Accounting 2010 Practice Exam Questions and Complete Solutions

Accounting - Language used to communicate financial information about economic entities - The language used to tell a story - This must be done ethically and accurately because many people are interested in this information External Users - Competitors: There are limitations on the information that is given because a company doesn't want to give away all their secrets to competitors. - Creditors: Lendors (could be banks) - Tax authorities - Investors - Regulatory authorities Internal Users - CEO/CFO/Executive Management - Accountants - Financers - Shareholders/stockholders - Employees Businesses are involved in three different activities 1. Financing 2. Investing 3. Operating Financing - Borrowing cash (debt financing) - Issuing (selling) shares of stock in exchange for cash (equity financing) - Loans from the bank - Borrowing directly from investors by issuing debt securities called bonds - Debt securities (bonds) sold to investors that must be repaid at a particular date some years in the future are called bonds payable Creditors Persons or entities to which a business owes money to Common Stock - The term used to describe the total amount of money paid in by stockholders for the shares they purchased - Results when the company sells new shares of stock - Shares entitling their holders to dividends that vary in amount and may even be missed depending on the fortunes of the company - A security that represents ownership in a company IFRS International Financial Reporting Standards