1.1 - What is Accounting?

Question 1

What is accounting

Answer 1

Accounting is a system of dealing with financial information, that provides information for decision-making.

Question 2

What’s the importance of analyzing and interpretation?

Answer 2

Analysis involves the use of ratios, percentages, graphs, and charts to highlight significant financial trends and relationships.

Interpretation involves explaining the uses, meaning, and limitations of reported data.

Question 3

Internal Users

Answer 3

Managers
Officers
Internal Auditors
Sales Managers
Budget Officers
Controller

Question 4

External Users

Answer 4

Lenders
Shareholders
Government
Labour Unions
External Auditors
Customers

Question 5

Types of Businesses:

Answer 5

Service Business – does not make or sell a product (not ‘tangible’)

Merchandising Business – buys goods and re-sells them for a profit

Manufacturing Business – produces the product

Non-Profit Organization – meets social needs, but not for the purpose of making money

Question 6

Forms of Business Ownership:

Answer 6

Sole Proprietorship – one owner of a business

Partnership – more than one owner of a business

Corporation – company owned by shareholders

Question 7

Routine Daily Activities of an accountant

Answer 7

• Processing bills, preparing cheques, daily banking, recording transactions

Question 8

Periodic Accounting Activities

Answer 8

• At regular intervals – payroll, financial statements, income tax return

Question 9

The Accounting Clerk (job description)

Answer 9

More routine job

• recording transactions
• recording accounting entries
• balancing the ledger
  -payroll
• banking transactions

Question 10

The accountant (job description)

Answer 10

Requires more education and experience

• Develops the system of accounting for the company
• ensures all GAAP are met
• interprets data
• prepares reports based on data,
• management,
• decision making,
• supervising the work of accounting employees