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Unformatted text preview: Classify the three activities of accounting. (SO 1) EXERCISES: SET B E1-1B Sophie Company performs the following accounting tasks during the year. ______Summarizing economic events. ______Selecting economic activities relevant to the company. ______Reporting information in a standard format. ______Preparing accounting reports. ______Measuring events in dollars and cents. ______Keeping a systematic chronological chart of events. ______Explaining uses, meaning, and limitations of data. ______Classifying economic events. ______Analyzing and interpreting information. Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. Instructions Categorize the accounting tasks performed by Sophie as relating to either the identification (I), recording (R), or communication (C) aspects of accounting. E1-2B (a) The following are users of financial statements. ______Customers ______Securities and Exchange Commission ______Internal Revenue Service ______Investors ______Labor unions ______Suppliers ______Factory manager ______Human resource worker ______Vice-president of Finance Instructions Identify the users as being either external users or internal users . (b) The following questions could be asked by an internal user or an external user. ______What price should we set for our product? ______Did the company earn a satisfactory income? ______Should we hire more employees? ______How does the companys profitability compare to other companies? ______What does it cost us to manufacture each unit produced? ______Which product should we emphasize? ______Will the company be able to provide a return to its stockholders? Instructions Identify each of the questions as being more likely asked by an internal user or an external user . E1-3B John Sturm, president of Lions Company, has instructed Jon Kitna, the head of the account- ing department for Lions Company, to report the companys land in the companys accounting reports at its market value of $225,000 instead of its cost of $125,000. Sturm says, Showing the land at $225,000 will make our company look like a better investment when we try to attract new investors next month. Instructions Explain the ethical situation involved for Jon Kitna, identifying the stakeholders and the alternatives....
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- Fall '10