Financial Accounting Chapter 1

1. |   | Explain what it means to say that an accounting class is not the same as a math class.Accounting is only adding, subtracting, and solving for unknown variables. |   |   LO1 |

2. |   | Identify some of the people interested in making decisions about a company.Investors – Creditors – Customers – Suppliers – Managers – Employees – Competitors – Regulators – Tax Authorities – Local Communities |   |   LO1 |

3. |   | What is the basic difference between financial accounting and managerial accounting?Managerial accounting deals with the methods accountants use to provide information to an organization's internal users—that is, its own managers.The two primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to external parties for decision-making purposes.  |   |   LO1 |

4. |   | What are the two primary functions of financial accounting?Measure business activities of a company and to communicate those measurements |   |   LO1 |

5. |   | What are the three basic business activities that financial accounting seeks to measure and communicate to external parties? Define each.Financing – Transactions involving external sources of funding. There are two basic sources of this external funding—the owners of the company who invest their own funds in the business, and creditors who lend money to the company. With this financing, the company engages in investing activities.Investing – Include the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery and (2) any resources not directly related to a company's normal operations.Operating - Transactions that relate to the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, advertising, wages, rent, and maintenance. |   |   LO2 |

9. |   | What are the three major legal forms of business organizations? Which one...