accepted Answer

IFRS requires more detailed disclosures than ASPE.

Question 19

If a company pays $3,000 in salaries expense, which of the following is the correct effect on the accounting equation?

Accepted Answer

Assets decrease by $$3,000; Owner's equity decreases by 3$$,000.

Question 20

A business receives $10,000 cash in advance for services to be performed in the future. How is this transaction recorded?

Accepted Answer

Increase Cash (asset) and increase Unearned Revenue (liability) by $10,000.

Introduction to Financial Accounting: Bookkeeping, Users, and the Business Environment

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