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COMMERCE 1AA3 Study Guide - Midterm Guide: International Financial Reporting Standards, Limited Liability Partnership, Cash Cash

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Emad Mohammad
Study Guide

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The Finacial Statements
Recording Business Transactions
Accrual Accounting and The Financial Statements
Internal Control and Cash
Short-Term Investments and Receivables
The Statement of Cash Flows
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Accounting Chapter 1
The Financial Statements
Base objective of an accountant: identify and measure activities of a business entity in order to evaluate
its performance and assess financial health. The information is then relayed on stake holders through
accounting reports (financial statements)
Stake holders: people who are apart of the business entity in some way.
Types of stake holders
External to business (financial accounting)
- Investors and creditors: must know if
investing is an ideal and if it is time to pay
- Government & regulatory bodies: uses
data to calculate data and moderate
- Individuals: use it to make economical life
decisions like buying a house
- Non-profit organizations: used to report
funding and recording operations
Financial accounting: accounting relevant to people outside the company who make decisions that do
not affect the company
Management accounting: accounting used for internal business decisions
Types of businesses
Proprietorship: an unincorporated business with only one oe. The etit’s life is liited  the
oe’s hoie o the death of the oe. The oe is held liale fo the usiess. The aoutig
entity is separate from the proprietorship.
Partnership: unincorporated business with two or more owners. The entit’s life is liited  the
oe’s hoie o  death. Pates ae usuall liale uless it’s a liited liailit pateship.
Corporation: a business with many share holders with an indefinite life. The shareholders are note
responsible for the business. Accounting entity is help separate from shareholders
Limited liability partnership: A limited liability partnership is a partnership in which some or all partners
have limited liabilities. It therefore exhibits elements of partnerships and corporations. One partner is
not responsible or liable for another partner's misconduct or negligence.
GAAPS (Generally Accepted Accounting Principles)
- sets the standards on how accountants must record, measure and report financial information.
- Sanctioned by the federal & provincial government and the Canadian securities administrators
- I Caada GAAP’s ae estalished  the Caadia istitute of hateed aoutats CICA
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Different types of GAAP in Canada
International financial reporting standards (IFRS)
Accounting standards for private enterprises
Other specialized GAAPS (do not need to know)
Fundamental qualitative characteristics (to be useful information must have these two qualities)
Relevance: information must have predictive value, confirmatory value or both. Predictive being the
information allows a third party to determine the future of the entity. Confirmatory, it confirms or
changes prior evaluations of an entity
Material (Included in Relevance): ifoatio that is ipotat eough t hage soeoe’s deisio
must be listed
Faithful representation: information must provide a faithful representation to users. It must reflect the
economic substance of a transaction or event. The information must be complete, neutral and accurate.
Enhancing qualitative characteristics (information must posses these 4 qualities)
Comparability: information must be written in such a way that it can be compared to other information
Verifiability: information must be written in such a way that it can be checked for accuracy,
completeness and reliability.
Timeliness: ifoatio ust e peseted i a tie that it a ifluee its use’s deisios.
Understandability: information must be easy to interoperate to reasonably knowledge users
The cost constraint
- The disclosure of accounting information should not exceed the expected benefits to users.
Accountings conceptual frame work
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