BUS 251 Final Ques ons and answers | Updated RATED
A+ | 2026 | NEW
IFRS
public companies follow these accoun ng standards
ASPE
Private companies can follow this standard.
Conceptual Frameworks to decide what informa on is useful to the financial statement user.
-to assist the organiza ons as they develop new financial repor ng standards
- to assist accountants in determining how to account for items for which no specific accoun ng
standards have been developed
- to assist users in their interpreta on of the informa on contained in the financial statements
Useful financial informa on must be both
relevant and representa onally faithful
Relevant
Confirmatory Value
Predic ve Value
Materiality
Faithful Representa on
Neutrality
Completeness
Freedom from Error
Quali es that mean financial statement info is useful
(enhancing qualita ve characteris cs.)
comparability, verifiability, meliness, understandability
To be representa onally faithful informa on must be...
complete, natural and free from error
Cash Basis of Accoun ng
,Record transac ons based on when the cash changes hands
revenues recorded when cash is received
expenses are recorded when cash is paid
Accrual Basis of Accoun ng
Revenues are recorded when they are earned
Expenses are recorded when they are incurred
Accoun ng Equa on
Assets = Liabili es + Shareholders' Equity
Retained Earnings
Net Income - Dividends Declared
Net Income
Revenues - Expenses
Profit Margin
Net Income/ Sales Revenue
Return on Equity
Net Income/ Average Total Shareholder's Equity
Average Total Shareholder's Equity = Equity at the beginning of a period + equity at the end of a
period /2
Return on Assets
Net Income/ Average Total Assets
Steps in the Accoun ng Cycle
Diagram on Textbook Chapter 3 "Understanding the Accoun ng Cycle"
Chart of Accounts
A list of all the companies accounts
Ch 3 Chart of Accounts for more info
Permanent Accounts
Accounts whose balances carry over from one period to the next. All statement of financial
posi ons accounts are permanent accounts.
,Temporary Accounts
Accounts used to keep track of informa on temporarily during each accoun ng period. The
balances in these accounts are eventually transferred to a permanent account (Retained
Earnings) at the end of the period by making closing entries
General Journal
the chronological accoun ng record of the transac ons of a business
This is where all the ini al entries are made
General Ledger
contains summary-level data for every asset, liability, equity, revenue, and expense account
journal entries are posted to the general ledger a=er the general journal
Trial balance
a lis ng of all the general ledger accounts and their balances. Used to check whether the total
of the debit balances is equal to the total of the credit balances.
Adjus ng Entries
Two Types: Accruals and Deferrals
They never involve cash and are made at the end of each accoun ng period (month, quarter or
year)
Accruals: required when a company needs to recognize a revenue before the receipt of cash or
an expense prior to the payment of cash. Ex. Wage Expense
Deferrals: required when a company needs to recognize a revenue in an accoun ng period a=er
the cash has been received or an expense in an accoun ng period a=er the cash has been paid.
Ex. Pre-paid rent Expense
Purpose of Adjusted trial Balance
This is done to ensure that the total debits in the accounts s ll equal the total credits. a=er the
adjus ng entries
Four Closing Entries
1. Close all revenue accounts to the Income Summary account.
2. Close all expense accounts to the Income Summary account.
3. Close the Income Summary account to Retained Earnings.
4. Close the Dividends Declared account to Retained Earnings.
, For Examples see Ch 3 "Preparing Financial Statements and Closing Entries"
Closing Entries Key Points
transfer the balances in all temporary accounts to Retained Earnings
reset all temporary account balances to zero
are made at the end of each year
When assessing revenues, users consider:
-quan ty by measuring growth
- quality by assessing the source of growth (such as same-store sales growth) and how closely
revenue growth corresponds with cash flow from opera ng ac vi es
Contract Based Approach to Revenue Recogni on
-focuses on the contracts a company has with its customers.
- contracts create rights
-the right to be paid by customers (right to receive considera on)
- performance obliga ons
-in this approach, changes in a company's net posi on in a contract are required before
revenues can be recognized.
- A company's net posi on in a contract increases when:
Its rights under the contract increase.
Its performance obliga ons under the contract decrease.
Five Step Model of Revenue Recogni on
1. Iden fy the Contract
2. Iden fy the performance obliga ons.
3. Determine the transac on price.
4. Allocate the transac on price to performance obliga ons.
5. Recognize revenue when each performance obliga on is sa sfied.
For for info on each see Ch4 Revenue Recogni on
Recognizing Revenue for Returns
Want to credit the refund liability un l a certain date
more info below
A+ | 2026 | NEW
IFRS
public companies follow these accoun ng standards
ASPE
Private companies can follow this standard.
Conceptual Frameworks to decide what informa on is useful to the financial statement user.
-to assist the organiza ons as they develop new financial repor ng standards
- to assist accountants in determining how to account for items for which no specific accoun ng
standards have been developed
- to assist users in their interpreta on of the informa on contained in the financial statements
Useful financial informa on must be both
relevant and representa onally faithful
Relevant
Confirmatory Value
Predic ve Value
Materiality
Faithful Representa on
Neutrality
Completeness
Freedom from Error
Quali es that mean financial statement info is useful
(enhancing qualita ve characteris cs.)
comparability, verifiability, meliness, understandability
To be representa onally faithful informa on must be...
complete, natural and free from error
Cash Basis of Accoun ng
,Record transac ons based on when the cash changes hands
revenues recorded when cash is received
expenses are recorded when cash is paid
Accrual Basis of Accoun ng
Revenues are recorded when they are earned
Expenses are recorded when they are incurred
Accoun ng Equa on
Assets = Liabili es + Shareholders' Equity
Retained Earnings
Net Income - Dividends Declared
Net Income
Revenues - Expenses
Profit Margin
Net Income/ Sales Revenue
Return on Equity
Net Income/ Average Total Shareholder's Equity
Average Total Shareholder's Equity = Equity at the beginning of a period + equity at the end of a
period /2
Return on Assets
Net Income/ Average Total Assets
Steps in the Accoun ng Cycle
Diagram on Textbook Chapter 3 "Understanding the Accoun ng Cycle"
Chart of Accounts
A list of all the companies accounts
Ch 3 Chart of Accounts for more info
Permanent Accounts
Accounts whose balances carry over from one period to the next. All statement of financial
posi ons accounts are permanent accounts.
,Temporary Accounts
Accounts used to keep track of informa on temporarily during each accoun ng period. The
balances in these accounts are eventually transferred to a permanent account (Retained
Earnings) at the end of the period by making closing entries
General Journal
the chronological accoun ng record of the transac ons of a business
This is where all the ini al entries are made
General Ledger
contains summary-level data for every asset, liability, equity, revenue, and expense account
journal entries are posted to the general ledger a=er the general journal
Trial balance
a lis ng of all the general ledger accounts and their balances. Used to check whether the total
of the debit balances is equal to the total of the credit balances.
Adjus ng Entries
Two Types: Accruals and Deferrals
They never involve cash and are made at the end of each accoun ng period (month, quarter or
year)
Accruals: required when a company needs to recognize a revenue before the receipt of cash or
an expense prior to the payment of cash. Ex. Wage Expense
Deferrals: required when a company needs to recognize a revenue in an accoun ng period a=er
the cash has been received or an expense in an accoun ng period a=er the cash has been paid.
Ex. Pre-paid rent Expense
Purpose of Adjusted trial Balance
This is done to ensure that the total debits in the accounts s ll equal the total credits. a=er the
adjus ng entries
Four Closing Entries
1. Close all revenue accounts to the Income Summary account.
2. Close all expense accounts to the Income Summary account.
3. Close the Income Summary account to Retained Earnings.
4. Close the Dividends Declared account to Retained Earnings.
, For Examples see Ch 3 "Preparing Financial Statements and Closing Entries"
Closing Entries Key Points
transfer the balances in all temporary accounts to Retained Earnings
reset all temporary account balances to zero
are made at the end of each year
When assessing revenues, users consider:
-quan ty by measuring growth
- quality by assessing the source of growth (such as same-store sales growth) and how closely
revenue growth corresponds with cash flow from opera ng ac vi es
Contract Based Approach to Revenue Recogni on
-focuses on the contracts a company has with its customers.
- contracts create rights
-the right to be paid by customers (right to receive considera on)
- performance obliga ons
-in this approach, changes in a company's net posi on in a contract are required before
revenues can be recognized.
- A company's net posi on in a contract increases when:
Its rights under the contract increase.
Its performance obliga ons under the contract decrease.
Five Step Model of Revenue Recogni on
1. Iden fy the Contract
2. Iden fy the performance obliga ons.
3. Determine the transac on price.
4. Allocate the transac on price to performance obliga ons.
5. Recognize revenue when each performance obliga on is sa sfied.
For for info on each see Ch4 Revenue Recogni on
Recognizing Revenue for Returns
Want to credit the refund liability un l a certain date
more info below
