Exam 1: Business, Accounting, and You

Identify the accounting assumption that has been violated for each of the following situations. a. Jeremy is preparing the financial statements for the High Tech Cleaning Company for 2013. The owners have decided to retire and close the business in early 2014. The financial statements have been prepared using historical costs. b. Mikhail has a small tattoo business. All his cash receipts are deposited into his personal bank account. He pays his bills from either his business bank account or his personal depending on which bank account has more money. c. Fred's Forestry business sells fir trees in both Canada and the United States. Depending on the transaction, Fred will record some transactions as Canadian and others as U.S. His financial statements have a mixture of Canadian and U.S. dollars.

Given the following accounts, calculate the income or loss for ABC Company.

Label each of the following items with its location in the accounting equation. Asset Liability Shareholders' Equity Revenue Expenses

Many law and accounting firms are set up as partnerships.

In preparing financial statement, the order of preparation is important to ensure accuracy and reduce duplicate work. Put the financial statements below in the order you would prepare them. Statement of cash flows Statement of comprehensive income Statement of financial position Statement of retained earnings

IFRS and ASPE are interchangeable.

The statement of financial position is reported as a specific date.

Financial statements can help the managers of a business in making decisions regarding the business.

Which of the following is NOT a reason to study accounting?

What is the most difficult type of business to form?

Sears is an example of a sole proprietor.

Which of the financial statements includes a listing of assets owned by the company?

Ling Li Jewellery has the following accounts. Identify the accounts found within the income statement. Common shares Jewellery Supplies Cash Revenue Salaries Expense Accounts Payable Marketing Expense Accounts Receivable Supplies Expense

The Conceptual Framework includes three constraints. Identify the constraints.

How would the payment of expenses affect the accounting equation?

Phillip recently started a business. Phillip's Photography will provide photography for weddings and special events. Listed below are the second month's transactions. Required (a) Set up the table to reflect the accounts and set up the headings in the order of the accounting equation. (b) Record each transaction on the table. (c) What are the total assets for March 2013? (d) What are the total liabilities for March 2013? (e) What is the net profit or net loss for March 2013? (f) Prepare the income statement for Phillip's Photography. (g) Demonstrate that the accounting equation is in balance.

ABC Company sold $34,000 worth of merchandise for cash. Explain the effect on the expanded accounting equation.

Listed below are the transactions for Clowns and Magic Company Limited. For each transaction, determine the amount and the effect on the accounting equation. 1. Purchased a special magic machine for $2,000, making a 20% down payment in cash, the remainder is on account. 2. Purchased $350 in magic supplies for cash. 3. Billed customers $1,500 for magic shows. 4. Purchased portable magic machine for children's event for $500, fully financed by a bank loan. 5. Collected $800 from customers for services previously billed. 6. Paid balance owing on special magic machine. 7. Incurred travel expenses of $85 on account. 8. Completed party services for customers who pay $440 cash. 9. Paid $1,250 in wages to employees.

Which accounting concept or principle states that information should be free of biases and neutral?

A company purchases merchandise (inventory) for cash. What is the net result on the accounting equation?