Understanding Financial Accounting, 3rd Canadian Test Bank

1 - 2 Test Bank for Understanding Financial Accounting, Third Canadian Edition corporations, whereas they are at risk in the case of proprietorships and partnerships. It also means corporations file separate tax returns, whereas the income from proprietorships and partnerships is reported on the personal tax returns of their owners. 4. Explain the three categories of business activities and identify examples of transactions related to each category. The three categories of business activities are: (1) operating, (2) investing, and (3) financing activities. Operating activities are related to the companys revenues and expenses, such as sales to customers, collections from customers, purchases of inventory, and payments of wages and other expenses. Investing activities include buying and selling property, plant, and equipment and buying and selling the shares of other companies. Financing activities include borrowing money, issuing shares, repaying loan principal, and paying dividends. 5. Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements. There are four basic financial statements: (1) the statement of income, (2) the statement of changes in equity, (3) the statement of financial position, and (4) the statement of cash flows. The objective of the statement