Introduction to Basic Accounting Flashcards
What is Accounting?
Accountingcan be described as a way to communicate the financial health of a business or an
organization to any and all interested parties.
What is Bookkeeping?
Bookkeeping on the other hand is the activity or occupation of keeping records of the financial affairs of a business.
What is the main purpose of accounting?
To gather and report financial information about a business’s performance, financial position, and cash flows.
How is accounting information used?
It helps in making decisions about managing, investing in, or lending to the business.
How are financial transactions recorded in accounting?
They are recorded through customer and supplier invoices or specialized journal entries.
Who are the main users of accounting information?
Owners/investors, employees, lenders, suppliers, customers, the government, and the public/local community.
Why do employees need accounting information?
To understand the company’s financial stability and assess its ability to pay higher wages or create more jobs.
Why do owners/investors use accounting information?
To make decisions about buying, holding, or selling shares and assess a company’s ability to pay dividends.
How do lenders use accounting information?
To check if a business can repay loans and pay interest on time.
Why do suppliers and other creditors use accounting information?
To decide how much credit they can safely allow to the business.
Why might customers be interested in accounting information?
To ensure the company can maintain a stable, long-term supply of key goods or services.
How does the government use accounting information?
To regulate businesses and set taxation policies.
Why is accounting information important to the public/local community?
To understand the company’s contribution to the local economy through jobs and support for local suppliers.
Use financial statements to decide whether to invest further.
Investors
Use financial statements to determine whether a company can build them a bus stop or fix their bad roads based on the company’s profitability.
Local Community
