BUS 251 Chapter 1
1. Financial statements attempt to capture financial information about an entity to assist
users in making informed decisions.
2. Shareholders are often not involved in the day-to-day operation of a business, and
elect a board of directors to represent the shareholders' interests.
3. Which of the following is an internal user of financial statement information?
board of directors
D. taxing authorities
4. In order to ensure accurate presentation of financial information, Generally Accepted
Accounting Principles (GAAP) is a set of unchanging rules that have been in use for
If financial information is described as reliable, which of the following is not a
necessary characteristic of that information?
D. neutrality 1. Relevance of financial information refers to whether the information would make a
difference in a decision.
2. An income statement and a statement of cash flows are similar in that both are flow
statements, while a balance sheet is not a flow statement.
3. The predominant form of organization of large businesses in Canada is the:
A. sole proprietorship
C. joint venture
4. In Canada, who establishes accounting recommendations and guidelines for publicly
A. Financial Accounting Standards Board (FASB)
B.The federal government
C. Accounting Standards Board (AcSB)
D. International Accounting Standards Board (IASB)
5. The basic accounting equation can be expressed as:
A. Assets = Liabilities
B.Assets = Liabilities + Shareholders' Equity
C. Assets – Liabilities = Share Capital
D. Assets = Liabilities + Share Capital 6. A change in retained earnings can generally be expressed as:
A. Net Income - Dividends
B. Assets - Liabilities
C. Net Income
D. Net Income + Dividends
7. The subsections of the cash flow statement include:
sales, expenses, and net income
B. assets, liabilities, and shareholders' equity
C. investing, operating, and financing activities
D. selling, purchasing, and operating activities
8. Which of the following is NOT a reason why financial statements are audited?
A. Auditors are independent of company management and thus add credibility to