The purpose of accounting

Question 1

Stakeholder

Answer 1

Someone with an interest in the business

Question 2

owner

Answer 2

owns the business, interested in profits

Question 3

bank

Answer 3

lends money to the business, interested in the business’s ability to repay the loan an interest

Question 4

government tax department

Answer 4

e.g. SARS in South Africa, interested in if the business has calculated the tax liability correctly based on profits

Question 5

management

Answer 5

those who run the business, interested in how well the business is performing to make better management decisions

Question 6

employees

Answer 6

people working for the business, interested in job security and possibility of a salary / wage increase

Question 7

suppliers

Answer 7

those who supply goods and services to the business, interested in the business’s ability to pay on time

Question 8

customers

Answer 8

those who buy goods and services from the business, interested in continued support especially where after-sales service is important

Question 9

potential investors

Answer 9

people considering investing in the business, interested in potential profitability

Question 10

purpose of Accounting

Answer 10

provide useful information to stakeholders (in the form of financial statements) so that they can make meaningful decisions

Question 11

bookkeeping

Answer 11

tracks all the financial activities of a business by keeping a detailed record of all of the transactions

Question 12

accounting

Answer 12

presents financial information in a manner that is easy to understand (i.e. financial statements) and that can be used by stakeholders

Question 13

auditing

Answer 13

checking the accounting records to ensure that the users of the financial information can trust it