The Nature and Purpose of Financial Accounting

In: Business and Management

Submitted By ryan2020ok
Words 4644
Pages 19
QUESTIONS

1. a. False. Bookkeeping, the preservation of systematic records, is only one aspect of accounting. Accounting also involves structuring the information so that it can be used to evaluate the performance of the company and make decisions about the future.

b. True. Accounting is designed around the tabulation of numerical information. Also, accounting data relate primarily to a company’s financial activities; information about personnel matters, community relations, etc. must come from other information systems.

c. False. Managerial accounting information is used by internal users; financial accounting information is provided to external users.

d. False. The balance sheet is a listing of a company’s assets, liabilities, and owners’ equity. The income statement reports net income which is the excess of revenues over expenses.

e. True. Financial analysts closely follow large companies and publicly report any indications of unusual financial performance. Small companies are not followed by analysts, so investors must do more homework themselves.

f. False. Accounting standards in the United States are set by the FASB. The IRS has no direct connection with financial accounting standards.

g. False. The IASB (International Accounting Standards Board) is an international body formed to create a common set of worldwide accounting standards.

h. True. A CPA (certified public accountant) is an accountant who has received college-level accounting training, passed the CPA exam, and satisfied other state licensing requirements. CPAs work everywhere—CPA firms, law firms, government agencies, and universities, to name a few.

i. True and False. Information technology has made it easier to tabulate, process, and disseminate accounting information. However, the vast computer potential for transmission and analysis of accounting data has forced…...

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