Chapter 1: Introduction to Accounting

Question 1

What is the role of accounting?

Answer 1

Accounting provides accounting information for stakeholders to make informed decisions regarding the management of resources and performance of businesses.

Question 2

What is the role of accountants?

Answer 2

1. They acts as stewards of business to provide accounting information for stakeholders’ decision-making.
2. Set up an accounting information system to collate, record, organize and report accounting information to enable stakeholders to make informed decisions.
3. Adapt, solve problems, think critically and provide
   accounting information and non-accounting information by providing timely, relevant and credible information that are easily understood by stakeholders based on accounting theories.

Question 3

State and explain the 2 professional ethics.

Answer 3

1. Integrity – straightforward and honest in all professional and business relationships.
2. Objectivity - not letting bias, conflict of interest or undue influence of others to override personal professional judgement.

Question 4

State the stakeholders and the type of decision making they need to make.

Answer 4

Stakeholders Types of decision making
Owners
Decide to continue business or sell the business based on risks and returns.
Managers
Decide how to plan, control, monitor and improve performance of business.

Employees

Decide to continue working in the business
based on career prospects and profit of business.

Lenders
Decide to grant loan to business
depending on business ability to repay the loan principal and pay interest.

Suppliers Decide to sell to business on credit or on cash terms depending on ability to pay.
Customers
Decide whether to buy from the business
based on ability to provide goods or services when they need and good after-sales service.

Government Decide how much taxes to collect from business and check if business complies with tax regulations.
Competitors Decide how to improve their own performance by comparing themselves.

Question 5

State the difference between a service and trading business.

Answer 5

Trading business mainly buys and sells goods while Service business mainly provides service.

Question 6

State the features of the sole proprietorship

Answer 6

1. Only one owner who contributes capital to set up business.
2. Owns and runs the business with full control.
3. Hard getting bank loan as limited to personal funds and lack of collaterals.
4. High risk as all debts and losses are personally borne by the owner.
5. Exists until owner is alive and wants to continue operations.
6. Easy to update new owner with Corporate Regulatory Authority with minimal administrative duties to adhere.