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ACC 100 Study Guide - Comprehensive Midterm Guide: Tertiary Sector Of The Economy, Retained Earnings, Current Liability


Department
Accounting
Course Code
ACC 100
Professor
Joel Shapiro
Study Guide
Midterm

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Ryerson
ACC 100
MIDTERM EXAM
STUDY GUIDE

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INTRODUCTION TO FINANCIAL ACCOUNTING
Week 1 Lecture/Textbook Notes
Introduction
A business is the activity of making, buying or selling goods to provide services in
exchange for money
The three main business sectors are PRIMARY, SECONDARY AND TERTIARY
Primary sector —> grow and gather raw materials (ex. potato farms, coal mining, oil
drilling)
Secondary sector —> turn raw materials into products (ex. car manufacturing, frozen
food factory, cardboard box factory)
Tertiary sector —> sell goods/products to customers (ex. restaurants, hairdressers,
music shops)
Tertiary Sector
retailer —> earns a profit by reselling good or providing services to consumers/public
in order to satisfy wants and needs
wholesaler —> buys large quantities of goods from manufacturer, warehouses them
and resells them to retailers (do not generally sell to consumers)
Stakeholders
stakeholder —> individuals or groups who either affect the business or are affected
by the actions of the business; has an objective (something they want from their
relationship with the business); internal and external
internal stakeholders —> work for the business; objectives are to keep job, do job
more efficiently, get promoted, get paid for work (ex. general employees, marketing
manager, company lawyer, tax manager, owners)
external stakeholders —> outside of business; objectives are to make money from
business (ex. shareholders of a corporation, governments, customers, suppliers,
creditors/banks, society/community)
external stakeholders use financial information of a business to make decisions
Accounting System
an information system that collects, groups and communicates a business’ financial
position, including its financial health and profitability
internal stakeholders have all access to accounting information, however external
stakeholders depend on financial statements
financial statements —> provide a business’ financial performance, its current
financial position and cash flows; used by external stakeholders to analyze a
business and answer questions to make decisions and meet their objectives
stakeholders want specific qualities in financial information so they can use that
information for decision-making
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Qualitative Characteristics
Qualitative characteristics are used to develop ASSUMPTIONS that specify how
accountants must record, measure and report information
Quality
Description
Faithful
truthful, it is complete, free of error, neutral
(unbiased)
Relevant
applicable or pertinent to decision making,
helps predict future and/or confirm past
decisions
Comparable
able to compare the same business from
year to year OR between two different
businesses in the same industry
Veriable
accurate, will always have the same
conclusion
Timely
new and updated information is provided
quickly
Understandable
clear and concise
Assumption
Description
Separate Entity
only the activities of the business are
included in the business’ financial
information (no personal information)
Unit-of-measure
all transactions must be reported using
the monetary unit of the country the
business’ head office is located in, even if
the business has offices in many countries
Going concern
businesses will continue their operations
well into the future
Historic cost
all purchases will be recorded at the
amount that was paid for them
Time period (periodicity)
information is broken into artificial time
periods such as a month, quarter or year,
so that stakeholders can analyze and
compare information to make decisions
Assumption
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