Question 1

Expenses are the cost of assets consumed or services used in the process of generating revenue.

Accepted Answer

Expenses are the costs associated with operating a business and are deducted from revenues to determine profits. They can include items such as salaries, rent, utilities, supplies, and taxes, among others.

Question 2

Assets are resources owned by a business that provide current services or benefits to the business.

Accepted Answer

False

Question 3

The liability of corporate shareholders is limited to the amount of their investment.

Accepted Answer

Limited liability is one of the key advantages of being a corporate shareholder, as it means that they are not personally responsible for the debts or obligations of the corporation beyond the amount of their investment.

Question 4

A proprietorship is usually operated by the owner.

Accepted Answer

A proprietorship is a business structure where the owner has complete control over the operations and management of the business. Therefore, it is usually operated by the owner.

Question 5

Accounting communicates financial information about a business to both internal and external users.

Accepted Answer

Accounting is a process of recording, classifying, summarizing and interpreting financial transactions to communicate financial information to internal stakeholders such as managers, employees, owners and external stakeholders such as investors, creditors, customers, and government agencies.

Question 6

Financing activities for corporations include borrowing money and selling shares.

Accepted Answer

Financing activities for corporations often include borrowing money through loans or bonds issued to investors and selling shares through initial public offerings or stock sales.

Question 7

Canada Revenue Agency is the major external user of information.

Accepted Answer

The Canada Revenue Agency is an external user of financial information, but it is not necessarily the major one. Other external users include investors, creditors, and regulatory agencies.

Question 8

A proprietor has unlimited liability.

Accepted Answer

A proprietor is a sole owner of the business and, therefore, has unlimited liability. This means that they are personally responsible for all the debts and obligations of the business, and their personal assets can be used to settle any outstanding debts in case of business failure or default.

Question 9

A private corporation is one whose shares are traded on an organized stock exchange, like the Toronto Stock Exchange.

Accepted Answer

A private corporation is one whose shares are not traded on an organized stock exchange.

Question 10

External users of accounting information include the managers who plan, organize, and run a business.

Accepted Answer

External users of accounting information are not managers within the business, but rather outside individuals or organizations such as investors, creditors, regulators, and customers. Managers are considered internal users of accounting information.

Question 11

Two internal users of accounting information are investors and managers.

Accepted Answer

Managers are internal users of accounting information, but investors are considered external users.

Question 12

The information needs and questions of external users vary considerably.

Accepted Answer

External users, such as investors, creditors, and customers, have their own unique information needs and questions depending on their specific interests and purposes in using financial information. For example, investors may be interested in information about a company's financial performance and future growth prospects, while creditors may be more concerned with a company's ability to repay loans.

Question 13

The purchase of equipment is an example of a financing activity.

Accepted Answer

The answer of The purchase of equipment is an example...

Question 14

Accounting information is not important to marketing managers.

Accepted Answer

Accounting information can be crucial for marketing managers, especially when it comes to budgeting, forecasting, and understanding the financial impact of marketing initiatives. It helps them make informed decisions and allocate resources effectively.

Question 15

Shareholders and creditors are the only people who need accounting information.

Accepted Answer

Accounting information is important for not only shareholders and creditors but also for management, employees, customers, suppliers, government agencies, and other stakeholders who have an interest in the financial performance and health of the company.

Question 16

High standards of ethics are not required for preparers of financial information.

Accepted Answer

High standards of ethics are required for preparers of financial information as they deal with sensitive and confidential information of an organization and play a vital role in maintaining the financial integrity of the organization. Lack of ethics can lead to fraudulent activities and misleading financial reporting, which can have severe consequences for the organization and its stakeholders. Therefore, preparers of financial information are expected to adhere to high ethical standards and maintain professional integrity.

Question 17

Investing activities involve collecting the necessary funds to operate the business.

Accepted Answer

Investing activities involve the acquisition and disposal of long-term assets such as property, plant, and equipment, or investments in other companies. Collecting funds to operate the business falls under financing activities.

Question 18

Accounting identifies and records economic events of a business.

Accepted Answer

This is a true statement. Accounting is the process of identifying, measuring, recording and communicating economic information to allow informed decisions to be made. It involves keeping track of a business's financial transactions, such as sales, purchases, expenses, and investments.

Question 19

A partnership is a business organized as a separate legal entity.

Accepted Answer

A partnership is not a separate legal entity. It is an unincorporated business where the partners are personally liable for the business' debts and obligations.

Question 20

Authorities, such as the Canada Revenue Agency, want to know whether a business complies with the tax laws.

Accepted Answer

Authorities, such as the Canada Revenue Agency, have the responsibility to ensure that businesses comply with tax laws.

Quiz 1: The Purpose and Use of Financial Statements