What are the two general kinds of accounting? What are the uses of them? Financial: --> outside users to determine financial health and firm profitability
Managerial: --> inside users to examine internal processes/products to evaluate managment/current operations
What is accounting? The pro...
ACG 5026 Midterm (Ch. 1 -8) Exam
Questions and Correct Answers
What are the two general kinds of accounting? What are the uses of them?
✅Financial:
--> outside users to determine financial health and firm profitability
Managerial:
--> inside users to examine internal processes/products to evaluate managment/current
operations
What is accounting? ✅The process of recording, summarizing, and analyzing financial
transactions.
Who uses the different kinds of accounting and for what decisions? ✅Financial:
1. Investors/Analyst
2. Creditors
3. Suppliers
4. Shareholders
5. Manager/sDirectors
QUESTIONS:
1. Buy or sell stock?
2. Lend $ or not?
3. Purchase/sell goods or not?
Managerial:
1. Management
2. Marketing teams
3. Production/Operations
QUESTIONS:
1. Develop new strategy?
2. Launch new product or not?
3. Change in managing operations?
Advantages (4) and Disadvantages (2) of Corporate entity ✅Advantages:
1. Limited Liability
2. Ease of raising capital
3. Ease of transferability
4. Separation of ownership and management
Disadvantages:
, 1. Double taxation
2. Paperwork/Formalities.
What are the three basic business activities? ✅1. Investing
-->Acquiring or disposing of resources need to produce and sell product/services.
2. Financing
-->Methods used to fund investments. (creditor vs. owner)
3. Operating
-->Production, promotion, and selling of products/services.
How do a firm's business activities relate to the four financial statements? ✅Balance
sheet
--> lists a company's investments and sources of financing (investing and financing)
I/S
--> Reports the results of operations (operating)
STMT OF Equity
--> Changes in owner financing (financing)
STMT of CF
--> Details the sources and uses of investing, operating, and financing activities.
What does an audit opinion provide?
What does a "clean audit" say? ✅Provides:
An opinion as to which the financial statements present fairly the financial activities
reported and if the statements were recorded in accordance to GAAP.
Clean opinion states:
auditors believe that the financial statements *present fairly* the economic conditions of
the firm. (NOT accurate)
What are the objectives of the conceptual framework of financial accounting? (5) ✅To
provide information:
1. that is USEFUL
2. to help assess the amount, timing, and uncertainty of CFs
3. about economic resources and claims on those resources.
4. about company performance
5. to monitor management in their effectiveness, efficiency, and ethics
What are the characteristics of the conceptual framework of financial accounting? (7)
✅1. Benefits > Costs
2. Materiality
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