Chapter 1_Important

Question 1

Elements of accounting?

Answer 1

1) Recording

2) Summarising

Question 2

Objective of accounting?

Answer 2

Provide financial information to the managers, owners, and other parties interested in an organisation

Question 3

Objective of financial reporting?

Answer 3

Providing useful information to investors is the main objective of financial reporting

Question 4

How many types of financial statements?

Answer 4

1) Statement of profit or loss
2) Statement of financial position
3) Statement of cash flow

Question 5

Relevance?

Answer 5

Information is relevant when it influences the economic decisions of users by helping them evaluate past, present or future events or confirming or correcting their past evaluations

Question 6

Bookkeeping?

Answer 6

Recording of monetary transactions appropriately classified, in the financial records of an entity, either manual means or otherwise

Question 7

Financial accounting?

Answer 7

1) Production of summary financial statements for external users
2) Prepared annually
3) Generally required by law
4) Reflects past performance and current position
5) Information calculated and presented in accordance with international accounting standards

Question 8

Management accounting?

Answer 8

1) Production of detailed accounts, Used by management to control to business and plan for the future
2) Normally prepared monthly, often on a rolling basis
3) Not mandatory
4) Includes budgets & forcasts of future activities as well as reflecting past performance
5) Information computed and presented in order to be relevant to managers

Question 9

How many types of organisations?

Answer 9

1) Profit-making organisation

2) Non-profit-making organisations