Intermediate Accounting I

Chapter 1 &2 Homework Questions

Chapter 1

Pg. 24, Questions 1&2

1. Differentiate between financial accounting and managerial accounting

a. Financial accounting – process that culminates in the preparation of financial reports on the enterprise for use by both internal and external parties.

b. Managerial accounting – process of identifying, measuring, analyzing and communicating financial info needed by management to plan, control, and evaluate a company’s operations.

2. Differentiate between “financial statements” and “financial reporting”.

c. Financial statements - The principal means through which a company communicates its financial information to those outside it. These statements provide a company's history quantified in money terms.

d. Financial reporting - The method of sharing financial information other than through formal financial statements. Examples include the president's letter or supplementary schedules in the corporate annual report, prospectuses, reports filed with government agencies, news releases, management's forecasts, and social or environmental impact statements.

Pg. 26, CA 1-7

Some argue that having various organizations establish accounting principles is wasteful and inefficient. Rather than mandating accounting rules, each company could voluntarily disclose the type of information it considered important. In addition, if an investor wants additional information, the investor could contact the company and pay to receive the additional information desired.

Comment on the appropriateness of this viewpoint.

* I don’t agree with this viewpoint. I believe that by having an established set of accounting principles is very important to making sure that rules and regulations are followed. The information that companies use to compare would not be consistent and it would be harder for them to really get a good comparison to go by. It could also be a good way for companies to hide information...