COM 315 MIDTERM QUESTIONS AND ACCURATE
ANSWERS
Main users of financial info: Internal to Corp - Answers - Management accounting uses
financial info to support decision making in the company
Main users of financial info: External to Corp - Answers - Investors
Creditors
Forms of business organization - Answers - Sole proprietor
Partnership
Corporation - Private / Public
Sole Proprietor - Answers - owned by one person.
simple to set up.
limited life and the owner has unlimited liability.
income tax paid by the sold owner on individual tax return.
No legal financial accounting filing requirements.
Partnership - Answers - Owned by 2 or more persons.
Formal legal agreement.
Limited life and each partners has unlimited liability
Income tax paid by partners on individual tax returns.
No legal financial accounting filing requirements.
Private Corporation - Answers - Legal "person".
Owned by shareholders.
Shareholders have limited liability.
Shares sold privately.
Has an indefinite life.
"Incorporated", "Inc", "Limited", or "Ltd" in title
Corp pays tax
In Canada, uses ASPE or financial reports OR
Can elect to use IFRS for financial reporting.
Public Corporation - Answers - Legal "person".
Owned by shareholders.
Shareholders have limited liability.
Shares sold publicly on a stock exchange.
Has an indefinite life.
"Incorporated", "Inc", "Limited", or "Ltd" in title
Corp pays tax
In Canada, Uses IFRS for financial reporting.
, Companies must also follow laws from Exchange Commissions due to public market
trading.
What is the difference between a sole proprietor and a partnership? - Answers - A legal
agreement is required for the business in a partnership
Private and public corporations are both_______. - Answers - Legal "persons" separate
from shareholders.
Financial reporting - Answers - When financial accounting is included in company
reports along with other items.
Objective of financial reporting - Answers - To provide financial info to users that will be
useful in decision making
Fundamental Qualitative characteristics of financial reporting - Answers - Relevance
Faithful representation
Fundamental Qualitative characteristic: Relevance - Answers - Info has relevance if it
makes a diff in users decisions.
Has predictive value and/ or confirmatory value.
Materiality.
Fundamental Qualitative characteristic: Faithful representation - Answers - Info should
reflect economic reality.
Must be complete, neutral (prudence / conservatism), and free from material error.
Enhancing qualitative characteristics - Answers - Verifiability
Comparability
Understandability
Timeliness
What is the financial reporting guidance for a public corp? - Answers - International
Financial reporting standards (IFRS) & Security exchange commissions
Key underlying assumptions - Answers - Going concern assumption
Time period assumption
Stable Monetary Unit assumption
Separate entity assumption
The accounting equation - Answers - Assets - Liabilities = Equity
Revenue - Answers - Income & gains
Expenses - Answers - losses
ANSWERS
Main users of financial info: Internal to Corp - Answers - Management accounting uses
financial info to support decision making in the company
Main users of financial info: External to Corp - Answers - Investors
Creditors
Forms of business organization - Answers - Sole proprietor
Partnership
Corporation - Private / Public
Sole Proprietor - Answers - owned by one person.
simple to set up.
limited life and the owner has unlimited liability.
income tax paid by the sold owner on individual tax return.
No legal financial accounting filing requirements.
Partnership - Answers - Owned by 2 or more persons.
Formal legal agreement.
Limited life and each partners has unlimited liability
Income tax paid by partners on individual tax returns.
No legal financial accounting filing requirements.
Private Corporation - Answers - Legal "person".
Owned by shareholders.
Shareholders have limited liability.
Shares sold privately.
Has an indefinite life.
"Incorporated", "Inc", "Limited", or "Ltd" in title
Corp pays tax
In Canada, uses ASPE or financial reports OR
Can elect to use IFRS for financial reporting.
Public Corporation - Answers - Legal "person".
Owned by shareholders.
Shareholders have limited liability.
Shares sold publicly on a stock exchange.
Has an indefinite life.
"Incorporated", "Inc", "Limited", or "Ltd" in title
Corp pays tax
In Canada, Uses IFRS for financial reporting.
, Companies must also follow laws from Exchange Commissions due to public market
trading.
What is the difference between a sole proprietor and a partnership? - Answers - A legal
agreement is required for the business in a partnership
Private and public corporations are both_______. - Answers - Legal "persons" separate
from shareholders.
Financial reporting - Answers - When financial accounting is included in company
reports along with other items.
Objective of financial reporting - Answers - To provide financial info to users that will be
useful in decision making
Fundamental Qualitative characteristics of financial reporting - Answers - Relevance
Faithful representation
Fundamental Qualitative characteristic: Relevance - Answers - Info has relevance if it
makes a diff in users decisions.
Has predictive value and/ or confirmatory value.
Materiality.
Fundamental Qualitative characteristic: Faithful representation - Answers - Info should
reflect economic reality.
Must be complete, neutral (prudence / conservatism), and free from material error.
Enhancing qualitative characteristics - Answers - Verifiability
Comparability
Understandability
Timeliness
What is the financial reporting guidance for a public corp? - Answers - International
Financial reporting standards (IFRS) & Security exchange commissions
Key underlying assumptions - Answers - Going concern assumption
Time period assumption
Stable Monetary Unit assumption
Separate entity assumption
The accounting equation - Answers - Assets - Liabilities = Equity
Revenue - Answers - Income & gains
Expenses - Answers - losses
