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BUS 139 > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is accounting

A

the process identifying, measuring and communicating information to allow informed judgements and decisions by users of the information.

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2
Q

What is finance

A

the study of how businesses raise funds and select appropriate investments

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3
Q

Why would a customer use accounting information

A

to figure out how the business may meet customer needs

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4
Q

Why would a competitor use accounting information

A

to learn how best to compete with that business and make comparisons with their own performance

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5
Q

Why would an employee use accounting information

A
  • to know if they should keeping working for the business
  • know the future plans , profits and financial strength of business
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6
Q

Why would the government use accounting information

A

to make sure the business is paying the correct tax

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7
Q

Why would community representatives use accounting information

A
  • to provide economic support of the business
  • the business’s ability to provide employment for community
  • use of community resources
  • the business’s willingness to fund environmental improvements
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8
Q

Why would investment analysts use accounting information

A

whether to advise clients to invest in the business

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9
Q

Why would suppliers use accounting information

A

whether to continue to supply to the business, can they afford goods on credit

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10
Q

Why would lenders use accounting information

A

assess businesses affordability, should they lend money

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11
Q

Why would managers use accounting information

A

assess whether the performance of the business needs to be improved

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12
Q

Why would owners (shareholders) use accounting information

A

whether to invest more into the business or sell shares

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13
Q

What are the two fundamental qualities of financial information

A

relevance and faithful representation

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14
Q

What is relevance

A

the ability of accounting information to influence decisions

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15
Q

What is faithful representation

A

the ability of information to be relied on to represent what it is meant to represent

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16
Q

What three qualities does an account need to be faithfully represented

A
  • to be complete, incorporate everything
  • neutrality, without bias
  • free from error
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17
Q

What is materiality

A

quality of accounting info meaning that misrepresentation will alter decisions made by users

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18
Q

What is comparability

A

quality that helps users to identify similarities and differences between items of info

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19
Q

What is verifiability

A

quality that provides assurance to users that the info is faithfully represented

20
Q

What is timeliness

A

provison that accounting info should be made available in time for users to make their decisions

21
Q

What is understandability

A

quality that allows info to be understood by those who the info is for

22
Q

What is the accounting information system

A

the system used to identify, record, analyse and reports accounting info

23
Q

What is management accounting

A

seeks to meet the accounting needs of managers

24
Q

What is financial accounting

A

seeks to meet the needs of owners, lenders and other external users

25
Q

What is the nature of financial reports

A

they tend to be general purpose

26
Q

What is the nature of management reports

A

they tend to be specific purpose reports

27
Q

What is the level of detail in a financial report

A

they tend to be less detailed and provide a broad overview of performance

28
Q

What is the level of detail in a management report

A

provide managers with considerable detail to help with operational decisions

29
Q

Do financial report follow regulations

A

they are subject to accounting regulations imposed by law and accounting rule makers

30
Q

Do management reports follow regulations

A

no, only to meet needs of managers

31
Q

When are financial reports produced

A

annual basis, sometimes half yearly

32
Q

When are management reports produced

A

as frequently as needed by managers

33
Q

What time period does financial reporting look at

A

reflect position and performance for past period (can occasionally concern future performance)

34
Q

What time period does management reporting look at

A

provides information concerning future performance and past performance

35
Q

What is a sole proprietorship

A

a form of business unit where an individual is operating the business on their own account

36
Q

What are the qualities of a sole proprietorship

A
  • small
  • easy to set up, no formal procedures
  • owner has say over decision making
  • owner has unlimited liability
37
Q

What is a partnership

A

business unit where at least two individuals, no more than twenty, operate a business with the intention of making profit

38
Q

What are the qualities of a partnership

A
  • small
  • easy to set up, no formal procedures
  • parternships not recognised as separate entities from business
  • partners have unlimited liability
39
Q

What is a limited company

A

business unit that is granted separate legal existence from the owners

40
Q

What are the qualities of a limited company

A
  • range from small to large
  • number of owners can be unlimited
  • owners have limited liability, will not use private assets to pay debts
  • only liable for the amount they have invested in the business
  • limits risk
  • lengthy process to set up
41
Q

What does the board of directors do (3)

A
  1. set overall direction and strategy for business
  2. monitor and control activities
  3. communicate with shareholders and others
42
Q

What is the role of a CEO

A

responsible for running the business on a day to day basis

43
Q

What is the role of the chair

A

responsible for running the business in an efficient manner

44
Q

What is strategic management

A

setting a course to achieve long term goals such as objectives and ensuring they are implemented effectively

45
Q

Three examples of unethical behaviour

A
  • lying
  • stealing
    -fraudulent behaviour
46
Q

Three examples of not for profit organisiations

A
  • charities
  • churches
  • trade unions

BUS 139 (7 decks)

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