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Questions and Answers
Which one of the following accurately describes the difference between bookkeeping and accounting?
Is accounting considered an art or a science?
What is the double entry system?
What are the objectives of financial accounting?
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Who are the users of accounting information?
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Study Notes
Bookkeeping vs. Accounting
- Bookkeeping involves recording, classifying, and reporting financial transactions and events, focusing on the maintenance of a company's financial records.
- Accounting encompasses bookkeeping, plus analyzing, interpreting, and reporting financial information to stakeholders, with a focus on decision-making and strategy.
Nature of Accounting
- Accounting is considered a science, as it involves the application of established principles and guidelines, such as GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards).
Double Entry System
- The double entry system is a method of recording transactions, where each transaction affects at least two accounts, with a debit to one account and a corresponding credit to another account.
- The underlying principle is that the total value of debits equals the total value of credits, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced.
Objectives of Financial Accounting
- Provide financial information to stakeholders, enabling informed decision-making.
- Report on a company's financial performance and position.
Users of Accounting Information
- Internal users: managers and employees, using accounting information to make operational and strategic decisions.
- External users: investors, creditors, regulators, and the general public, using accounting information to assess a company's financial health and make investment decisions.
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Description
Test your knowledge on the fundamentals of financial accounting with this quiz. Explore topics such as the meaning of accounting, the difference between bookkeeping and accounting, the objectives of financial accounting, and more. Perfect for anyone looking to enhance their understanding of this important field.
