Gsm5301-Class Exercise

GSM5301: CLASS EXERCISE 1

1. Explain the meaning of accounting.

Accounting is the process of identifying, measuring, and communicating economic information to permit informed judgment and decisions by users of the information.

2. The two main branches of accounting are management accounting and financial accounting.

a. Explain the purpose of each of these branches of accounting.

Management accounting- The objective is to aid managers to carry out their responsibilities in terms of planning, implementation and control for the organization. The information is used to control the company’s operation and decision making.

Financial accounting- The main objective is to provide the information of financial position and financial performance of the business for internal and external parties to make judgment on the organization.

b. Contrast the distinguishing features of the accounting information produced by each branch.

|Features |Management Accounting |Financial Accounting |

|Reporting beneficiaries |Management accounting is aimed at internal users, |Financial accounting mostly for external users |

| |such as the company’s management or board of |such as investors, creditors, auditors or |

| |directors.  |analysts. |

|Governing Principles |Management accounting statements do not have to |Financial accounting must report correspond to |

| |comply with GAAP or any other regulations, and |specific principles and guidelines – Generally |

| |internal cost/benefit evaluation determines what kind|Accepted Accounting Principles (GAAP). |

| |and how much information they should report....