Chapter 1 - Introduction To Accounting

Question 1

Explain the difference between trading and service business

Answer 1

A trading business buy goods from suppliers and sell them to its customer while a service business provides services to its customer.

Question 2

List 2 features of a Sole Proprietorship

Answer 2

Ownership - Owned by one person who contributes capital to the SP
Lifespan - SP exists as long as the sole owner is alive and wishes to continues with the operation.

Question 3

List 2 feature of a Limited Liability Partnership (LLP)

Answer 3

Ownership - Owned by 2 or more partners where each partners contributes capital to set up the LLP
Lifespan - LLP exists forever until it is wound up or struck off.

Question 4

List 2 features of a Private Limited Company (PLC)

Answer 4

Ownership - Owned by 50 or less shareholders where each shareholders buys shares and contribute capital.
Lifespan - PLC exist forever until it is wound up or struck off.

Question 5

List 2 stakeholders and explain their interaction with the business. Provide an example that the chosen stakeholders would need to make.

Answer 5

Employees - Work for the business and perform executive duties. Whether to continue working for the business.

Suppliers - Supply goods to the business. Whether to sell the goods to the business ON CREDT based on their ability to pay.

Question 6

What is the role of accounting?

Answer 6

The role of accounting is to be an information system that provides accounting information for stakeholders to make informed decisions regarding the management of resources and performance on business.

Question 7

What the 2 professionals ethics accountants should uphold?

Answer 7

1. Having integrity; to be straightforward and honest

2. Being objective; to not let bias, conflict of interest, or the undue influence of others override one’s judgment.

Question 8

Explain why it is important to be ethical

Answer 8

• As accountants provide relevant timely information for stakeholders for decision-making, the information should be truthful and accurate.
• When one does not have integrity and is not objective, may provide unreliable information that misleads others to make poor decisions.