Week 2 Introduction to Financial Accounting

Question 1

Accounting does three things:
a) ___
b) it records, classifies and summarizes these events, and
c) it communicates this information to interested parties.

Answer 1

it identifies events and transactions that have an economic impact on the firm,

Question 2

Accounting does three things:
a) it identifies events and transactions that have an economic impact on the firm,
b) ___
c) it communicates this information to interested parties.

Answer 2

it records, classifies and summarizes these events, and

Question 3

Accounting does three things:
a) it identifies events and transactions that have an economic impact on the firm,
b) it records, classifies and summarizes these events, and
c) ___

Answer 3

it communicates this information to interested parties.

Question 4

When accounting information is produced for internal purposes, we refer to it as ___.

Answer 4

managerial accounting

Question 5

When accounting information is ___, we refer to it as managerial accounting.

Answer 5

produced for internal purposes

Question 6

When accounting information is used to report the firm’s financial performance to outsiders, we refer to this activity as ___.

Answer 6

financial accounting

Question 7

When accounting information is ___, we refer to this activity as financial accounting.

Answer 7

used to report the firm’s financial performance to outsiders

Question 8

Managers are responsible for preparing ___, which is a booklet that contains the financial statements of the firm, explanatory notes and a detailed discussion and analysis of the results

Answer 8

the annual report

Question 8

Financial statements in the annual report are verified by an external independent party, ___ who reviews the accounts and produces a letter called the ___, part of the annual report.

Answer 8

the auditor / auditor’s report

Question 9

___

Investors
Creditors
Government agencies
Employees
Public interest groups

Answer 9

Users of Financial Accounting

Question 10

Users of Financial Accounting

___
Creditors
Government agencies
Employees
Public interest groups

Answer 10

Investors

Current investors use financial accounting to assess the performance of the firm; prospective investors use financial accounting to decide whether or not to invest in the firm.

Question 11

Users of Financial Accounting

Investors
___
Government agencies
Employees
Public interest groups

Answer 11

Creditors

Banks, suppliers, etc. Lenders of money or goods use financial accounting to decide whether or not to grant credit to the firm or to assess the likelihood of recovering their debts.

Question 12

Users of Financial Accounting

Investors
Creditors
___
Employees
Public interest groups

Answer 12

Government agencies

Tax authorities, regulators, etc.

Question 13

Users of Financial Accounting

Investors
Creditors
Government agencies
___
Public interest groups

Answer 13

Employees

Trade unions use financial accounting in collective bargaining over wages, benefits and working conditions for their members.

Question 14

Users of Financial Accounting

Investors
Creditors
Government agencies
Employees
___

Answer 14

Public interest groups

Environmentalists, groups pursuing corporate social responsibility, etc., also use financial accounting information to evaluate firms’ policies in these dimensions.

Question 15

Any firm performs three key activities: 1) ___ 2) to acquire long-term resources, which are used 3) to generate profits for the providers of capital. This is known as the business cycle.

Answer 15

it raises capital

Question 16

Any firm performs three key activities: 1) it raises capital 2) ___ 3) to generate profits for the providers of capital. This is known as the business cycle.

Answer 16

to acquire long-term resources, which are used

Question 17

Any firm performs three key activities: 1) it raises capital 2) to acquire long-term resources, which are used 3) ___. This is known as the business cycle.

Answer 17

to generate profits for the providers of capital

Question 18

Any firm performs three key activities: 1) it raises capital 2) to acquire long-term resources, which are used 3) to generate profits for the providers of capital. This is known as ___.

Answer 18

the business cycle