Accounting

Question 1

Define Accounting

Answer 1

The process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information

Question 2

Outline Financial Accounting

Answer 2

Provides information to users outside the organisation
Information is contained in an Annual Report and published by the organisation
AR assumes users have some business and accounting knowledge
AR provides information about financial position. (Owns and owes)
AR provides information about financial performance (Profit)

Question 3

What are the uses of Financial Accounting?

Answer 3

Investing in shares (Dividends? Share price increase?)
When buying or selling to another company you can assess reliability for payments or delivery, ethical standards
Seeking employment (wages, staff retention, directors pay, social responsibility, future plans)
Governments (tax revenue, executive pay, diversity, social responsibility)

Question 4

What is the Management Accountant responsible for?

Answer 4

Determining the relevant information
Collecting the information
Communicating the information
Incentives to achieve objectives
Monitoring achievement of objectives and highlighting any cause of concern

Question 5

Conceptually, what is the main difference between financial accounting and management accounting?

Answer 5

Financial accounting information is mainly designed for external users while management accounting information is designed for internal users

Question 6

What is financial management concerned with?

Answer 6

How a business operates (Sole Trader, Partnership, Company)
How funds for a business are raised (Overdraft, Loan, Issue Shares)
How funds are used (New factory, New company, New project)