Podcast
Questions and Answers
Manufacturing organizations and merchandising businesses both deal with purchasing, storing, and selling goods. (True/False)
Manufacturing organizations and merchandising businesses both deal with purchasing, storing, and selling goods. (True/False)
True
External users of accounting information include the government, fund providers, and those interested in the entity's operations. (True/False)
External users of accounting information include the government, fund providers, and those interested in the entity's operations. (True/False)
True
Merchandisers buy items in marketable form to be resold to their customers. (True/False)
Merchandisers buy items in marketable form to be resold to their customers. (True/False)
True
Manufacturers must make the goods they sell. (True/False)
Manufacturers must make the goods they sell. (True/False)
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The purchase of materials by a manufacturer is only the last step in the production process. (True/False)
The purchase of materials by a manufacturer is only the last step in the production process. (True/False)
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Accounting's primary objective is to provide financial information to internal users such as managers. (True/False)
Accounting's primary objective is to provide financial information to internal users such as managers. (True/False)
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The manufacturing process involves the conversion of raw materials into finished goods.
The manufacturing process involves the conversion of raw materials into finished goods.
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The manufacturer must make a major investment in physical facilities, such as factory buildings and warehouses.
The manufacturer must make a major investment in physical facilities, such as factory buildings and warehouses.
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Cost accounting was originally developed only for profit-seeking entities.
Cost accounting was originally developed only for profit-seeking entities.
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Financial accounting is primarily concerned with financial statements for external use by investors and creditors.
Financial accounting is primarily concerned with financial statements for external use by investors and creditors.
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The information provided by financial accounting is usually presented in the form of financial statements, tax returns, and other formal reports.
The information provided by financial accounting is usually presented in the form of financial statements, tax returns, and other formal reports.
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Creditors who provide debts are interested in the financial statements of the entity.
Creditors who provide debts are interested in the financial statements of the entity.
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The methods of accounting for sales, cost of goods sold, selling, and administrative expenses are different for manufacturing and merchandising organizations.
The methods of accounting for sales, cost of goods sold, selling, and administrative expenses are different for manufacturing and merchandising organizations.
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Labor is involved in the conversion of raw materials into finished goods.
Labor is involved in the conversion of raw materials into finished goods.
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Financial accounting is the use of accounting information for reporting to external parties, including investors and creditors.
Financial accounting is the use of accounting information for reporting to external parties, including investors and creditors.
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Cost accounting was developed to satisfy management’s need for product cost information only in manufacturing business.
Cost accounting was developed to satisfy management’s need for product cost information only in manufacturing business.
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Study Notes
Overview of Businesses
- Manufacturing organizations and merchandising businesses engage in purchasing, storing, and selling goods.
- Merchandisers acquire items in a ready-to-sell condition for resale to customers.
- Manufacturers produce the goods they sell, requiring significant investment in physical facilities.
Accounting Information Users
- External users of accounting information include government entities, fund providers, and parties interested in the organization’s operations.
- Internal users primarily consist of managers who utilize financial information for decision-making.
Manufacturing and Cost Accounting
- The manufacturing process transforms raw materials into finished goods, incorporating labor in this conversion.
- Cost accounting was specifically developed to meet management's needs for understanding product costs, primarily in manufacturing settings.
- Financial accounting focuses on creating financial statements for external stakeholders like investors and creditors.
Financial Reporting
- Financial accounting delivers information through financial statements, tax returns, and formal reports aimed at external use.
- Creditors are particularly interested in financial statements to assess the creditworthiness of the entity.
Differences in Accounting Methods
- There are distinct accounting methods employed for sales, cost of goods sold, and expenses between manufacturing and merchandising organizations.
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Description
Test your understanding of the primary objectives of accounting and the different types of users it serves, both internal and external. Explore the similarities between manufacturing organizations and merchandising businesses.
