Accountin ch.1 & 2 questions

Accountin ch.1 & 2 questions - Chapter 1 Business...

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Chapter 1 Business Decisions and Financial Accounting ANSWERS TO QUESTIONS 1. Accounting is the process of analyzing, summarizing, and reporting the results of a business’s activities. 2. Financial accounting focuses on preparing and using the financial statements that are made available to owners and external users such as customers and creditors who are interested in reading them. Managerial accounting focuses on other accounting reports that are not released to the general public, but instead are prepared and used by the managers who run the company. 3. Financial reports are used by both internal and external groups and individuals. The internal groups are comprised of the various managers of the business. The external groups include investors, creditors, governmental agencies, other interested parties, and the public at large. 4. The business itself, not the individual stockholders who own the business, is viewed as owning the assets and owing the liabilities on its balance sheet. A business’s balance sheet includes the assets, liabilities, and stockholders’ equity of only that business and not the personal assets, liabilities, and equity of the stockholders. The financial statements of a company show the results of the business activities of only that company. 5. (a) Operating – These activities are directly related to earning profits. They include buying supplies, making products, serving customers, cleaning the premises, advertising, renting a building, repairing equipment, and obtaining insurance coverage. (b) Investing – These activities involve buying and selling productive resources with long lives, such as buildings, land, equipment, and tools. (c) Financing – Any borrowing from banks, repaying bank loans, receiving contributions from stockholders, or paying dividends to stockholders are considered financing activities.
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6. The heading of each of the four primary financial statements should include the following: (a) Name of the business (b) Name of the statement (c) Date of the statement, or the period of time 7. (a) The purpose of the balance sheet is to report the financial position (assets, liabilities and stockholders’ equity) of a business at a specific date. (b) The purpose of the income statement is to present information about the revenues, expenses, and net income of a business for a specified period of time. (c)
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Accountin ch.1 & 2 questions - Chapter 1 Business...

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