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Chapter 1 Purpose and Importance of Accounting (rated 100% correct).
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Chapter 1 Purpose and Importance ofAccounting (rated 100% correct).
Accounting ANS - Accounting is an information and measurement system that identifies, records, and
communicates an organization's business activities.
Recordkeeping/Bookkeeping ANS - Recording of transactions and events.
Why is accounting important today? ANS - Because we live in an information age in which accounting
information impacts us all.
Financial Accounting ANS - focuses on the needs of external users
Managerial Accounting ANS - focuses on the needs of internal users
External Users ANS - - Lenders (creditors) loan money or other resources to an organization. They use
the info to assess if an organization will repay its loans.
- Shareholders (investors) are the owners of a corporation. They use the reports to decide whether to
buy, hold or sell stock.
- Boards of Directors oversee organizations. They use the info to evaluate the performance of executive
management.
- External (independent) auditors examine financial statements to verify that they are prepared
according to generally accepted accounting principles.
- Nonmanagerial and nonexecutive employees and labor unions use information to bargain for better
wages.
- Regulators have legal authority over certain activities of organizations. ie.(IRS) requires the reports for
computing taxes.
- Voters and government officials use information to evaluate government performance.
- Contributors to nonprofits use information to evaluate the use and impact of donations.
- Suppliers use info to analyze a customer before extending credit.
, - Customers use financial reports to assess the stability of potential suppliers.
Internal Users ANS - - Purchasing managers need to know what, when, and how much to purchase.
- Human resource managers need information about employees' payroll, benefits, and performance.
- Production managers use information to monitor costs and ensure quality.
- Distribution managers need reports for timely and accurate delivery of products and services.
- Marketing managers use reports to target consumers, set prices, and monitor consumer needs.
- Service managers use reports to provide better service to customers.
- Research and development managers use into on projected costs and revenues of innovations.
What are the four areas of opportunities of accounting? ANS - Financial
Managerial
Taxation
Accounting-Related
Private Accounting ANS - (Most Popular) Employees working for businesses.
Public Accounting ANS - Accounting services such as auditing and taxation.
Ethics ANS - Beliefs that separate right from wrong. They are excepted standards of good and bad
behavior.
Fraud Triangle ANS - Opportunity: low risk of getting caught
Rationalization: justifies fraud or doesn't see its criminal nature
Pressure (incentive): the person must feel pressure or have an incentive
Internal Controls ANS - Procedures to protect assets, ensure reliable accounting, promote efficiency,
and uphold company policies. ie. good records, physical controls (locks), and independent reviews.
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