Principles of Financial Accounting PDF

PRINCIPLES OF FINANCIAL ACCOUNTING ALAA HAFEZ FARAG CHAPTER ONE : THE NATURE OF ACCOUNTING What is accounting? Do we need accounting? Definition of Accounting: the process of identifying, measuring, and communicating economic information to permit informed judgments and decision...

PRINCIPLES OF FINANCIAL ACCOUNTING ALAA HAFEZ FARAG CHAPTER ONE : THE NATURE OF ACCOUNTING What is accounting? Do we need accounting? Definition of Accounting: the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information. the following functions could be closely related to accounting activity: recording, classifying and Summarizing. CHAPTER ONE : THE NATURE OF ACCOUNTING Accounting Branches: Financial Accounting (External). Management Accounting (Internal). The Main Objective of Accounting: (1) Accounting is intended to keep systematic records (2) Accounting is intended to protect entity’s properties (3) Accounting is intended to ascertain the operational profit or loss (4) Accounting is intended to determine the financial position of the Entity (5) Accounting is intended to facilitate decision-making process QUESTIONS:- 1- Accounting can be considered as the "language of business" because: A. It is used in everyday conversations B. It is a complex set of rules C. It is used to communicate business activities D. It is only understood by accountants Answer (c). 2- THE PRIMARY PURPOSE OF ACCOUNTING IS TO: A. Make money B. Track expenses C. Measure and evaluate economic activities D. Prepare financial statements Answer (c) 3- THE TERM "ECONOMIC ACTIVITIES" REFERS TO: A. Only business transactions B. Any action that involves money C. Government policies D. Personal expenses Answer (B).  4- Accounting information is used to: A. Make informed decisions. B. Avoid financial risks C. Calculate taxes D. All of the above Answer (D). 5- The raw materials of the accounting process are: A) Financial statements B) Economic activities C) Accounting standards D) Financial analysis Answer (B) 6- FOR A BUSINESS OWNER, ACCOUNTING INFORMATION IS NECESSARY FOR: A) Determining profitability. B) Assessing financial position. C) Making informed business decisions. D) All of the above. Answer (D) 7- WHICH OF THE FOLLOWING IS NOT A PURPOSE OF ACCOUNTING AT THE ENTERPRISE LEVEL? A) Planning future activities B) Raising finance C) Reporting to shareholders D) Personal financial planning Answer (D) 8- THE OUTPUTS OR PRODUCTS OF THE ACCOUNTING PROCESS ARE: A) Financial statements B) Economic activities C) Accounting standards D) Financial analysis Answer (A) 9-ACCOUNTING INFORMATION CAN BE USED TO: A) Evaluate the performance of a business B) Assess the financial position of an individual C) Make informed investment decisions D) All of the above Answer (D) 10- WHAT IS THE PRIMARY PURPOSE OF RECORDING IN ACCOUNTING? A. To ensure all montery transactions are recorded. B. To keep track of cash only. C. To avoid making mistakes. D. To impress investors. Answer (A) 11- WHY IS RECORDING CONSIDERED A BASIC FUNCTION OF ACCOUNTING? A. It's the first step in the accounting process. B. It's the most complex part of accounting. C. It's only done by businesses. D. It's not necessary for small businesses. Answer(A) 12- WHAT IS THE MAIN PURPOSE OF CLASSIFYING IN ACCOUNTING? A. To organize recorded data. B. To make accounting more complicated. C. To avoid errors in recording. D. To impress auditors. Answer(A) 13- WHICH OF THE FOLLOWING IS A COMMON ACCOUNTING STATEMENT USED FOR SUMMARIZING? A. Journal. B. Ledger. C. Income Statement. D. All of the above. Answer (C) 14- WHAT IS THE PRIMARY PURPOSE OF FINANCIAL ACCOUNTING? A. To provide information to internal users for decision-making. B. To prepare financial statements for external users. C. To analyze the performance of individual departments. D. To assist management in running the business. Answer: (B) 15- MANAGEMENT ACCOUNTING FOCUSES ON: A. Preparing financial statements for external users. B. Providing information to investors and creditors. C. Assisting management in running the business. D. None of the above. Answer: (C) 16- WHICH OF THE FOLLOWING INFORMATION DOES ACCOUNTING PROVIDE TO PROTECT AN ENTITY'S PROPERTIES? A. The amount of the owner's funds invested in the business. B. The amount the business owes to others. C. The amount the business has in cash. D. All of the above. Answer: D 17- WHICH OF THE FOLLOWING IS NOT A MAIN OBJECTIVE OF ACCOUNTING? A. Facilitating decision-making. B. Protecting the entity's properties. C. Determining the financial position of the entity. D. None of the above. Answer: D