, CHAPTER 1
THE PURPOSE AND USE OF FINANCIAL STATEMENTS
SUMMARY OF QUESTION TYPES BY STUDY OBJECTIVE AND LEVEL
OF DIFFICULTY
Item SO LOD Item SO LOD Item SO LOD Item SO LOD Item SO LOD
True-False Statements
1. 1 E 11. 2 E 21. 3 M 31. 4 E 41. 4 E
2. 1 E 12. 2 E 22. 3 E 32. 4 E 42. 4 M
3. 1 E 13. 2 E 23. 3 E 33. 4 E 43. 4 E
4. 1 E 14. 2 E 24. 3 M 34. 4 E 44. 4 E
5. 1 E 15. 2 E 25. 3 E 35. 4 E 45. 4 M
6. 1 E 16. 3 E 26. 4 M 36. 4 E 46. 4 E
7. 1 E 17. 3 E 27. 4 E 37. 4 E
8. 1 E 18. 3 M 28. 4 M 38. 4 E
9. 1 E 19. 3 M 29. 4 M 39. 4 E
10. 1 E 20. 3 E 30. 4 E 40. 4 M
Multiple Choice Questions
47. 1 E 60. 2 E 73. 3 E 86. 4 M 99. 4 M
48. 1 E 61. 2 E 74. 3 E 87. 4 H 100. 4 M
49. 1 M 62. 2 E 75. 3 E 88. 4 E 101. 4 E
50. 1 M 63. 2 E 76. 3 E 89. 4 M 102. 4 M
51. 1 E 64. 2 M 77. 3 E 90. 4 E 103. 4 M
52. 1 E 65. 2 E 78. 3 E 91. 4 E 104. 4 M
53. 1 E 66. 2 M 79. 3 E 92. 4 E 105. 4 E
54. 1 E 67. 3 E 80. 3 E 93. 4 E 106. 4 E
55. 1 E 68. 3 E 81. 3 E 94. 4 H 107. 4 E
56. 1 E 69. 3 E 82. 4 M 95. 4 M 108. 4 E
57. 2 M 70. 3 E 83. 4 M 96. 4 M 109. 4 E
58. 2 M 71. 3 E 84. 4 E 97. 4 M 110. 4 H
59. 2 M 72. 3 M 85. 4 E 98. 4 M
Exercises
111. 3 M 116. 4 M 121. 4 E 126. 4 E 131. 4 M
112. 3 M 117. 4 E 122. 4 H 127. 4 E 132. 4 H
113. 4 H 118. 4 E 123. 4 E 128. 4 E
114. 4 M 119. 4 M 124. 4 E 129. 4 M
115. 4 E 120. 4 H 125. 4 E 130. 4 E
Matching
133. 1–4 E,M
Short-Answer Essay
134. 1 E 136. 2 M 138. 4 E 140. 4 E
135. 1,2 M 137. 4 M 139. 4 M 141. 4 M
Note: E = Easy M = Medium H = Hard
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
,1-2 Test Bank for Financial Accounting: Tools for Business Decision-Making, 6th Canadian Edition
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 5. TF 9. TF 49. MC 53. MC 133-1. Ma
2. TF 6. TF 10. TF 50. MC 54. MC 134. SAE
3. TF 7. TF 47. MC 51. MC 55. MC 135. SAE
4. TF 8. TF 48. MC 52. MC 56. MC
Study Objective 2
11. TF 14. TF 58. MC 61. MC 64. MC 133-2. Ma 136. SAE
12. TF 15. TF 59. MC 62. MC 65. MC 133-3. Ma
13. TF 57. MC 60. MC 63. MC 66. MC 135. SAE
Study Objective 3
16. TF 21. TF 67. MC 72. MC 77. MC 111. Ex 133-7. Ma
17. TF 22. TF 68. MC 73. MC 78. MC 112. Ex 133-8. Ma
18. TF 23. TF 69. MC 74. MC 79. MC 133-4. Ma
19. TF 24. TF 70. MC 75. MC 80. MC 133-5. Ma
20. TF 25. TF 71. MC 76. MC 81. MC 133-6. Ma
Study Objective 4
26. TF 37. TF 83. MC 94. MC 105. MC 118. Ex 129. Ex
27. TF 38. TF 84. MC 95. MC 106. MC 119. Ex 130. Ex
28. TF 39. TF 85. MC 96. MC 107. MC 120. Ex 131. Ex
29. TF 40. TF 86. MC 97. MC 108. MC 121. Ex 132. Ex
30. TF 41. TF 87. MC 98. MC 109. MC 122. Ex 133-9. Ma
31. TF 42. TF 88. MC 99. MC 110. MC 123. Ex 133-10. Ma
32. TF 43. TF 89. MC 100. MC 113. Ex 124. Ex 137. SAE
33. TF 44. TF 90. MC 101. MC 114. Ex 125. Ex 138. SAE
34. TF 45. TF 91. MC 102. MC 115. Ex 126. Ex 139. SAE
35. TF 46. TF 92. MC 103. MC 116. Ex 127. Ex 140. SAE
36. TF 82. MC 93. MC 104. MC 117. Ex 128. Ex 141. SAE
Note: TF = True-False Ma = Matching
MC = Multiple Choice Ex = Exercise SAE = Short-Answer Essay
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
, The Purpose and Use of Financial Statements 1-3
CHAPTER STUDY OBJECTIVES
1. Identify the users and uses of accounting. The purpose of accounting is to provide
useful information for decision-making. There are two types of user groups who use
accounting information: internal and external users. Internal users work for the business
and need accounting information to plan, organize, and run operations. The primary
external users are investors, lenders and other creditors. Investors (existing and potential
shareholders) use accounting information to help decide whether to buy, hold, or sell
shares. Lenders (such as bankers) and other creditors (such as suppliers) use accounting
information to evaluate the risk of granting credit or lending money to a business. In order
for financial information to have value to its users, both internal and external, it must be
prepared by individuals with high standards of ethical behaviour.
2. Describe the primary forms of business organizations. There are three types of
organizations that use accounting information: proprietorships, partnerships, and
corporations. A proprietorship is a business owned by one person. A partnership is a
business owned by two or more people. A corporation is a separate legal entity whose
shares provide evidence of ownership. Corporations can be public or private, which means
their shares are closely held.
Generally accepted accounting principles are a common set of guidelines, which can differ
depending on the form of business organization, that are used to record and report
economic events. Public corporations follow International Financial Reporting Standards
(IFRS) and private corporations have the choice of using IFRS or Accounting Standards for
Private Enterprises (ASPE). Proprietorships and partnerships generally follow ASPE.
3. Explain the three main types of business activity. Financing activities involve raising the
necessary funds (through debt or equity) to support the business. Investing activities
involve acquiring the resources (such as property, plant, and equipment) that are needed to
run the business. Operating activities involve putting the resources of the business into
action to generate a profit.
4. Describe the purpose and content of each of the financial statements. The income
statement presents the revenues and expenses of a company for a specific period of time.
The statement of changes in equity summarizes the changes in shareholders’ equity that
have occurred for a specific period of time. The statement of financial position reports the
assets, liabilities, and shareholders’ equity of a business at a specific date. The statement
of cash flows summarizes information about the cash inflows (receipts) and outflows
(payments) for a specific period of time. Notes to the financial statements add explanatory
detail where required. The financial statements are included in an annual report, along with
nonfinancial and other financial information.
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
THE PURPOSE AND USE OF FINANCIAL STATEMENTS
SUMMARY OF QUESTION TYPES BY STUDY OBJECTIVE AND LEVEL
OF DIFFICULTY
Item SO LOD Item SO LOD Item SO LOD Item SO LOD Item SO LOD
True-False Statements
1. 1 E 11. 2 E 21. 3 M 31. 4 E 41. 4 E
2. 1 E 12. 2 E 22. 3 E 32. 4 E 42. 4 M
3. 1 E 13. 2 E 23. 3 E 33. 4 E 43. 4 E
4. 1 E 14. 2 E 24. 3 M 34. 4 E 44. 4 E
5. 1 E 15. 2 E 25. 3 E 35. 4 E 45. 4 M
6. 1 E 16. 3 E 26. 4 M 36. 4 E 46. 4 E
7. 1 E 17. 3 E 27. 4 E 37. 4 E
8. 1 E 18. 3 M 28. 4 M 38. 4 E
9. 1 E 19. 3 M 29. 4 M 39. 4 E
10. 1 E 20. 3 E 30. 4 E 40. 4 M
Multiple Choice Questions
47. 1 E 60. 2 E 73. 3 E 86. 4 M 99. 4 M
48. 1 E 61. 2 E 74. 3 E 87. 4 H 100. 4 M
49. 1 M 62. 2 E 75. 3 E 88. 4 E 101. 4 E
50. 1 M 63. 2 E 76. 3 E 89. 4 M 102. 4 M
51. 1 E 64. 2 M 77. 3 E 90. 4 E 103. 4 M
52. 1 E 65. 2 E 78. 3 E 91. 4 E 104. 4 M
53. 1 E 66. 2 M 79. 3 E 92. 4 E 105. 4 E
54. 1 E 67. 3 E 80. 3 E 93. 4 E 106. 4 E
55. 1 E 68. 3 E 81. 3 E 94. 4 H 107. 4 E
56. 1 E 69. 3 E 82. 4 M 95. 4 M 108. 4 E
57. 2 M 70. 3 E 83. 4 M 96. 4 M 109. 4 E
58. 2 M 71. 3 E 84. 4 E 97. 4 M 110. 4 H
59. 2 M 72. 3 M 85. 4 E 98. 4 M
Exercises
111. 3 M 116. 4 M 121. 4 E 126. 4 E 131. 4 M
112. 3 M 117. 4 E 122. 4 H 127. 4 E 132. 4 H
113. 4 H 118. 4 E 123. 4 E 128. 4 E
114. 4 M 119. 4 M 124. 4 E 129. 4 M
115. 4 E 120. 4 H 125. 4 E 130. 4 E
Matching
133. 1–4 E,M
Short-Answer Essay
134. 1 E 136. 2 M 138. 4 E 140. 4 E
135. 1,2 M 137. 4 M 139. 4 M 141. 4 M
Note: E = Easy M = Medium H = Hard
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
,1-2 Test Bank for Financial Accounting: Tools for Business Decision-Making, 6th Canadian Edition
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 5. TF 9. TF 49. MC 53. MC 133-1. Ma
2. TF 6. TF 10. TF 50. MC 54. MC 134. SAE
3. TF 7. TF 47. MC 51. MC 55. MC 135. SAE
4. TF 8. TF 48. MC 52. MC 56. MC
Study Objective 2
11. TF 14. TF 58. MC 61. MC 64. MC 133-2. Ma 136. SAE
12. TF 15. TF 59. MC 62. MC 65. MC 133-3. Ma
13. TF 57. MC 60. MC 63. MC 66. MC 135. SAE
Study Objective 3
16. TF 21. TF 67. MC 72. MC 77. MC 111. Ex 133-7. Ma
17. TF 22. TF 68. MC 73. MC 78. MC 112. Ex 133-8. Ma
18. TF 23. TF 69. MC 74. MC 79. MC 133-4. Ma
19. TF 24. TF 70. MC 75. MC 80. MC 133-5. Ma
20. TF 25. TF 71. MC 76. MC 81. MC 133-6. Ma
Study Objective 4
26. TF 37. TF 83. MC 94. MC 105. MC 118. Ex 129. Ex
27. TF 38. TF 84. MC 95. MC 106. MC 119. Ex 130. Ex
28. TF 39. TF 85. MC 96. MC 107. MC 120. Ex 131. Ex
29. TF 40. TF 86. MC 97. MC 108. MC 121. Ex 132. Ex
30. TF 41. TF 87. MC 98. MC 109. MC 122. Ex 133-9. Ma
31. TF 42. TF 88. MC 99. MC 110. MC 123. Ex 133-10. Ma
32. TF 43. TF 89. MC 100. MC 113. Ex 124. Ex 137. SAE
33. TF 44. TF 90. MC 101. MC 114. Ex 125. Ex 138. SAE
34. TF 45. TF 91. MC 102. MC 115. Ex 126. Ex 139. SAE
35. TF 46. TF 92. MC 103. MC 116. Ex 127. Ex 140. SAE
36. TF 82. MC 93. MC 104. MC 117. Ex 128. Ex 141. SAE
Note: TF = True-False Ma = Matching
MC = Multiple Choice Ex = Exercise SAE = Short-Answer Essay
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
, The Purpose and Use of Financial Statements 1-3
CHAPTER STUDY OBJECTIVES
1. Identify the users and uses of accounting. The purpose of accounting is to provide
useful information for decision-making. There are two types of user groups who use
accounting information: internal and external users. Internal users work for the business
and need accounting information to plan, organize, and run operations. The primary
external users are investors, lenders and other creditors. Investors (existing and potential
shareholders) use accounting information to help decide whether to buy, hold, or sell
shares. Lenders (such as bankers) and other creditors (such as suppliers) use accounting
information to evaluate the risk of granting credit or lending money to a business. In order
for financial information to have value to its users, both internal and external, it must be
prepared by individuals with high standards of ethical behaviour.
2. Describe the primary forms of business organizations. There are three types of
organizations that use accounting information: proprietorships, partnerships, and
corporations. A proprietorship is a business owned by one person. A partnership is a
business owned by two or more people. A corporation is a separate legal entity whose
shares provide evidence of ownership. Corporations can be public or private, which means
their shares are closely held.
Generally accepted accounting principles are a common set of guidelines, which can differ
depending on the form of business organization, that are used to record and report
economic events. Public corporations follow International Financial Reporting Standards
(IFRS) and private corporations have the choice of using IFRS or Accounting Standards for
Private Enterprises (ASPE). Proprietorships and partnerships generally follow ASPE.
3. Explain the three main types of business activity. Financing activities involve raising the
necessary funds (through debt or equity) to support the business. Investing activities
involve acquiring the resources (such as property, plant, and equipment) that are needed to
run the business. Operating activities involve putting the resources of the business into
action to generate a profit.
4. Describe the purpose and content of each of the financial statements. The income
statement presents the revenues and expenses of a company for a specific period of time.
The statement of changes in equity summarizes the changes in shareholders’ equity that
have occurred for a specific period of time. The statement of financial position reports the
assets, liabilities, and shareholders’ equity of a business at a specific date. The statement
of cash flows summarizes information about the cash inflows (receipts) and outflows
(payments) for a specific period of time. Notes to the financial statements add explanatory
detail where required. The financial statements are included in an annual report, along with
nonfinancial and other financial information.
Copyright © 2014 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited
