Questions and Answers
What is the main focus of Financial Accounting?
What type of accounting is concerned with the receipt and disposition of public finance/funds?
Which type of user would be most interested in Cash Flow information?
What is the purpose of Auditing?
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Which type of accounting is concerned with the creation of new knowledge?
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What type of information does Financial Accounting provide?
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Who would be most interested in Financial Performance information?
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What is the purpose of Management Accounting?
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What is the primary function of accounting?
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What is accounting often referred to as?
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Who is considered the 'Father of Accounting'?
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What is the name of the book written by Luca Bartolomeo de Pacioli?
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What type of records were kept by military personnel of the Roman army?
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What is one of the functions of accounting?
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What is accounting described as?
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Where were some of the earliest accounting records found?
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Study Notes
What is Accounting?
- Accounting is a service activity that provides quantitative information, primarily financial in nature, about economic entities.
- Its purpose is to aid in making economic decisions and reasoned choices among alternative courses of action.
Nature of Accounting
- Accounting is an art.
- Accounting is financial in nature.
- Accounting is a process.
- Accounting is an information system.
Functions of Accounting
- Maintaining systematic records.
- Communicating financial results of an entity.
- Meeting legal requirements.
- Protecting assets of a business.
- Assisting management.
History of Accounting
- Accounting records date back over 7,000 years to ancient civilizations in Mesopotamia.
- Other early accounting records were found in ancient Babylon, Assyria, and Sumeria.
- The Roman Empire had access to detailed financial information.
- Merchants during the Goryeo Dynasty of Korea kept track of business and trades through record-keeping methodologies.
Father of Accounting
- Luca Bartolomeo de Pacioli, an Italian mathematician and Franciscan friar.
- Published "Summa de arithmetica, geometrica, proportioni, et proportionalita" in 1494, which described accounting methods, including double-entry bookkeeping.
Types of Accounting
- Financial Accounting: deals with recording business transactions to produce financial statements.
- Management Accounting: collects information for management use.
- Cost Accounting: focuses on the costs a company incurs.
- Government Accounting: deals with public finance and funding.
- Auditing: involves checking and verifying financial information.
- Tax Accounting: computes and reports taxes.
- Accounting Education: teaches accounting and financial literacy.
- Accounting Research: creates new knowledge in accounting.
Accounting Information
- Provides information on resources and obligations (financial position).
- Provides information on profitability (financial performance).
- Provides information on capital (equity).
- Provides information on cash flow.
Users of Accounting Information
- Internal Users: management and owners who need financial information for decision-making.
- Owners: assess if the business needs funding.
- Managers: use financial information for planning and organization.
- External Users: outside parties who require financial information.
- Investors: decide whether to invest in the company.
- Creditors: assess whether the company can pay its obligations.
- Customers: dependent on the firm's financial performance.
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Description
Test your knowledge of the fundamental concepts of accounting, including its nature and functions. Learn about the roles of accounting in providing financial information and making economic decisions.
