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SOLUTIONS MANUAL
Jo-Ann L. Johnston Carol A. Meissner Peter R. Norwood
ACCOUNTING
Ninth Canadian Edition Volume 1 Charles T. Horngren / Walter T. Harrison / Jo-Ann L. Johnston Carol A. Meissner / Peter R. Norwood .All Chapters Solutions Manual Supplement files download link a t the end of this file. 1 / 4
ii Table of Contents Chapter 1: Accounting and the Business Environment ...................................................................1
Chapter 2: R
ecording Business Transactions ................................................................................54
Chapter 3: M
easuring Business Income: The Adjusting Process ................................................147
Chapter 4:
Completing the Accounting Cycle .............................................................................226 Chapter 5: Merchandising Operations and the Accounting Cycle ...............................................329 Chapter 6: Accounting for Merchandise Inventory ....................................................................421
Chapter 7: A
ccounting Information Systems ...............................................................................503 Chapter 8: Internal Control and Cash ..........................................................................................628
Chapter 9: Recei
vables ................................................................................................................682 Chapter 10: Property, Plant, and Equipment; Goodwill; and Intangibles....................................756
Chapter 11: C
urrent Liabilities and Payroll .................................................................................823
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Chapter 1 Accounting and the Business Environment Questions 1.Accounting is a system for measuring, processing, and communicating financial information. Bookkeeping is a procedural element of accounting.
2.a. The general public uses accounting information to manage bank accounts, loan payments, etc.b.Managers and owners of businesses use accounting to monitor expenses and revenue recorded.c.Investors and creditors use accounting information to evaluate investments and loan applications.
- Government agencies (including taxation authorities) use
accounting data to create reports and collect payments.e.Not-for-profit organizations such as churches and hospitals use accounting information in much the same way as managers of businesses do—to manage their organizations.
3.Reasons for the development of accounting thought include the commercial climate of fifteenth-century Italy, the Industrial Revolution, the rise of the corporation as a business organization, income tax, the increase in the complexity of economic activities, and the increase in government influence on daily life. (Only two are required.) 4.Three professional designations of accountants are Chartered Accountant (CA), Certified General Accountant (CGA), and Certified Management Accountant (CMA).
5.The Accounting Standards Board formulates generally accepted accounting principles. It is not a government agency.
6.The owner of a proprietorship is called the proprietor, the owners of a partnership are called partners, and the owners of a corporation are called shareholders.
7.Ethical standards in accounting are designed to encourage accountants to produce honest information for decision making. The provincial institutes of CAs’ and the CGAAC’s ethical standards are directed toward independent auditors, but also govern CAs and CGAs, respectively, in industry and government. The SMAC’s standards relate more to management accountants.
8.The economic entity assumption draws clear boundaries around each entity. It is important because it allows decision makers to evaluate each entity as a separate economic unit.
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9.Four examples of types of accounting entities are a household, a business such as a drugstore or a manufacturer, a professional organization such as a law firm or a medical practice, and a not-for- profit organization such as a church or a hospital. (Answers will vary.) 10.The essence of the reliability characteristic is that accounting information should be based on the most objective and verifiable data possible.
11.The cost principle dictates that assets and services purchased be recorded at the actual cost.
12.Liabilities = Assets – Owner’s Equity.
13.An account receivable is an asset because it is an economic resource that provides a future benefit—the right to collect cash from another party. An account payable is a liability because it is another party’s claim against the business’s cash—an economic obligation.
14.Transactions are events that affect the financial position of the entity and that may be reliably recorded. They are the raw material of accounting. Without transactions, there would be nothing to account for.
15.The result of operations is a net loss of $4,400, because expenses exceed revenues.
16.A more descriptive title for the balance sheet is the “statement of financial position.” 17.The balance between assets on the left side and liabilities and owner’s equity on the right side of the balance sheet gives this financial statement its name. The balance appears in the accounting equation, Assets = Liabilities + Owner’s Equity, which is essentially a summary of the balance sheet in equation form.
18.Another title of the income statement is the “statement of operations” or the "statement of earnings." 19.The balance sheet is like a snapshot of the entity at a specific time. The income statement is like a moving picture/video of the entity’s operations during a period of time.
20.The statement of owner’s equity presents a summary of the changes that occurred in owner’s equity during the period due to additional investments by the owner, or drawings or withdrawals by the owner, and due to net income or net loss.
- Capital is another term for the owner’s equity of a proprietorship.
- Since Canada adopted IFRS in 2011, publicly accountable enterprises,
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22.Net income (or net loss) flows from the income statement to the statement of owner’s equity. Ending owner’s equity then flows to the balance sheet. The change in cash during the period on the balance sheet is explained by the cash flow statement, and the ending balance of cash on the cash flow statement matches the cash amount on the balance sheet.
which includes companies whose shares trade on stock exchanges, must report their financial results under IFRS. They are not allowed to report under accounting standards for private enterprises (ASPE).
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