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Introduction to Financial Accounting

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Questions and Answers

Who are some examples of people interested in receiving financial information for decision-making purposes?

Suppliers, employees, government agencies
Stockholders, suppliers, banks (correct)
Employees, government agencies, business owners
Stockholders, banks, business owners

What is the main function of the accounting information system (AIS)?

Recording and reporting financial statements
Processing and summarizing data (correct)
Input and output of information
Sorting and analyzing financial transactions

Which are the three major components in the accounting equation?

Cash, Inventory, Accounts Payable
Debits, Credits, Equities
Revenue, Expenses, Profits
Assets, Liabilities, Owner’s Equity (correct)

What is the main focus of financial accounting?

Analysis and reporting of financial transactions (B) Signup and view all the answers

What are assets in accounting?

Resources that generate income and future benefits (A) Signup and view all the answers

What is the main purpose of costing in the field of business?

To classify, record, and allocate the expenditure for the determination of costs of products (C) Signup and view all the answers

Why is it necessary to understand the expenditure in terms of material, labor, and other direct and indirect expenses?

To estimate the profit and understand its relationship with costs and price (C) Signup and view all the answers

What are the three elements of a transaction that are necessary components of any business activity?

Cost, profit, and price (D) Signup and view all the answers

What is the main purpose of estimating the cost, profit, and price relationship?

To estimate the profit and understand its relationship with costs and price (D) Signup and view all the answers

Why is it necessary to ascertain the expenditure involved in business?

To fix the price of a product produced (B) Signup and view all the answers

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