AFM 123 QUESTIONS WITH VERIFIED ANSWERS
What are the types of Accounting? - Answers - financial accounting and managerial
accounting
What are the types of accounting users? What are their purposes? - Answers - internal
users: management
External users: investors, creditors, customers, labour unions
What are characteristics of a proprietorship - Answers - one person, same legal entity
as the busiess unlimited liability, profits in owner tax returns
What are characteristics of a partnership? - Answers - two owners, same legal entity as
the business, shared unlimited liability, individual portion of profit returns go individual
tax returns
Corporation - Answers - A business owned by stockholders through (common) shares,
company and person are separate, company is liable
A non-business organization - Answers - has no profit goal
(ie. hospyals, public schools, charities)
Accounting standards - Answers - GAAP: generally accepted accounting principles
(also ASPE and IFRS)
Name the 6 qualitative characteristics - Answers - 1. relevance
2. faithful representation
3. comparability
4. verifiability
5. timelines
6. understanding
relevance - Answers - information makes a difference to the decesion maker
Faithful Presentation - Answers - complete, neutral, and error free
comparability - Answers - same practices and measurements across the board
verifiability - Answers - objectively confirming information. No subjective answers.
Timeliness - Answers - Timely info for proper decision making
, Understanding - Answers - external user needs to be able to understand
9 principles of accounting - Answers - 1. business entity
2. consistency
3. cost
4. full disclosure
5. going concern
6. matching
7. materiality
8. monetary unit
9. recognition
Business Entity - Answers - exists independently of its owner's personal holdings
consistency - Answers - a business uses teh same accounting policies and procedures
from period to period
cost - Answers - transaction recorded at original cost
Full Disclosure - Answers - providing all information necessary for consumers to make
an informed decision
Going Concern - Answers - assuming the business will remain in operation for the
foreseeable future
matching - Answers - transactions recorded in the period they occurred
Materiality - Answers - Concerns the relative size of an item and its effect on decisions
monetary unit - Answers - stable units of money
recognition - Answers - revenues recorded when earned and expenses recorded when
incurred
What is the accounting equation? - Answers - Assets = liabilities + equity
Assets are made up of.. - Answers - cash, accounts recievable , prepaud insurance,
and equipment
(all financed by debt and equity)
liabilities are made up of.. - Answers - bank loan, accounts payable, and unearned
revenue
Equity is made up of.. - Answers - share capital and retained earnings
What are the types of Accounting? - Answers - financial accounting and managerial
accounting
What are the types of accounting users? What are their purposes? - Answers - internal
users: management
External users: investors, creditors, customers, labour unions
What are characteristics of a proprietorship - Answers - one person, same legal entity
as the busiess unlimited liability, profits in owner tax returns
What are characteristics of a partnership? - Answers - two owners, same legal entity as
the business, shared unlimited liability, individual portion of profit returns go individual
tax returns
Corporation - Answers - A business owned by stockholders through (common) shares,
company and person are separate, company is liable
A non-business organization - Answers - has no profit goal
(ie. hospyals, public schools, charities)
Accounting standards - Answers - GAAP: generally accepted accounting principles
(also ASPE and IFRS)
Name the 6 qualitative characteristics - Answers - 1. relevance
2. faithful representation
3. comparability
4. verifiability
5. timelines
6. understanding
relevance - Answers - information makes a difference to the decesion maker
Faithful Presentation - Answers - complete, neutral, and error free
comparability - Answers - same practices and measurements across the board
verifiability - Answers - objectively confirming information. No subjective answers.
Timeliness - Answers - Timely info for proper decision making
, Understanding - Answers - external user needs to be able to understand
9 principles of accounting - Answers - 1. business entity
2. consistency
3. cost
4. full disclosure
5. going concern
6. matching
7. materiality
8. monetary unit
9. recognition
Business Entity - Answers - exists independently of its owner's personal holdings
consistency - Answers - a business uses teh same accounting policies and procedures
from period to period
cost - Answers - transaction recorded at original cost
Full Disclosure - Answers - providing all information necessary for consumers to make
an informed decision
Going Concern - Answers - assuming the business will remain in operation for the
foreseeable future
matching - Answers - transactions recorded in the period they occurred
Materiality - Answers - Concerns the relative size of an item and its effect on decisions
monetary unit - Answers - stable units of money
recognition - Answers - revenues recorded when earned and expenses recorded when
incurred
What is the accounting equation? - Answers - Assets = liabilities + equity
Assets are made up of.. - Answers - cash, accounts recievable , prepaud insurance,
and equipment
(all financed by debt and equity)
liabilities are made up of.. - Answers - bank loan, accounts payable, and unearned
revenue
Equity is made up of.. - Answers - share capital and retained earnings
