ch01 - CHAPTER 1 INTRODUCTION TO ACCOUNTING AND BUSINESS...

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CHAPTER 1 INTRODUCTION TO ACCOUNTING AND BUSINESS CLASS DISCUSSION QUESTIONS 1. The objective of most businesses is to max- imize profits. Profit is the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide those goods or services. 2. A manufacturing business changes basic in- puts into products that are then sold to cus- tomers. A service business provides ser- vices rather than products to customers. A restaurant such as Applebee’s has charac- teristics of both a manufacturing and a ser- vice business in that Applebee’s takes raw inputs such as cheese, fish, and beef and processes them into products for consump- tion by their customers. At the same time, Applebee’s provides services of waiting on their customers as they dine. 3. The corporate form allows the company to obtain large amounts of resources by issu- ing stock. For this reason, most companies that require large investments in property, plant, and equipment are organized as cor- porations. 4. The business strategy of KIA is a low-cost strategy. In contrast, the business strategy of Porche is a differentiation strategy. The difference in strategies is directly reflected in the prices of the autos. For example, you can purchase a KIA for under $10,000 while the entry level Porche begins at over $40,000. 5. Super Wal-Mart will compete for customers using a low-cost strategy. The size and buy- ing power of Wal-Mart Corporation provides Wal-Mart a competitive advantage over your friend in the ability to offer low prices. Thus, your friend should attempt to compete using a differentiation strategy. For example, your friend could offer personalized service to customers such as knowing customers’ names, friendly atmosphere, home delivery of medicines, help in filing insurance forms, 24-hour call service, etc. 6. eBay offers value to its customers by devel- oping a Web-based community in which buyers and sellers are brought together in an efficient format to browse, buy, and sell items such as collectibles, automobiles, high-end or premium art items, jewelry, con- sumer electronics, and a host of practical and miscellaneous items. 7. The stakeholders of a business normally in- clude owners, managers, employees, cus- tomers, creditors, and the government. 8. Simply put, the role of accounting is to provide information for managers to use in operating the business. In addition, account- ing provides information to other stakehold- ers to use in assessing the economic per- formance and condition of the business. 9. No. The business entity concept limits the recording of economic data to transactions directly affecting the activities of the busi- ness. The payment of the interest of $3,600 is a personal transaction of Deana Moran and should not be recorded by First Delivery Service. 10.
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This note was uploaded on 06/27/2008 for the course ACCY 201 taught by Professor ? during the Spring '07 term at Ole Miss.

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ch01 - CHAPTER 1 INTRODUCTION TO ACCOUNTING AND BUSINESS...

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