Intro to Accounting

Question 1

Distinguish between book-keeping and accounting.

Answer 1

Book-keeping only involves recording. Accounting is the process of recording, summarizing, reporting, analyzing and interpretation of financial information.

Question 2

What are the roles of accounting?

Answer 2

• Stewardship: Accountants are given the responsibility to manage business resources and provide financial information to the business owner.
• Decision-making: To provide financial information for decision-making purposes.

Question 3

Who are the users of accounting information?

Answer 3

Internal:
• Business Owner
• Managers - for planning and control of the business

External:
• Potential investors - check for profitability
• Creditors - check for liquidity to decide credit limits
• Bank - check for liquidity to decide approval of bank loans.
• Government - for taxation purposes

Question 4

Explain the two principles of professional ethics expected of accountants.

Answer 4

• Integrity – Being straightforward and honest in all professional business relationships
• Objectivity – Being unbiased, avoid conflict of interest or undue influence on others to override professional judgement