Tutorial 1

Question 1

Recording in Accounting

Answer 1

Recording consists of keeping a systematic,
chronological diary of events, measured in monetary units.

Question 1

Accounting consists of three basic activities

Answer 1

It identifies, records, and communicates
the economic events of an organization to interested users.

Question 2

Analysis

Answer 2

Analysis involves use of ratios, percentages, graphs, and charts to highlight significant financial trends and relationships.

Question 3

Identifying in Accounting

Answer 3

As a starting point to the accounting process, a company identifies the economic events relevant to its business.

Question 4

Communication in Accounting

Answer 4

Communicate the collected information to interested users by means of accounting reports.
A vital element in communicating economic events is the accountant’s ability to analyze and interpret the reported information.

Question 5

Interpretation

Answer 5

Interpretation involves explaining the uses, meaning, and limitations of reported data.

Question 6

Bookkeeping

Answer 6

Usually involves only the recording of economic events.

Question 7

Internal users

Answer 7

Internal users of accounting information are managers who plan, organize, and run the business.

Question 8

Managerial accounting

Answer 8

Managerial accounting provides internal reports to help users make decisions about their companies. Examples are financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year.

Question 9

External users

Answer 9

External users are individuals and organizations outside a company who want financial information about the company. The two most common types of external users are investors and creditors.

Question 10

Investors

Answer 10

Investors (owners) use accounting information to decide whether to buy, hold, or sell ownership shares of a company.

Question 11

Creditors

Answer 11

Creditors (such as suppliers and bankers) use accounting
information to evaluate the risks of granting credit or lending money.

Question 12

Taxing authorities

Answer 12

Taxing authorities want to know whether the company complies
with tax laws.

Question 13

GAAP

Answer 13

Generally accepted accounting principles

Question 14

Regulatory agencies

Answer 14

Regulatory agencies, such as the Financial Services Authority of Indonesia
(IDN), want to know whether the company is operating within prescribed rules.

Question 15

convergence

Answer 15

In order to increase
comparability, in recent years the two standard-setting bodies made eff orts to reduce the differences between IFRS and U.S. GAAP

Question 16

historical cost principle

Answer 16

The historical cost principle (or cost principle) dictates that companies record assets at their
cost. This is true not only at the time the asset is purchased, but also over the time the asset is
held.

Question 17

fair value principle

Answer 17

The fair value principle states that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability). Fair value information may be more useful than historical cost for certain types of assets and liabilities

Question 18

monetary unit assumption

Answer 18

The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in money terms. This assumption enables accounting to quantify (measure) economic events. The monetary unit assumption is vital to applying
the historical cost principle.

Question 19

The economic entity

Answer 19

The economic entity assumption requires that the activities of the entity be kept separate and distinct from the
activities of its owner and all other economic entities.