Week 2 Fin/324 Individual Assignment

Individual Assignment: Assignments from the Readings

FIN/324

Chapter 1 Discussion Question 5

Why is accounting often referred to as the “language of business?:

Business is the general term applied to the activities involved in the production and distribution

of goods and services. Accounting is used to record and report the financial

effects of business activities. Accounting rovides the means of recording and communicating the successes and failures of business organizations. Without accounting information, several important

financial decisions would be made blindly. Investors, for example, would have no

way to distinguish between a profitable company and one that is on the verge of failure.

Bankers could not evaluate the riskiness of potential loans, corporate managers would

have no basis for controlling costs, setting prices, or investing the company’s resources

and governments would have no basis for taxing income (Albrecht, Stice, Stice, & Swain 2008).

Chapter 1 Discussion Question 7

What are generally accepted accounting principles (GAAP)? Who currently develops and issues GAAP?:

In the United States, accounting standards for publicly listed companies are set by the

Financial Accounting Standards Board (FASB). The FASB maintains its influence as the accounting standard setter for the United States (and the most influential accounting body in the world) by carefully protecting its prestige and reputation for setting good standards. The FASB seeks consensus by requesting written comments and sponsoring public hearings on all its proposed standards. The end result of this public process is a set of accounting rules that are described as being generally accepted accounting principles (GAAP) (Albrecht, Stice, Stice, & Swain 2008).

Practice Exercise 3-1

The company borrowed $85,000 in cash from Eastern Bank.

On the balance sheet the money borrowed will be considered an asset and a liability being that the $85,000 is a loan. As the...