1. Write a definition of the primary sector.

What industries would be categorized in the

primary sector?

A primary sector can be defined as the entity that produces raw materials that
manufacturers can use to create products. Industries like farming, mining and forestry
can be considered to be primary sector industries.

Google def: The primary sector of the economy extracts or harvests products from the earth
such as raw materials and basic foods.

2. Write a definition of the secondary sector. Give examples of three businesses that
would be categorized in the secondary sector.

A secondary sector can be defined as the sector that uses the raw materials provided to
create useful products for consumers. Industries like furniture manufacturers and
automobile manufacturers are examples of secondary sector industries.

3. Write a definition of the tertiary sector. Provide the names of three companies that
would be categorized in the tertiary sector (e.g. Canadian Tire)

A tertiary sector can be defined as the sector that buys products from the manufacturer
and then resells them to the consumer for a profit. Examples include Walmart,
Shoppers Drug Mart and Dollarama.

an accounting system: an information system that collects, groups, and communicates a

business's financial position, including its financial health and profitability

CYU 1

A fashion designer can be categorized into the secondary sector. This is because the designer uses the
raw materials provided from the primary sector to create clothing they then sell to the retailer.

 Stakeholders are individuals or groups that have any type of effect or are affected by a business’
actions.
 Internal vs External Users of Accounting Information
- Internal users use info within a company; include employees, managers,
- External users use info outside of company; creditor, shareholders, consumers, government,
accountant

CYU 1-2

The main objective of a customer who buys a car is to get a car that is made with materials of quality
and available at an affordable price.

CYU 1-3
Jim might violate qualities like faithful, relevant, comparable and verifiable. This is because he might be
biased towards Volkswagen and give only the positive side of buying the car. He might not give the full
rundown of the car’s history and potential problems in the future.

Qualititative Characteristics of Stakeholder’s Information

 Faithful – truly represents what really happened or what really exists also, has neutrality with no
favoring one stakeholder more than other
 Relevant – important info to user; helps make confirmations about previous performance and
predict future
 Comparable: fin info is prepared with same methods from period to period; info can be
compared to another business in the same industry
 Verifiable: two people come to the same conclusion and same results when viewing the fin info
 Timely : info is up to date
 Understandable: keep big words to a minimum, don’t use language only understandable by
experts

CYU 1-3

The qualitative characteristic “timely” is built on the Periodicity Assumption.

Assumptions
 Separate Entity: only this business’ activity is recorded in financial statement not the owner’s
 Unit of Measure: monetary unit used is the one of the country where the head office of the
company resides.
 Going concern: business will continue operating into the future
 Historic Concern: purchases recorded at the amount paid for them
 Periodicity/Time Period: Info is broken down to time periods for stakeholder understanding
 Full Disclosure: anything affecting the external stakeholders’ decisions is reported

ICDQ1 - 1

1. Medical Researcher : 2 or 3 (3 because providing a service)

2. Clothing Manufacturer: 2
3. Taxi: 3
4. Lawn Care: 3
5. Coca Cola: 2 or 3 because they have retail stores and also they manufacture.
6. Fish Farms: 1
7. Ryerson: 3

ICDQ1 -2

1. B
2. A
3. E
4. C
 5. D

ICDQ1 -3

1. The qualitative characteristic faithful is being violated because the owner is not being truthful
about the true purpose of the car – which is for his daughter and not for business purposes.

Relevant was violated because a stakeholder looking at the fin statements would see a car was owned
by the company but it isn’t

2. The qualitative characteristic comparable is being followed here because the policy allows for
the stakeholders to make decisions based on the most updated and most relevant information
provided by the new accounting policy.

3. Faithful is violated because it is not true. (faithful is most likely the right answer in these mcq
questions)

The qualitative characteristic verifiable is being violated here because the amount differs from
the original amount. Someone else wont see the same amount.

ICDQ1 – 4

Faithful – Full Disclosure

Relevant – Going Concern

Comparable – Unit of Measure

Verifiable – Historic Cost

Timely – Time Period

Understandable – Separate Entity

ICDQ1 – 5

1. Separate entity is violated because the car should not be on the business books.
The assumption full disclosure is being violated because the owner is not being truthful about
the purpose of the car’s purchase.
2. The assumption full disclosure is being followed because the relevant information is being made
available to the stakeholders.
3. The assumption Historic Cost is being violated because the amount paid differs from the amount
recorded.

NOTES FROM LEECTURE

  Internal stakeholders are management
 External stakeholders; unions, employees, insurance company, government
 Generally accepted accounting principles (GAAP); followed by Accountants
- Qualitative Characteristics + Assumptions
- ASPI (for small businesses)

Practice Questions

PQ1-1
1. Carpenter – Secondary Sector
2. Doctor -3
3. McDonalds- 3
4. Hydro One- 1
5. Web Designer – 2
6. Advertising Company – 3
7. Dairy Farmer – 2
8. Keg – 3
9. Firefighter -3

PQ1-2
1. D
2. F
3. A
4. C
5. B
6. E
7. G

PQ1 -3
Faithful –truthful, free of error, neutrality (one stakeholder isn’t favored over another)
Relevant – Important information is available to the stakeholders, the information allows for
confirming past performance and helps to predict future of the company
Comparable- Information of the company can be easily compared with a business in the same
industry, same methods are used to present information
Verifiable – Two parties looking at the information will come to the same conclusion and result.
Timely - Information is kept up to date
Understandable – The information is presented in the most simplistic way, where most general
public would be able to comprehend it

PQ1 -4
1. The qualitative characteristic comparable is being violated because the company is not
using the same methods as always to prepare their financial statements. They are straying
away from their 12 month period to a 13 month period, which is not what they usually
do.
2. The qualitative characteristic comparable is being followed, because this allows for
stakeholders to easily compare businesses of this same industry.
3. The qualitative characteristic timely is not being followed. The information is not being
reported on a frequent basis.

PQ1-5
Separate Entity: The financial statement of the company is kept separate from the owners
Unit of Measure: The monetary unit used is the same as the country where the company’s head
office is.
Going Concern : The company will continue operations in the future.
Historic Cost: Expenses are recorded by the amount paid for them
Time Period: Financial Information is reported by dividing operations into periods.
Full Disclosure: Anything that will affect a stakeholder’s decision is being reported

PQ1-6

1. The assumption time period is being violated because the information that is released to
the stakeholders isn’t within the correct division of periods.
 2. Full Disclosure is being followed because the company is keeping their information up to
date and using similar policies as other companies so shareholders can make their own
informed decisions.
3. The Assumption Time Period is being violated because the financial information is not
being reported in accurate time periods, which does not help stakeholders make
decisions. Also the assumption full disclosure is being violated because the company is
not releasing important information for the use of stakeholders.

Qualitative Characteristics of Financial Information

1. Faithful
2. Relevant
3. Comparable
4. Timely
5. Understandable
6. Verifiable

Assumptions of Financial Statements

1. Separate Entity
2. Historic Cost
3. Going Concern
4. Full Disclosure
5. Unit of Measure
6. Time Period

Faithful – Full Disclosure, Separate Entity

Relevant – Going Concern, Separate Entity, Time Period

Comparable – Unit of Measure

Verifiable – Historic Cost

Timely – Time Period

Understandable – Ties into all Assumptions