introduction to accounting

Question 1

state the role of accounting

Answer 1

to provide accounting information for decision making by stakeholders on the management of resources and the performance of businesses

Question 2

state the role of accountants

Answer 2

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

Question 3

owners and shareholders

Answer 3

whether to continue to invest in the business or sell the business, depending on the risks and returns related to the business

Question 4

managers

Answer 4

whether to consider ways to improve the performance of the business

Question 5

employees

Answer 5

whether to continue working at the business

Question 6

lenders

Answer 6

whether to grant loans to the business, depending on the business’ ability to repay the loan principal and pay interest

Question 7

suppliers

Answer 7

whether to sell to the business on credit, depending on its ability to pay

Question 8

customers

Answer 8

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

Question 9

government

Answer 9

whether the business complies with the tax regulations and decides the amount of tax to collect from the business

Question 10

competitors

Answer 10

whether they are comparable to the business and how to improve their own performance

Question 11

accounting info needed to know which goods to buy

Answer 11

cost of inventory, storage cost, gross profit margin

Question 12

non-accounting info needed to know which goods to buy

Answer 12

customer preference, types of storage, nature of product

Question 13

accounting info needed to know which supplier to buy from

Answer 13

cost of inventory, credit terms, delivery charges, cash and trade discounts

Question 14

non-accounting info needed to know which supplier to buy from

Answer 14

local or overseas supplier, reputation of supplier, warranty, after-sales service, return policy, online vs brick and mortar

Question 15

accounting info needed to know the credit worthiness of customer

Answer 15

trade receivables balance, no. of days trade receivables are overdue, existing customers’ history of repayment

Question 16

non-accounting info needed to know the credit worthiness of customer

Answer 16

economic outlook, reputation of customer, specific industry outlook, customer’s history of repayment

Question 17

accounting info needed to know which non-current asset to buy

Answer 17

price of non-current asset, installation cost, related repair cost

Question 18

non-accounting info needed to know which non-current asset to buy

Answer 18

purpose of non-current asset, features of non-current asset, customers’ reviews of the non-current asset, warranty

Question 19

accounting info needed to know whether to buy or rent non-current asset

Answer 19

cost of ownership vs renting,
business’ current financial situation

Question 20

non-accounting info needed to know whether to buy or rent non-current asset

Answer 20

advantages and/or disadvantages of buying or renting

Question 21

accounting info needed to know which legal form of business to set up

Answer 21

not applicable

Question 22

non-accounting info needed to know which legal form of business to set up

Answer 22

level of control desired, risk, capital commitment for initial setup, nature of business

Question 23

2 professional ethics an accountant must uphold

Answer 23

integrity and objectivity

Question 24

explain what it means by integrity

Answer 24

to be straightforward and honest in all professional relationships

Question 25

explains what it means by objectivity

Answer 25

to not let any bias, conflict of interest or undue influence of others to override professional judgement

Question 26

explain the importance of having integrity and objectivity in preparing and presenting accounting info

Answer 26

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.