Week 11:

Question 1

Organizations take decisions on a daily basis and accounting is a central part of its management systems.

Answer 1

True; concerned with recording analyzing and sharing information. decision making

Question 2

Organizations make decisions include the following and not limited to:

Answer 2

How financial plans are made. How investment decisions are made. Financing a business and cost management.

Question 3

Accounting

Answer 3

is concerned with the collecting, analyzing and communicating financial information.

Question 4

Finance also known as

Answer 4

Financial Management: like accounting, exists to help decision makers. It is concerned with the ways in which funds for a business are raised and invested.

Question 5

How do you identify finance and the forms to choose?

Answer 5

the main forms of finance available
the costs and benefits of each form of finance
the risks associated with each form of finance;
the role of financial markets in supplying fiance

Question 6

is accounting a form of business

Answer 6

yes

Question 7

What does relevance mean in accounting?

Answer 7

accounting information should make a difference. capable of influencing user decisions. must help predict future events (such as next years profit) and to help confirm past events (such as establishing last years profit).

Question 8

materiality

Answer 8

An item of information should be considered material, or significant, if its omission or misstatement could alter the decisions that users make.

Question 9

What is faithful representation?

Answer 9

Accounting information should represent what it is supposed to represent.
Should be the following:
Complete
Neutral without bias
Free from error no errors in the way in which the estimates are prepared and described.

Question 10

What are further qualities in accounting?

Answer 10

Comparability
Verifiability
Timeliness
Understandability

Question 11

Further qualities

Comparability

Answer 11

comparisons. better comparisons can be made where the accounting system treats items that are basically the same in the same way where policies for measuring and presenting accounting information are made clear.

Question 12

Further qualities

Verifiability

Answer 12

Quality provides assurance to users that the accounting information provided faithfully represents what it is supposed to represent. Accounting information is verifiable where different, independent experts would be able to agree that it provides a faithful portrayal.

Question 13

Further qualities

Timeliness

Answer 13

Accounting information should be produced in time for users to make their decisions. A lack of timeliness will undermine the usefulness of the information.

Question 14

Understandability

Answer 14

Accounting information should be set out as clearly and concisely as possible.

Question 15

management accounting

Answer 15

seeks to meet the accounting needs of managers

Question 16

financial accounting

Answer 16

seeks to meet the needs of the other users identified earlier in the chapter

Question 17

the main areas of difference stands in accounting management are as follows

Answer 17

Nature of reports produced.
level of detail
regulations
Reporting interval
Time orientation
Range and quality of information

Question 18

Nature of reports produced

Answer 18

financial accounting reports tend to be general purpose. Aimed primarily at providers of finance such as owners and lenders, they contain financial information that will be useful for a broad range of users.

Question 19

level of detail

Answer 19

financial accounting reports provide users with a broad overview of the performance and position of the businesses for a period.

Question 20

Regulations

Answer 20

financial accounting reports of many businesses are subject to regulations imposed by the law and by accounting rule makers. These regulations often require a standard content and perhaps a standard format to be adopted. Management accounting reports on the other hand are not subject to regulation and can be designed to meet the needs of particular managers.

Question 21

What are the 4 characteristics of an asset in accounting?

Answer 21

A probable future of economic benefit must exist
Benefit must arise from past transactions: must have already occurred.
The business must have the right to control the resource
The asset must be capable of measurement in monetary terms.

Question 22

Missing one condition for asset meaning in accounting purposes means it is still considered an asset? True or False

Answer 22

False

Question 23

Tangible assets

Answer 23

assets that have physical substance and can be touched such as inventories.

Question 24

Intangible assets

Answer 24

assets that have no physical substance but which, nevertheless, provide expected future benefits (such as patents) are referred to as intangible.

Question 25

what are the 2 classified claims

Answer 25

Equity (owners claims) and liabilities (claims of outsiders)

Question 26

what is a current liabilities?

Answer 26

basically amounts due for settlement in the short term. To be more precise, they are liabilities that meet any of the following conditions:

Question 27

Financial Statements

Answer 27

background to present the elements of performance management, providing the required characteristics of balance, profit and loss account, additional information, cash flow statement, statement of changes in equity and the business activity report as a supplementary statement of the financial statement of selected entities.

Question 28

Cash flow is also known as

Answer 28

Financial measures

Question 29

Performance management

Answer 29

improvement - synchronizing improvement to create value for and from customers with the result of economic value creation to stockholders and owners.

Question 30

accounting is also identified as

Answer 30

accounting system

Question 31

Financial statement is..

Answer 31

final element of business entity financial accounting and contains multidimensional data obtained from the accounting books

Question 32

Performance management is based on

Answer 32

using financial measures (ex-pressed in monetary units) and non-financial measures (not expressed in monetary units).

Question 33

Assets

Answer 33

financial values of things owned by or owning to the business e.g. car, house

Question 34

liabilities

Answer 34

financial values of things owed by the business: loans trade payables

Question 35

Capital or equity

Answer 35

the amount invested in the business by the owners: share cap or retained earnings

Question 36

Long term is also referred to

Answer 36

non current for ongoing use in the business (normally over one year ) not for resale

Question 37

short term or current assets or liablities

Answer 37

quickly turn around normally within one year

Question 38

in a standard statement layout what is listed first in assets non current and current? assets furthest from cash assets closest to cash

Answer 38

assets further from cash

Question 39

what type of accounting equation does the standard layout reflect?

Answer 39

Assets= Equity + Liabilities

Question 40

what equation does the alternative layout represent?

Answer 40

Assets - Liabilities = equity

Question 41

Useful life of an asset

Answer 41

Physical life and economic life

Question 42

Accruals convention

Answer 42

that profit is the excess of revenue over expenses for a period not the excess of cash receipts over cash payments.

Question 43

Accruals accounting the same as accruals convention?

Answer 43

Yes

Question 44

Income statement

Answer 44

also called profit and loss account measures and reports how much profit a business has generated over a period.

Question 45

revenue

Answer 45

measure of the inflow of economic benefits arising from the ordinary operations of a business