Chapter 2 Review Questions
Balance Sheet
A balance sheet is a statement showing the financial position of a person, business, or other organization
Debtor
Any Company or person who owes money to the business
Creditor
Any supplier to whom the business owes money
Principle of Conservatism
Assets or profits are neither overstated nor understated when uncertainty exists
Continuing concern concept
Assumes that a business will continue to operate unless it is known that it will not
Asset
Classify each of the following as an asset or liability. A Canada Savings Bond
Liability
Classify each of the following as an asset or liability. An amount loaned to R.J Jonas
Asset
Classify each of the following as an asset or liability. Automobile
Liability
Classify each of the following as an asset or liability. Bank Loan
Asset
Classify each of the following as an asset or liability. House and Lot
Asset
Classify each of the following as an asset or liability. Land
Liability
Classify each of the following as an asset or liability. Mortgage Payable
Asset
Classify each of the following as an asset or liability. Office Furniture
Total of one's debts
Define "Liability"
Things that one's own that have dollar value
Define "asset"
Assets - Liabilities = Owner's Equity
Form of the fundamental accounting equation
Listed under Liabilities
How is an automobile that is not fully paid listed on a balance sheet?
In the order of their liquidity
In what order are assets listed on a balance sheet?
In the order in which they will be paid
In what order are liabilities listed on a balance sheet?
CICA Handbook
In what publication are most of the rules of accounting found?
Left side
On which side of a balance sheet are the assets listed?
Right Side
On which side of a balance sheet are the liabilities listed?
left side under assets
On which side of a balance sheet does a creditor appear?
Principle of Conservatism
Provides that accounting for a business should be fair and reasonable
Business Identity Concept
Provides that the accounting for a business organization must be kept separate from the personal affairs of its owners, or from any other business or organization
Accounts Payable
The money that a business owes to its creditors
Accounts Receivable
The money that is owed to a business by its customers.
Liquidity
The order in which the assets are converted into cash
Business Identity Concept
This means that the owner of the business should not place any personal assets, such as the family home, on the business balance sheet.
Accounts Payable
This money is a liability of the business
Accounts Receivable
This money is considered an asset of the business
Standards for accountants in Canada
What has the Canadian Institute of Chartered Accountants established?
Capital and net worth
What is another term that means the same thing as "equity"
Separates a column of figures from their total
What is meant by a single ruled line drawn beneath a column of figures?
If a total happens to be a final total
When is a double rule line drawn beneath a total?
Business Name
Where can short forms or abbreviations be used on financial statements?
First heading
Where does the name of a business appear in the heading of a balance sheet?
Cash on Hand and Bank Balance
Which is the most liquid asset?
Owner
Who benefits from gains made in closing down a business?
Creditors
Who has first claim against the assets of a business?
Owner
Who primarily suffers from losses incurred inclosing down a business?
No one misinterprets the writing or the numbers
Why is it important for an accountant's work to be neat?
Going Concern Concept
another term for continuing concern concept
list assets, list liabilities, find net worth
explain how to calculate a person's financial position
Owner's equity
represent the claims of owners against the assets of a business
Generally accepted accounting principles
what does GAAP stand for?
