1. Introduction to accounting

Question 1

Two roles of accounting

Answer 1

Decision Making and Stewardship

Question 2

How does accounting help in decision making?

Answer 2

Accounting records, summarises, reports, analyses and interprets financial data which help stakeholders to know and understand the organisation better.

Question 3

How does accounting play the role of stewardship?

Answer 3

Accounting system and structures reduce possibility of misuse of business resources and manipulation of data.

Question 4

Name two internal stakeholders.

Answer 4

Any two: owner, management, staff

Question 5

Name two external stakeholders.

Answer 5

Any two: shareholders, suppliers, banks, government, potential investors, customers, community

Question 6

State the two ethical principles an accounts officer must have.

Answer 6

Integrity and Objectivity

Question 7

Name the three main forms of business entities.

Answer 7

Sole proprietorship, Partnership, Companies

Question 8

Give two features of a sole proprietorship.

Answer 8

Any two: 1. only one owner

2. owner is the sole decision maker
3. owner gets all the profits but suffers all the losses
4. there is unlimited liability

Question 9

Give two features of a company.

Answer 9

Any two:

1. minimum one owner; no maximum. Owners are known as shareholders.
2. capital is in the form of shares
3. Shareholders earn dividends, not profits
4. there is limited liability

Question 10

Name two advantages of operating a company over sole proprietorship

Answer 10

Any two:

1. companies have limited liabilities
2. more funds are available since there can be many shareholders contribution
3. run by board of directors who are usually expertise in their own field

Question 11

What are two disadvantages of being a shareholder over being the sole proprietor

Answer 11

Any two:

1. Shareholders do not get the profits earned by the business; they receive only dividends
2. Shareholders have little say over how the business is run

Question 12

Explain integrity

Answer 12

Integrity means moral right, doing what is right and not falsifying accounts.

Question 13

Explain objectivity

Answer 13

Objectivity means not bias. Records are based on objective evidence and not opinion.