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Questions and Answers
What is the primary purpose of accounting?
What is the primary purpose of accounting?
To provide information to users about the economic activities and condition of a business.
Accounting only involves the recording of economic events, commonly known as bookkeeping.
Accounting only involves the recording of economic events, commonly known as bookkeeping.
False (B)
What are the three basic activities that comprise accounting?
What are the three basic activities that comprise accounting?
Identifying, recording, and communicating economic events.
What is the difference between management accounting and financial accounting?
What is the difference between management accounting and financial accounting?
Who are considered external users of accounting information?
Who are considered external users of accounting information?
What are the key factors that differentiate the types of accounting information needed by different users?
What are the key factors that differentiate the types of accounting information needed by different users?
Hired employees represent a business transaction.
Hired employees represent a business transaction.
What is the accounting equation?
What is the accounting equation?
What are the essential steps in the recording process of accounting transactions?
What are the essential steps in the recording process of accounting transactions?
What is GAAP and why is it important?
What is GAAP and why is it important?
The balance sheet reflects the financial position of a company at a specific point in time.
The balance sheet reflects the financial position of a company at a specific point in time.
To whom are the liabilities of a company owed?
To whom are the liabilities of a company owed?
Flashcards
What is accounting?
What is accounting?
An information system that provides reports on a business's economic activities and condition.
What are the three core activities of accounting?
What are the three core activities of accounting?
Identifies, records, and communicates economic events of an organization to interested users.
What is bookkeeping?
What is bookkeeping?
The recording of economic events.
Is bookkeeping the same as accounting?
Is bookkeeping the same as accounting?
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Why are users of financial information categorized?
Why are users of financial information categorized?
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How does management use accounting information?
How does management use accounting information?
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What type of information do managers require?
What type of information do managers require?
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What is financial reporting?
What is financial reporting?
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Who are the targets of financial reporting?
Who are the targets of financial reporting?
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Who are considered external users?
Who are considered external users?
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How do investors utilize accounting information?
How do investors utilize accounting information?
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How do creditors use accounting information?
How do creditors use accounting information?
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How do owners use accounting information?
How do owners use accounting information?
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How do suppliers use accounting information?
How do suppliers use accounting information?
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How do bankers use accounting information?
How do bankers use accounting information?
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How do taxing authorities use accounting information?
How do taxing authorities use accounting information?
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How do regulatory agencies use accounting information?
How do regulatory agencies use accounting information?
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Why are different types of accounting information needed?
Why are different types of accounting information needed?
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What is the first step in the accounting recording process?
What is the first step in the accounting recording process?
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What kind of transactions are recorded in the accounting system?
What kind of transactions are recorded in the accounting system?
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What is recording in accounting?
What is recording in accounting?
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How do expenses and drawings affect owner's equity?
How do expenses and drawings affect owner's equity?
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How do revenues affect owner's equity?
How do revenues affect owner's equity?
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What is the accounting equation?
What is the accounting equation?
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Is hiring an employee a business transaction?
Is hiring an employee a business transaction?
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What is a transaction in accounting?
What is a transaction in accounting?
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What does GAAP stand for?
What does GAAP stand for?
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What is a balance sheet?
What is a balance sheet?
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What are liabilities in accounting?
What are liabilities in accounting?
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Study Notes
Accounting Principles
- Definition of Accounting: An information system providing reports on a business's economic activities and condition.
- Basic Accounting Activities: Identifying, recording, and communicating economic events of an organization to interested parties.
- Bookkeeping: Primarily involves recording economic events; a part of the accounting process.
- Users of Financial Information: Divided into management (internal) and external users (investors, lenders, customers, suppliers, government).
- Management Information Needs: Detailed, timely information to perform various business functions.
- Financial Reporting for External Users: Provides information to external users not directly involved in running the organization.
- External Users: Include actual and potential shareholders, lenders, and other investors.
- Additional External Users: Customers, suppliers, the government, and the general public.
- Specific User Needs: External users (investors, owners, creditors, suppliers, bankers) use accounting information for different purposes like evaluating investment risks, making decisions about buying/selling/holding, assessing credit risks.
- Taxing and Regulatory Agencies: Want to ensure compliance with tax regulations and operational standards.
- Information Needs and Decision Types: Different types of decisions require different types of information.
- Recording Process First Step: Analyzing each transaction for its effect on the accounts.
- Measurable Transactions: Recorded transactions using dollars and cents in the financial system.
- Recording: Keeping a systematic diary of events in dollars and cents.
- Owner's Equity Impact: Decreases with expenses and drawings, increases with revenues.
- Accounting Equation: Owner's equity + liabilities = assets.
- Business Transactions: Hired employees are not business transactions.
- Definition of 'Transaction': An economic event (e.g., sale, purchase).
- GAAP: Generally Accepted Accounting Principles (the rules and guidelines used by accountants).
- Balance Sheet: Prepared as of a specific date showing a company's assets, liabilities, and equity.
- Liabilities: Amounts owed to creditors.
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Description
This quiz covers the fundamental principles of accounting, including definitions, basic activities, and the different types of users of financial information. It highlights the importance of bookkeeping, internal and external users, and management information needs. Test your understanding of how accounting serves various stakeholders in a business.
