1.Introduction To Accounting

Question 1

What is accounting?

Answer 1

The process of identifying, measuring, analysing and communicating financial information to enable users to make decisions.

Question 2

Name 3 internal users of accounting

Answer 2

Shareholders, managers, employees

Question 3

Name 3 external users of accounting

Answer 3

Lenders, suppliers and government

Question 4

Why do shareholders need accounting information?

Answer 4

To assess the performance, profit and risk of retaining their investment in the business.

Question 5

Why do managers need accounting information?

Answer 5

To plan budgets to achieve its profit objectives, monitor cash flow and outgoings, to make financial decisions.

Question 6

Why do employees need accounting information?

Answer 6

To determine job security and growth ability of the company which can lead to an increase in salaries.

Question 7

Why do suppliers need accounting information?

Answer 7

To determine the likelihood the business will pay them if sold to on credit or make them pay in advance.

Question 8

Why do lenders need accounting information?

Answer 8

To determine how likely the business can pay back the loan and interest.

Question 9

Why do the government need accounting information?

Answer 9

To determine the correct amount of tax they should pay and if they have actually paid it

Question 10

What is financial accounting?

Answer 10

Provides information to external users based on balance sheets, income statements and statement of cash flows

Question 11

What is managerial accounting?

Answer 11

Information for internal users, used to make decisions to continue business activities, invest in a project and manufacturing or selling of products.