Accounting Exam Review
ACTG 2010 Chapter Summaries
Chapter 1: The Accounting Environment
Investors – invest
Banks – lend
Complementary organizations/businesses – do business with someone
Management – increase in wages
a system of producing information about an entity and making that information available to people that need
it/have a stake in the business.
Comparing the benefits of an action to the costs and then choosing in a course of action that best suits
2 big questions for a big before lending money:
Will the company be able to pay back the money it borrowed, plus interest?
If the company were unable to pay me back, what resources does it have that I could take and sell to recover my
providing information to those external to a company.
Ex. Investors, banks, creditors, suppliers,
taxation authorities (CRA), lenders, competitors.
providing information to the managers of the entity and other decision markers who work for the
Constraints faced by entities:
contracts, law, accounting rules, moral and ethical considerations,
Income Tax Act,
powerful users, securities legislation, etc.
is an economic unit of some sort/kind.
Four types of accounting entities:
separate legal entity created under the corporation laws of Canada, a province, or some other jurisdiction in the
Corporations have many of the same rights and responsibilities as an individual; enter into contracts, can be sued, must
file TAX RETURN.
Shares are distributed amongst the owners when the corporation is formed.
Can also be issued at any time throughout the life
of the corporation.
is present: only money that is invested in the company can be taken out when sued, no action against any
specific shareholder can ensue.
shares can be purchased by anyone who is interested in owning a piece of the entity and has the money
to buy the shares.
These are usually traded on the
such as the TSX.
shares and other securities are not available for purchase unless it is agreed.
unincorporated business that has one owner.
Does not pay taxes.
The proprietor includes the money made in
his or her personal tax return, along with money made from other sources, such as employment.
unincorporated business that has multiple two or more owners called
Partners can also be other
corporations as well.
Partnerships do not pay taxes, instead the money earned by the partnership is included in the income of