FINANCIAL ACCOUNTING
QUESTION 1
Explain the nature of the accounting equation.
ANSWER
Nature of the accounting equations
This states that a company total assets are equal to the sum of its liabilities
and its shareholders equity. This straightforward relationship between
assets, liabilities and equity is considered to be the foundation of the
double entry accounts system.
The accounting equation can be expressed as follows:
Assets = Liabilities + Equities
QUESTION 2
Analyze FOUR objectives of financial statements
ANSWER
Objectives of Financial Statements
1. To provide information about the economic resources and obligation
of a business.
2. To provide the true and fair view of position of the business
3. To provide the true and Fairview of financial performance of the
, entity i.e it revenue and its expenses.
4. To form basis for education of stakeholders
5. To report on the effectiveness and efficiency of the management
6. To increase the under stability of end users
QUESTION 3
Outline the information required by each of the following users of
accounting information:
(i) Owners.
(ii) Customers.
(iii) Suppliers.
(iv) Lenders.
(v) Management
ANSWER
Owners – They are interested in the financial position of the business.
Also the dividend to be received out of their investment
Customers – They require accounting information to determine
whether company is reliable. They are concerned with financial
position
Suppliers – Use accounting information to determine whether the
company is credit worth and they pay once they buy goods on credit.
Lenders – Use Accounting information to evaluate credit worthiness
QUESTION 1
Explain the nature of the accounting equation.
ANSWER
Nature of the accounting equations
This states that a company total assets are equal to the sum of its liabilities
and its shareholders equity. This straightforward relationship between
assets, liabilities and equity is considered to be the foundation of the
double entry accounts system.
The accounting equation can be expressed as follows:
Assets = Liabilities + Equities
QUESTION 2
Analyze FOUR objectives of financial statements
ANSWER
Objectives of Financial Statements
1. To provide information about the economic resources and obligation
of a business.
2. To provide the true and fair view of position of the business
3. To provide the true and Fairview of financial performance of the
, entity i.e it revenue and its expenses.
4. To form basis for education of stakeholders
5. To report on the effectiveness and efficiency of the management
6. To increase the under stability of end users
QUESTION 3
Outline the information required by each of the following users of
accounting information:
(i) Owners.
(ii) Customers.
(iii) Suppliers.
(iv) Lenders.
(v) Management
ANSWER
Owners – They are interested in the financial position of the business.
Also the dividend to be received out of their investment
Customers – They require accounting information to determine
whether company is reliable. They are concerned with financial
position
Suppliers – Use accounting information to determine whether the
company is credit worth and they pay once they buy goods on credit.
Lenders – Use Accounting information to evaluate credit worthiness
