Accounting and Business
1. The ﬁve main activities involved in accounting are gathering ﬁnancial information; preparing and collecting permanent records; rearranging, summarizing, and classifying ﬁnancial information; preparing information reports and summaries; and establishing controls to promote accuracy and honesty among employees.
2. Answers should include three of the 19 questions listed on pages 2 and 3 of the student textbook. 3. Owners and managers form one group that beneﬁts from information presented by the accounting system. The other group consists of outsiders, like investors, bankers, labour unions, and government agencies.
4. Knowledge of accounting makes you more employable because there are many jobs that require accounting and clerical skills in many ﬁelds.
5. Knowledge of accounting can help business owners gain a better understanding of banking; how to keep track of amounts owed to suppliers and owed by customers; how to manage accounting records for the government; how to produce an income statement; and how to handle payroll accounting.
6. Public accountants offer their services to the general public for a fee, in the same way that a lawyer does.
7. Auditing is the examination and testing of the books, records, and procedures of a business so that an accountant is able to express an opinion about its ﬁnancial statements.
8. Three kinds of business besides the service business are the merchandising business, the manufacturing business, and non-proﬁt organizations.
9. Three forms of business ownership are sole proprietorship, partnership, and corporation.
10. An example of a routine accounting activity is recording transactions daily. An example of a periodic accounting activity is processing payroll.
11. The accounting cycle is a recurring set of accounting procedures carried out during each ﬁscal period.
12. Three professional accounting organizations are the Certiﬁed General Accountants
Association, the Society of Management Accountants of Canada, and the Canadian
Institute of Chartered Accountants.
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Chapter 1 Accounting and Business
CHAPTER 1 REVIEW QUESTIONS (continued)
13. On average, it takes about seven years of post-secondary study and work to become a professional accountant.
14. The Canadian Institute of Chartered Accountants is highly regarded because of their CICA
Handbook, which is used as the standard set of rules by all accounting organizations in
15. The Canadian Institute of Chartered Accountants requires 36 months of practical experience to earn the Chartered Accountant (CA) designation.
16. Members of the Canadian Institute of Chartered Accountants, the Certiﬁed General
Accountants Association of Canada, and the Society of Management Accountants are exploring a proposal to merge the three organizations. The Chartered Professional
Accountant or CPA is the designation an accountant would earn after fulﬁlling the requirements of this new merged organization.
17. IFRS stands for International Financial Reporting Standards.
18. An accounting clerk’s work is routine and clerical in nature.
19. An accountant is responsible for all aspects of accounting.
20. Spreadsheets are used by all members of the accounting team, but they play an especially important role in the hands of accountants. Accountants are responsible for maintaining the entire accounting system, which includes planning and forecasting. Spreadsheet software allows accountants to quickly see the results of changing ﬁnancial scenarios. Spreadsheets are also useful for generating charts and tables that can be used in presentations.
Using Your Knowledge
Exercise 1, p. 13
A. Certiﬁed General Accountants Association
Society of Management Accountants