Week 1

Question 1

What are the three accounting disciplines?

Answer 1

• Financial accounting
• Management accounting
• finance

Question 2

Which accounting discipline is used by external users?

Answer 2

Financial accounting

Question 3

Which accounting discipline is used by internal users?

Answer 3

Management accounting

Question 4

who decides how to format and layout management accounting statements?

Answer 4

the company’s board of directors and managers

Question 5

what primary info does financial accounting show us?

Answer 5

reports on past performance and current position

Question 6

what primary info does management accounting show us?

Answer 6

forecasts for future and monitor current performance

Question 7

What is the principal type of measurement for financial accounting?

Answer 7

financal data- quantitative

Question 8

what is the principal type of measurement for management accounting?

Answer 8

quantitative and qualitative, financial and non-financial

Question 9

how often is financial accounting measured?

Answer 9

annually

Question 10

how often is management accounting measured?

Answer 10

monthly

Question 11

what are the three FUNCTIONS of financial accounting?

Answer 11

recording (expenses and income) , processing (turning it into financial info) and presenting (financial statements such as income statements, balance sheet and cash flow statements)

Question 12

who are the users of financial accounting?

Answer 12

investors, lenders, creditors, customers, employees, government etc

Question 13

what is the name of the organisations that makes sure all firms follow the same accounting standards?

Answer 13

International Accounting standards board (IASB)

Question 14

why does the IASB make sure every firm follows its standards?

Answer 14

So that there is comparability between all financial statements for the benefit of their users

Question 15

what does the statement of financial position look at?

Answer 15

what is owned and what is owed by the business

Question 16

what does the statement of profit or loss look at?

Answer 16

looks at the income and expenses of the firm for the current year allowing reflection on the performance of the business

Question 17

what does the statement of cash flows look at?

Answer 17

reflects cash received and cash spent by the business

Question 18

what does faithfully represent mean?

Answer 18

financial info must be neutral (no bias), complete and free from error

Question 19

what does equity (or capital) mean?

Answer 19

what the business owes the owner of the funds (business).

Question 20

what are expenses?

Answer 20

the daily costs incurred in running the business

Question 21

what is materiality?

Answer 21

Materiality is how important the data is to a decision. Thus if the data is omitted from the decision making will it have a big influence on the decision made.

Question 22

what does understandability mean?

Answer 22

Financial data needs to be understood by people outside of the accounting world such as lenders and investors

Question 23

describe a sole trader in respect to running the business, accounting and control

Answer 23

All liabilities are in the hands of the owner. There is no separation between the business and the owner legally so all taxation is paid through the owner

Question 24

describe a partnership in respect to running the business, accounting and control

Answer 24

2-20 partners. partners are taxed on their individual earnings

Question 25

describe an LTD in respect to running the business, accounting and control

Answer 25

Shareholders are the owners of the company. The business is a separate legal entity so the business and its owners pay separate taxation. The shareholders are not responsible for the debts of the company but can claim any investment (shares purchased) as well as any residual benefit from the company

Question 26

can an investor recover their invested money if the business fails and is unable to pay the employees wages or government tax bills?

Answer 26

NO

Question 27

can an investor recover their invested money if the business fails and is able to pay the employees wages or government tax bills?

Answer 27

YES