Chapter 1&2

Question 1

THE ACCOUNTING INFORMATION SYSTEM

Answer 1

Source Document During transactions 
                               ⬇️
                   Record in Journals
                               ⬇️
                     Post to Ledgers
                               ⬇️
                Prepare Trial Balance
                               ⬇️
            Prepare Income Statement
                               ⬇️
               Prepare Balance Sheet

Question 2

Who are the Internal users (stockholders)

Answer 2

Owner and manager

Question 3

Who are external users?

Answer 3

Bank ,suppliers,investors,customer, government

Question 4

Difference between Accounting and Book-keeping

Answer 4

Book-keeping
Routine process of recording business transactions.

Accounting
The whole process of recording, summarising, analysing and reporting financial information to users to make decisions.

Question 5

Why the bank use financial reports that Accountants prepare?

Answer 5

To assess the ability of the business to pay bank loans and interest.

Question 6

Why suppliers use financial reports that Accountants prepare?

Answer 6

To assess the ability of the business to pay debts.

Question 7

Why the owner uses financial reports that Accountants prepare?

Answer 7

To compare performance of his own business over time and with competitors

Question 8

Why the manager uses financial reports that Accountants prepare?

Answer 8

To monitor business operations and make changes to business strategies.

Question 9

Why customers use financial reports that Accountants prepare?

Answer 9

To assess the stability of the business and whether it can be a long-term partner.

Question 10

Why investors use financial reports that Accountants prepare?

Answer 10

To assess if the business is a good investment.

Question 11

Why the government uses financial reports that Accountants prepare?

Answer 11

To assess the amount of tax the business needs to pay.