Topic 1 - Introduction

Question 1

What are the two main types of accounting?

Answer 1

Financial accounting and managerial accounting

Question 2

What is financial accounting?

Answer 2

Financial accounting provides information for external decision makers such as investors and lenders.

Question 3

What is managerial accounting?

Answer 3

Managerial accounting provides information for internal decision makers such as managers to operate the business.

Question 4

What is Corporate Social Responsibility (CSR)?

Answer 4

The impact of a company’s activities on the welfare of society.

Question 5

What are socially responsible activities?

Answer 5

Socially responsible activities result from policies and procedures that have been put in place by an entity to ensure that it is an acceptable, ethical citizen

Question 6

What are some examples of socially responsible activities?

Answer 6

Attitudes towards, and practices associated with, customers, employees, the environment and the community

Question 7

What is the primary role of a company’s management according to literature?

Answer 7

The formulation and execution of policies leading to the maximisation of shareholders’ wealth.

Question 8

What are the justifications for companies voluntarily undertaking socially responsible activities?

Answer 8

• Enlightened self-interest
• Stakeholder management
• Corporate legitimacy

Question 9

What is enlightened self-interest?

Answer 9

Costs that appear to be motivated by a desire to promote society’s best interest, but which are also incurred in the hope of generating benefits for the company that exceed those costs

Question 10

What is Stakeholder management theory?

Answer 10

An organisation is part of a broader environment with complex and dynamic relationships with its many stakeholders

Question 11

What is the meaning of stakeholder management?

Answer 11

Make the stakeholder happy to set the right expectation for the business.

Question 12

What is corporate legitimacy?

Answer 12

The relationship between a company and society is subject to a social contract that says as long as the company’s activities are consistent with society’s values, the company’s legitimacy and survival are assured

Question 13

What are three corporate strategies to close a legitimacy gap and avoid sanctions by society?

Answer 13

• Changing corporate performance and activities to conform to legitimacy standards and communicating change to stakeholders
• Attempting to change external expectations about corporate performance through communication
• Using communication to direct attention from the legitimacy gap or to reinforce the community’s perception of management’s responsiveness