Exam (elaborations)

Solutions for Fundamentals of Financial Accounting, 7th Canadian Edition Phillips (All Chapters included)

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Complete Solutions Manual for Fundamentals of Financial Accounting, 7th Canadian Edition by Fred Phillips,Robert Libby,Patricia A. Libby,Brandy Mackintosh ; ISBN13: 9781264836147. (Full Chapters included Chapter 1 to 13)....CHAPTER 1 Business Decisions and Financial Accounting CHAPTER 2 The Balanc...

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Uploaded on March 25, 2024
Number of pages 889
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fundamentals
financial accounting
7th canadian edition
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9781264836147
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Fundamentals of Financial
Accounting, 7th Canadian Edition
by Fred Phillips

Complete Chapter Solutions Manual
are included (Ch 1 to 13)

** Immediate Download
** Swift Response
** All Chapters included
** Exercises and Problems
** Excel files included

,Chapter 1
Business Decisions and Financial Accounting
ANSWERS TO QUESTIONS

1. Accounting is a system of analyzing, recording, and summarizing the results of a
business’s activities and then reporting them to decision makers.

2. An advantage of operating as a sole proprietorship, rather than a corporation, is that it is
easy to establish. Another advantage is that income from a sole proprietorship is taxed
only once in the hands of the individual proprietor (income from a corporation is taxed in
the corporation and then again in the hands of the individual shareholder). A disadvantage
of operating as a sole proprietorship, rather than a corporation, is that the individual
proprietor can be held responsible for the debts of the business.

3. Financial accounting focuses on preparing and using the financial statements that are
made available to owners and external users such as customers, creditors, and potential
investors who are interested in reading them. Managerial accounting focuses on other
accounting reports that are not released to the general public, but instead are prepared
and used by employees, supervisors, and managers who operate the company.

4. Financial reports are used by both internal and external groups and individuals. The
internal groups are comprised of the various managers of the business. The external
groups include investors, creditors, governmental agencies, other interested parties, and
the public at large.

5. The business itself, not the individual shareholders who own the business, is viewed as
owning the assets and owing the liabilities on its balance sheet. A business’s balance
sheet includes the assets, liabilities, and shareholders’ equity of only that business and
not the personal assets, liabilities, and equity of the shareholders. The financial
statements of a company show the results of the business activities of only that company.

6. (a) Operating – These activities are directly related to earning profits. They include buying
supplies, making products, serving customers, cleaning the premises, advertising, renting
a building, repairing equipment, and obtaining insurance coverage.
(b) Investing – These activities involve buying and selling productive resources with long
lives (such as buildings, land, equipment, and tools), purchasing investments, and lending
to others.
(c) Financing – Any borrowing from banks, repaying bank loans, receiving
contributions from shareholders, or paying dividends to shareholders are considered
financing activities.

, 7. The heading of each of the four primary financial statements should include the following:
(a) Name of the business
(b) Name of the statement
(c) Date of the statement, or the period of time covered by the statement

8. (a) The purpose of the balance sheet is to report the financial position (assets, liabilities
and shareholders’ equity) of a business at a point in time.
(b) The purpose of the income statement is to present information about the revenues,
expenses, and net income of a business for a specified period of time.
(c) The statement of retained earnings reports the way that net income and the
distribution of dividends affected the financial position of the company during the period.
(d) The purpose of the statement of cash flows is to summarize how a business’s
operating, investing, and financing activities caused its cash balance to change over a
particular period of time.

9. The income statement, statement of retained earnings, and statement of cash flows would
be dated “For the Year Ended December 31, 2023,” because they report the inflows and
outflows of resources during a period of time. In contrast, the balance sheet would be
dated “At December 31, 2023,” because it represents the assets, liabilities, and
shareholders’ equity at a specific date.

10. Net income is the excess of total revenues over total expenses. A net loss occurs if total
expenses exceed total revenues.

11. The accounting equation for the balance sheet is: Assets = Liabilities + Shareholders’
Equity. Assets are the economic resources controlled by the company. Liabilities are
amounts owed by the business. Shareholders’ equity is the owners’ claims to the
business. It includes amounts contributed to the business (by investors through
purchasing the company’s shares) and the amounts earned and accumulated through
profitable business operations.

12. The equation for the income statement is Revenues – Expenses = Net Income.
Revenues are increases in a company’s resources, arising primarily from its operating
activities. Expenses are decreases in a company’s resources, arising primarily from its
operating activities. Net Income is equal to revenues minus expenses. (If expenses
exceed revenues, the company has a Net Loss.)

13. The equation for the statement of retained earnings is: Beginning Retained Earnings + Net
Income – Dividends = Ending Retained Earnings. It begins with beginning-of-the-year
retained earnings, which is the prior year’s ending retained earnings reported on the prior
year’s balance sheet. The current year's net income reported on the income statement is
added and the current year's dividends declared are subtracted from this amount. The
ending retained earnings amount is reported on the end-of-year balance sheet.

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Solutions for Fundamentals of Financial Accounting, 7th Canadian Edition Phillips (All Chapters included)

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