Test Bank - for Fundamentals of Financial Accounting, 8th Edition by Fred Phillips All Chapters Complete Guide A+

Test Bank for Financial Accounting IFRS
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Edition 2nd Edition by Weygandt Kimmel
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and Kieso
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CHAPTERg1gACCOUNTIN
GgINgACTION

CHAPTERgLEARNINGgOBJECTIVES

1. Explaingwhatgaccountinggis.gAccountinggisganginformationgsystemgthatgidentifies,grecords,gan
dgcommunicatesgthegeconomicgeventsgofgangorganizationgtoginterestedgusers.
2. Identifygthegusersgandgusesgofgaccounting.gThegmajorgusersgandgusesgofgaccountinggaregasgfol
lows:g(a)gManagementgusesgaccountingginformationgtogplan,gorganize,gandgrungthegbusiness.
(b)gInvestorsg(owners)gdecidegwhethergtogbuy,ghold,gorgsellgtheirgfinancialginterestsgongthegbasi
sgofgaccountinggdata.g(c)gCreditorsg(suppliersgandgbankers)gevaluategthegrisksgofggrantinggcredit
gorglendinggmoneygongthegbasisgofgaccountingginformation.gOtherggroupsgthatgusegaccountinggi

nformationgaregtaxinggauthorities,gregulatorygagencies,gcustomers,glaborgunions,gandgeconomic
gplanners.

3. Understandgwhygethicsgisgagfundamentalgbusinessgconcept.gEthicsgaregthegstandardsgofgcondu
ctgbygwhichgactionsgaregjudgedgasgrightgorgwrong.gEffectivegfinancialgreportinggdependsgongso
undgethicalgbehavior.
4. Explaingaccountinggstandardsgandgthegmeasurementgprinciples.gAccountinggisgbasedgongsta
ndards,gsuchgasgInternationalgFinancialgReportinggStandardsg(IFRS).gIFRSggenerallygusesgonego
fgtwogmeasurementgprinciples,gtheghistoricalgcostgprinciplegorgthegfairgvaluegprinciple.gSelection
gofgwhichgprinciplegtogfollowggenerallygrelatesgtogtrade-

offsgbetweengrelevancegandgfaithfulgrepresentation.
5. Explaingthegmonetarygunitgassumptiongandgthegeconomicgentitygassumption.gThegmonetaryg
unitgassumptiongrequiresgthatgcompaniesgincludegingthegaccountinggrecordsgonlygtransactiongdat
agthatgcangbegexpressedgingtermsgofgmoney.gThegeconomicgentitygassumptiongrequiresgthatgtheg
activitiesgofgeachgeconomicgentitygbegkeptgseparategfromgthegactivitiesgofgitsgownersgandgother
geconomicgentities.


6. Stategthegaccountinggequation,gandgdefinegitsgcomponents.gThegbasicgaccountinggequationgis:
Assetsg=gLiabilitiesg+gEquity
g

,1g-g2 TestgBankgforgFinancialgAccounting:gIFRSgEdition,g2e




Assetsgaregresourcesgagbusinessgowns.gLiabilitiesgaregcreditors'gclaimsgongtotalgassets.gEquitygisgth
egownershipgclaimgongtotalgassets.
Thegexpandedgaccountinggequationgis:gAss
etsg=gLiabilitiesg+gSharegCapital—Ordinary
+gRevenuesg–gExpensesg–gDividends
Sharegcapital—
ordinarygisgaffectedgwhengthegcompanygissuesgnewgordinarygsharesgingexchangegforgcash.g
Revenuesgaregincreasesgingassetsgresultinggfromgincomegearninggactivities.gExpensesgaregth
egcostsgofgassetsgconsumedgorgservicesgusedgingthegprocessgofgearninggrevenue.gDividendsg
aregpaymentsgthegcompanygmakesgtogitsgshareholders.
7. Analyzegthegeffectsgofgbusinessgtransactionsgongthegaccountinggequation.gEachgbusinessgtran
sactiongmustghavegagdualgeffectgongthegaccountinggequation.gForgexample,gifgangindividualgass
etgincreases,gtheregmustgbegagcorrespondingg(1)gdecreaseginganothergasset,gorg(2)gincreasegingags
pecificgliability,gorg(3)gincreasegingequity.
8. Understandgthegfourgfinancialgstatementsgandghowgtheygaregprepared.gAngincomegstatement
gpresentsgthegrevenuesgandgexpenses,gandgresultinggnetgincomegorgloss,gforgagspecificgperiodgof

gtime.gAgretainedgearningsgstatementgsummarizesgthegchangesgingretainedgearningsgforgagspecif

icgperiodgofgtime.gAgstatementgofgfinancialgpositiongreportsgthegassets,gliabilities,gandgequitygat
gagspecificgdate.gAgstatementgofgcashgflowsgsummarizesginformationgaboutgthegcashginflowsg(r

eceipts)gandgoutflowsg(payments)gforgagspecificgperiodgofgtime.
a
9.gExplaingthegcareergopportunitiesgingaccounting.gAccountinggoffersgmanygdifferentgjobsgingf
ieldsgsuchgasgpublicgandgprivategaccounting,ggovernment,gandgforensicgaccounting.gAccounti
nggisgagpopulargmajorgbecausegtheregaregmanygdifferentgtypesgofgjobs,gwithgunlimitedgpotenti
algforgcareergadvancement.


TRUE-FALSEgSTATEMENTS
1. Ownersgofgbusinessgfirmsgaregthegonlygpeoplegwhogneedgaccountingginformation.

Ans:gF LO1 BT:gK Difficulty:gEasy
TOT:g.5gmin.g AACSB:gReflectivegThinkingg AICPAgBB:gCriticalgThinkingg AICPAg
FN:gReporting

2. Transactionsg thatg cang beg measuredg ing dollarsg andg centsg areg recordedg ing theg financialg
informationgsystem.

Ans:gTg LO1g BT:gKg Difficulty:gEasyg TOT:g.5gming AACSB:gReflectivegThinkingg AICPAg BB
:gCriticalgThinkingg AICPAg FN:gReporting




ForgInstructorgUsegOnly

, AccountinggingAction 1g-g3



3. Theg hiringg ofg ag newg companyg presidentg isg ang economicg eventg recordedg byg theg financi
alginformationgsystem.

Ans:gFg LO1g BT:gCg Difficulty:gEasyg TOT:g.5gming AACSB:gReflectivegThinkingg AICPAg BB
:gCriticalgThinkingg AICPAg FN:gReporting

4. Managementgofgagbusinessgenterprisegisgthegmajorgexternalgusergofginformation.

Ans:gF LO2 BT:gK Difficulty:gEasy TOT:g.5gming AACSB:gReflectivegThinking
AICPAgBB:gCriticalgThinkingg AICPAg FN:gReporting
5. Accountinggcommunicatesgfinancialginformationgaboutgagbusinessgenterprisegtogbothginterna
lgandgexternalgusers.

Ans:gT LO2 BT:gK Difficulty:gEasy
TOT:g.5gmin.g AACSB:gReflectivegThinkingg AICPAgBB:gCriticalgThinkingg AICPAg
FN:gReporting

6. Accountingginformationgisgusedgonlygbygexternalgusersgwithgagfinancialginterestgingagbusine
ssgenterprise.

Ans:gFg LO2g BT:gCg Difficulty:gEasyg TOT:g.5gmin.g AACSB:gReflectivegThinkingg AICPAg BB
:gCriticalgThinkingg AICPAg FN:gReporting

7. Financialg statementsg areg theg majorg meansg ofg communicatingg accountingg informationg t
oginterestedgparties.

Ans:gTg LO2g BT:gKg Difficulty:gEasyg TOT:g.5gmin.gAACSB:gReflectivegThinkingg AICPAg BB
:gCriticalgThinkingg AICPAg FN:gReporting

8. Bookkeepingg andg accountingg areg oneg andg theg sameg becauseg theg bookkeepingg function
gincludesgthegaccountinggprocess.



Ans:gF LO2 BT:gC Difficulty:gEasy TOT:g.5gmin. AACSB:gReflectivegThinking
AICPAgBB:gCriticalgThinkingg AICPAg FN:gReporting

9. ThegoriginsgofgaccountinggaregattributedgtogLucagPacioli,gagfamousgmathematician.

Ans:gT LO2 BT:gK Difficulty:gEasy
TOT:g.5gmin.g AACSB:gReflectivegThinkingg AICPAgBB:gCriticalgThinkingg AICPAg
FN:gReporting

, ForgInstructorgUsegOnly