Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley test bank

The objective of the statement of cash flows is to enable financial statement users to assess the company’s inflows and outflows of cash related to its operating, investing, and financial activities for a period of time.
The notes to a company’s financial statements are used to provide additional detail and context for items in the financial statements. They enable the financial statements themselves to remain uncluttered, while increasing their usefulness.
 
TRUE-FALSE STATEMENTS
 
 
1. Decision makers are often referred to as users of the financial statements and include investors and creditors.
 
Answer: True
 
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Define financial accounting and understand its relationship to economic decision-making.
CPA: Financial Reporting
AACSB: Analytic
 
 
2. The primary purpose of financial accounting information is to aid users in their economic decision-making relative to the organization.
 
Answer: True
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Define financial accounting and understand its relationship to economic decision-making.
CPA: Financial Reporting
AACSB: Analytic
 
 
3. The section of an annual report that contains management’s discussion of the company’s operating results is referred to as the Statement of Management’s Responsibility.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Define financial accounting and understand its relationship to economic decision-making.
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 
4. The shareholders are an example of an internal user of annual report information.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify the main users of financial accounting information and explain how they use this information.
CPA: Financial Reporting
AACSB: Analytic
 
 
5. Information contained in the financial statements of a company is of use to both internal and external users.
 
Answer: True
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify the main users of financial accounting information and explain how they use this information.
CPA: Financial Reporting
AACSB: Analytic
 
 
6. There may be a single shareholder in the case of a public company or many shareholders in the case of a private company.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Identify the main users of financial accounting information and explain how they use this information.
CPA: Financial Reporting
AACSB: Analytic
 
 
7. A firm's activities can be divided into borrowing, investing, and operating.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Easy
Learning Objective: Explain the three categories of business activities and identify examples of transactions related to each category.
CPA: Financial Reporting
AACSB: Analytic
 
 
8. If an investor owns 10% of the shares of a company, they normally own 10 shares of the company.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Explain the three categories of business activities and identify examples of transactions related to each category.
CPA: Financial Reporting
AACSB: Analytic
 
 
9. Dividends are payments made by the company to distribute future profits.
 
Answer: False
 
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Explain the three categories of business activities and identify examples of transactions related to each category.
CPA: Financial Reporting
AACSB: Analytic
 
 
10. A gain or increase in the value of shares is known as capital appreciation.
 
Answer: True
 
Bloomcode: Knowledge
Difficulty: Medium
Learning Objective: Explain the three categories of business activities and identify examples of transactions related to each category.
CPA: Financial Reporting
AACSB: Analytic
 
 
11. Creditors are entities that lend money to a company rather than buying shares of a company.
 
Answer: True
 
Bloomcode: Knowledge
Difficulty: Easy