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• 1 LU:2

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• What are the fundamental purposes of accounting? What should be provided? List three points. What should be the form? List four points.

  Provided: 
  

  1. accurate 
  2. useful 
  3. timely 

  Financial information
  Form: 
  

  1. statements 
  2. forecasts 
  3. budgets 
  4. many types of reports 

  financial statements 

• What is bookkeeping when thinking of its role in accounting?

  It is the initial phase of accounting.

• What is the primary function of bookkeeping?

  Record business transactions in the accounting records.

• List three reason why financial Statements are needed?

  • Managers need time and accurate info so intelligent decisions can be made whether the business succeeds 
    
  • Investors need financial statements to analyze the quality of the investment 
  • Banks need financial statements to see if they are at risk by being involved with customers on an open line of credit

• What are the two users of financial statements 

  • External users: who are ouside of the business (Investors, banks and suppliers) 
    
  • Internal users: Who manage the company (BOD, president and other officers of the business) 

• The difference between Financial accounting and managerial Accounting

  • Financial accounting: focuses on recording information for the preparation of financial statements for external users (Classifying and summarizing business transactions)
  • Managerial Accounting (Manager = Internal users): Recording and accumulating info so that financial statements and reports can be prepared for the internal users (Performance reports, budget plans ect) 

• List the three exchanges of Business Transactions

  The exchange of: 
  

  1. Merchandise 
  2. Property
  3. Services 

  
  For Cash or promise to Pay 

• List the Classifications in Accounting systems

  1. Assets = Possessions, and cash 
     
  2. Liabilities = Debts of the business and claims on assets by outsiders 
  3. (Owners) Equity = The owner's financial interest in the business; claims on assets by owners 
  4. Revenue 
  5. Expenses 

• In which classification in accounting does Profit belong

  The owners Equity

• List the four different specialized accounting positions and its purposes

  1. Budgeting and forecasting: Deals which estimate the companies performance made by a plan called the budget 
     
  2. Cost accounting: Kosten, relates to the recording, classification, allocation and reporting of current and future costs
  3. Tax Accounting: All the monitoring of taxes which have to be paid and filling tax forms 
  4. Internal auditing: The analysis of company operations to determine whether they are following management policy