introduction to accounting Flashcards
state the role of accounting
to provide accounting information for decision making by stakeholders on the management of resources and the performance of businesses
state the role of accountants
act as stewards of businesses by preparing and providing accounting information for decision-making. to perform this role, an accountant will set up the accounting information system
owners and shareholders
whether to continue to invest in the business or sell the business, depending on the risks and returns related to the business
managers
whether to consider ways to improve the performance of the business
employees
whether to continue working at the business
lenders
whether to grant loans to the business, depending on the business’ ability to repay the loan principal and pay interest
suppliers
whether to sell to the business on credit, depending on its ability to pay
customers
whether to buy from the business, depending on the business’ ability to provide the goods and/or services that they need and good after-sales service
government
whether the business complies with the tax regulations and decides the amount of tax to collect from the business
competitors
whether they are comparable to the business and how to improve their own performance
accounting info needed to know which goods to buy
cost of inventory, storage cost, gross profit margin
non-accounting info needed to know which goods to buy
customer preference, types of storage, nature of product
accounting info needed to know which supplier to buy from
cost of inventory, credit terms, delivery charges, cash and trade discounts
non-accounting info needed to know which supplier to buy from
local or overseas supplier, reputation of supplier, warranty, after-sales service, return policy, online vs brick and mortar
accounting info needed to know the credit worthiness of customer
trade receivables balance, no. of days trade receivables are overdue, existing customers’ history of repayment
non-accounting info needed to know the credit worthiness of customer
economic outlook, reputation of customer, specific industry outlook, customer’s history of repayment
accounting info needed to know which non-current asset to buy
price of non-current asset, installation cost, related repair cost
non-accounting info needed to know which non-current asset to buy
purpose of non-current asset, features of non-current asset, customers’ reviews of the non-current asset, warranty
accounting info needed to know whether to buy or rent non-current asset
cost of ownership vs renting,
business’ current financial situation
non-accounting info needed to know whether to buy or rent non-current asset
advantages and/or disadvantages of buying or renting
accounting info needed to know which legal form of business to set up
not applicable
non-accounting info needed to know which legal form of business to set up
level of control desired, risk, capital commitment for initial setup, nature of business
2 professional ethics an accountant must uphold
integrity and objectivity
explain what it means by integrity
to be straightforward and honest in all professional relationships
explains what it means by objectivity
to not let any bias, conflict of interest or undue influence of others to override professional judgement
explain the importance of having integrity and objectivity in preparing and presenting accounting info
stakeholders place trust and rely on the info provided by accountants to make business decisions. If given false or inaccurate info about the business, they are likely to make poor decisions.
