ACC 706 Exam 1 Questions and 100% Verified Correct Answers 2026

ACC 706 Exam 1 Questions and 100% Verified Correct Answers 2026 Why are financial statements so important? - Correct Answer -Provide a picture of how the company has been operating currently and being able to compare it to prior years -Help investors come up with information to decide if it is a good investment or is if it to risky. What are the two key functions the financial statements serve? - Correct Answer Information asymmetry, and contract efficiency information asymmetry - Correct Answer Provide a way for company management to transfer information about business activities to people outside the company. Contract Efficiency - Correct Answer Financial statement information is often included in contracts between the company and other parties. Why is there a supply and demand aspect for accounting information? - Correct Answer the information is demanded because users want to know what is going on with the company, and this would supply the company to present it for receiving benefits from it. What are some benefits to supplying information? - Correct Answer •Obtaining capital more cheaply. •Better terms from suppliers. •Avoid the "lemon" problem. one side assuming something about an issue because they don't have that much information to go off of. Who are the FS users? - Correct Answer Shareholders, investors, employees, managers, lenders, suppliers, customers, the government or regulators Why do shareholders and investors want the information about the FS? - Correct Answer investment decisions, proxy contents (times when shareholders are voting on an issue) Why do employees and managers want the information about the FS? - Correct Answer Managers want it because of Performance assessments and Compensation contracts where they get a bonus for hitting benchmarks. Both of them want it also for their company sponsored pension plans Why do lenders and suppliers want the information about t