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EXERCISES-Chapter 1-2-3-4


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2/12/2014 1 CHAPTER 1 ACCOUNTING IN BUSINESS IN BOOK-KEEPING MODEL, WHAT SHOULD BE THE INPUT & OUTPUT? Record Æ Sort Æ Summarize INPUT OUTPUT Most people draw a distinction between book-keeping & accounting. Accountants know how to do everything that a book-keepers does. In addition, they do much more. Next to each of the following, write a “B” if it is done by both a book-keeper and an accountant; write an “A” if the activities is done only by accountant? ……a, Making a record of daily cash sales ……b, Interpreting and analyzing the results of weekly summary of events affecting the business ……c, Classifying events affecting the business according to type of events ……d, Setting up a book -keeping system FILL IN THE MISSING WORDS, CIRCLE THE CORRECT RESPONSES Accounting defined 1, The accounting process (or accounting cycle) may be defined as the systematic process that identifies, measures, and reports relevant………………………….information about business organisations to interested users 2, Accountants observe many events of a business entity and i……………..and measure in financial terms (in dollars) those events considered evidence of economic activities (or events) 3,Which of the following would be considered economic activities? A, Manufacture of goods B, Sale of manufactured goods, C, Treatment of a hospital patient D, Purchase of a large piece of machinery The nature of accounting information 4, Accountants report on financial activities by preparing financial statements (reports). Often, accountants are asked to interpret these statements and reports for various groups such as management and creditors, to determine how the business entity is performing compared to (prior/future) years and other similar business entities 5, Timeliness requires financial information to be provided at a time when it may be considered in reaching a decision. The usefulness of information (increase/decrease) with time 6,Accounting information is useful to managers and workers, investors and creditors, and other parties such as government agencies. Accounting information provides data to help the decision-making process of persons: A. Inside the business entity (internal decision-maker) B. Outside the business (external decision-makers) C.Both (a) and (b) FILL IN THE MISSING WORDS, CIRCLE THE CORRECT RESPONSES Types of decision-makers 7, Accounting is often divided into two categories: managerial accounting (for internal decision-makers) and financial accounting (for--------------decision-makers) 8,Creditors and lenders. Should a loan be granted to the business entitiy? Will the business entity be able to pay its …………………… ..as they become due? 9, Financial statements are formal R …………… . Providing information on a business entity's financial position (solvency), cash inflows and outflows, and the results of operations 10, Financial accounting information is historical in nature, reporting on what has happened in the ……………… .Thus, external parties use relevant and reliable financial statements to
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