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Questions and Answers
Accounting is considered the language of business.
Accounting is considered the language of business.
True
The main responsibility of management is to ignore financial reporting.
The main responsibility of management is to ignore financial reporting.
False
Financial reports are useful only to internal users such as managers.
Financial reports are useful only to internal users such as managers.
False
Accounting helps in controlling economic resources within a business.
Accounting helps in controlling economic resources within a business.
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Walmart does not provide earnings reports to its investors.
Walmart does not provide earnings reports to its investors.
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The terminology and symbols in accounting are meant to confuse users.
The terminology and symbols in accounting are meant to confuse users.
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Amazon’s managers prepare financial reports to monitor money earned and spent.
Amazon’s managers prepare financial reports to monitor money earned and spent.
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A sole trader has limited liability for their business debts.
A sole trader has limited liability for their business debts.
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In a partnership, at least two partners are required.
In a partnership, at least two partners are required.
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A public limited company can sell shares to the public.
A public limited company can sell shares to the public.
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Private limited companies are required to publish their financial information to shareholders.
Private limited companies are required to publish their financial information to shareholders.
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The liabilities of partners in a partnership are limited to the amount they have invested.
The liabilities of partners in a partnership are limited to the amount they have invested.
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Accounting serves as an information system that only records financial transactions.
Accounting serves as an information system that only records financial transactions.
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Accounting information aids decision-makers by helping them allocate scarce resources efficiently.
Accounting information aids decision-makers by helping them allocate scarce resources efficiently.
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Amazon uses its accounting system to track only its sales and profits, ignoring expenses.
Amazon uses its accounting system to track only its sales and profits, ignoring expenses.
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Tesla utilizes its accounting system to gather data on costs, profits, and investments.
Tesla utilizes its accounting system to gather data on costs, profits, and investments.
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The primary function of accounting is to provide information necessary for decision-making.
The primary function of accounting is to provide information necessary for decision-making.
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An effective accounting system only focuses on the historical aspect of transactions.
An effective accounting system only focuses on the historical aspect of transactions.
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The accounting information system is separate from the management information system.
The accounting information system is separate from the management information system.
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Managerial decisions at companies like Amazon are influenced by knowledge of where profits are coming from.
Managerial decisions at companies like Amazon are influenced by knowledge of where profits are coming from.
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Accounting information is irrelevant for resource allocation in businesses.
Accounting information is irrelevant for resource allocation in businesses.
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A sole proprietorship is owned by two or more people.
A sole proprietorship is owned by two or more people.
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Companies are separate legal entities that protect shareholders from personal financial liability.
Companies are separate legal entities that protect shareholders from personal financial liability.
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A partnership combines resources and expertise from its owners to increase business effectiveness.
A partnership combines resources and expertise from its owners to increase business effectiveness.
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The profits from a company go directly to its owners without any obligations.
The profits from a company go directly to its owners without any obligations.
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Small businesses, like those in sole proprietorships, lack the flexibility to adapt to market changes.
Small businesses, like those in sole proprietorships, lack the flexibility to adapt to market changes.
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Large companies, such as Amazon and Apple, are investing in technology and sustainability.
Large companies, such as Amazon and Apple, are investing in technology and sustainability.
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Partnerships typically require less capital compared to sole proprietorships.
Partnerships typically require less capital compared to sole proprietorships.
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Examples of partnerships include accounting firms and clinics.
Examples of partnerships include accounting firms and clinics.
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The primary disadvantage of a sole proprietorship is the sole owner's ability to keep all profits.
The primary disadvantage of a sole proprietorship is the sole owner's ability to keep all profits.
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Limited liability is a key feature of sole proprietorships.
Limited liability is a key feature of sole proprietorships.
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The Transaction Processing System (TPS) tracks every transaction in real-time and is vital for handling large volumes of daily transactions.
The Transaction Processing System (TPS) tracks every transaction in real-time and is vital for handling large volumes of daily transactions.
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The Accounting Information System (AIS) does not process transaction data collected by the TPS.
The Accounting Information System (AIS) does not process transaction data collected by the TPS.
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The Management Information System (MIS) provides a detailed view of each individual transaction.
The Management Information System (MIS) provides a detailed view of each individual transaction.
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The TPS serves as the foundation for other systems by providing raw data.
The TPS serves as the foundation for other systems by providing raw data.
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Amazon's AIS tracks the gross merchandise volume but does not analyze any expenses.
Amazon's AIS tracks the gross merchandise volume but does not analyze any expenses.
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Through analyzing reports from the AIS, the MIS aids in making strategic decisions for business management.
Through analyzing reports from the AIS, the MIS aids in making strategic decisions for business management.
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The TPS is capable of processing several thousand transactions simultaneously.
The TPS is capable of processing several thousand transactions simultaneously.
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The Accounting Information System (AIS) creates raw transaction data.
The Accounting Information System (AIS) creates raw transaction data.
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The MIS can help determine pricing adjustments based on sales trends.
The MIS can help determine pricing adjustments based on sales trends.
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The MIS only summarizes past transactions and cannot influence future business strategies.
The MIS only summarizes past transactions and cannot influence future business strategies.
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Study Notes
Course Information
- Course code: ACN3101
- Course title: Accounting & Financial Information
- Lecturer: Dr. Zaidi Mat Daud
- Contact information:
- Room: A218
- Tel: 016-6647500
- Email: [email protected]
Topic 1: Accounting in the Business
- Learning Outcomes:
- Understand the role of accounting
- Understand the forms of business entity
- Understand the types of business entity
Roles of Accounting
- Language of business: Accounting uses words and symbols to communicate financial information that's useful to internal and external users. The terminology and symbols aim for effective communication.
Slide 3 Simplify Technique
- Accounting shares information using simple language and symbols, like numbers, to communicate financial facts.
- This information helps people inside and outside the business make decisions.
- The language and symbols in accounting are designed to display the financial picture clearly.
Accountability and Control
- Accountability: Management is responsible for preparing and presenting accounting reports to demonstrate the business's performance and position. The reports must provide adequate information.
- Controlling: Controlling resources involves monitoring financial structure to manage limited economic resources effectively.
Accountability and Control (S5)
- Management is responsible for preparing and sharing financial reports that show business performance.
- Control involves tracking finances and resources, ensuring they're used wisely.
- An example is Amazon's managers using reports to monitor earned and spent funds, improving their control over company finances to maintain profitability.
Information System
- Accounting is an information system that gathers, processes, and communicates financial information about an identifiable economic entity.
- It's a vital service for decision-making about resource allocation in business and the economy.
K.I.S.S.USB (Detailed)
- Accounting is a system collecting, processing, and sharing information about business money and resources. It helps with planning and decision-making.
- Good accounting provides information vital for managers and decision-makers to use limited resources efficiently.
Information System in Accounting (S7)
- Accounting is an information system that gathers, processes, and shares financial data for a business.
- This information facilitates informed decisions about limited resources.
- Example: Tesla uses accounting to track costs, profits, and investments, and to decide where to spend, save, or expand, developing new models or creating more production capacity.
Management Information System (MIS)
- The MIS uses data from the AIS (Accounting Information System) to give managers a broad view of the business.
- It analyzes trends, gives summaries, and helps make strategic decisions.
Explanation of Each System (S10)
- Transaction Processing System (TPS) functions as a digital record keeper, tracking transactions in real-time, like customer purchases. This is a foundational system for data gathering.
- Accounting Information System (AIS) processes TPS data into meaningful financial reports. For example, they report crucial data such as total sales, expenses, and profit for a specified period.
- Management Information System (MIS) uses AIS data to give managers complete business insight by generating summaries and analyzing trends. This enables strategic decision-making.
Current Situation Example with E-commerce (Amazon)
- TPS records details like products, prices, quantity and payments.
- AIS takes TPS data and organizes it into financial reports that show daily, monthly or yearly earnings or expenses.
- MIS analyses reports to identify patterns, adjust pricing or marketing accordingly for improvements
Forms of Business Entity
- Sole Proprietorship: Owned by one person, like restaurants, mini markets. Simple to start but the owner takes all the risks.
- Partnership: Owned by two or more people. Accounting firms, legal firms and clinics often use this structured. Partners share profits and responsibilities and each contributes skills or finances for the venture.
- Company: A separate legal entity owned by shareholders. Examples include large corporations like BHP, Coles, Myer, CSR, or Westpac. Profits go to the shareholders and company debts do not impact their personal finances.
Types of Business Entity
- Services Business: Accounting firms, banks, or salons/beauty supplies that mainly provide services rather than selling products.
Merchandising/Trading/Retailing
- Buying goods in bulk from manufacturers to sell to customers. Businesses range from hypermarkets to specialist stores.
Manufacturing
- Producing goods by processing raw materials in factories. Finished products may be sold to wholesalers/retailers or to other manufacturers as component parts.
Business Stakeholders
- They have interest in a firm's economic performance.
- Their interest hinges on reports from the business for effective decision-making.
What are the Two Types of Reports from Accounting Information?
- Internal Reports: Used by management for planning and making decisions. Example: implementing plans and controlling costs.
- External Reports: Used by external parties with a financial interest in the company. Examples include balance sheets, income statements, and statements of cash flows.
Financial Accounting vs. Management Accounting
- Financial Accounting: Provides financial information about a business's performance to external users, such as shareholders. It follows recording practices like double-entry bookkeeping to produce financial reports like profit and loss and cash flow statements.
- Management Accounting: Provides internal reports to support business decision-making, planning, and control. It's not regulated by external law. It can evaluate cost accounting and decision-making.
User Information Requirements
- Internal Users: Management, employees. Need information about costs, decisions, planning, and control, or job security.
- External Users: Shareholders, lenders, suppliers, customers, tax authorities. Need information like company assets, cash position, future prospects, and profits, for instance, to calculate taxes. They also want information about a company's social or environmental impact.
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Description
This quiz covers the fundamental roles of accounting in business, including its communication methods and the various types of business entities. Gain insights into how accounting serves as the language of business, aiding decision-making for both internal and external users.
