Chapter 1 Accounting Information for
Decision Making
Why is accounting the language of business? - answersit is widely used to describe all
types of business activity, like costs
What role does accounting information play in making economic decisions? - answers1.
Economic activities describing the accounting process,
2. Assumptions and measurement techniques used to portray accounting information,
and
3. Reported results most relevant in making decisions.
see p. 5 in the book for how the accounting process works. - answers...
financial accoutning - answersinformation that describes
1. financial resources,
2. priorities, and
3. economic entities (something existing by itself) primarily used by external decision
makers, such as investors and creditors.
management accounting - answersaccounting information used to
1. assist managers in operating the business
What is the objective in financial and managerial accounting? - answersprovide
individuals who use and prepare accounting with a basic understanding of financial and
managerial accounting
What are 3 similarities between management accounting information and financial
accounting information? - answers1. Use of judgment required,
2. Info prepared should be subject to the system of internal control, and
3. both are related to tax accounting
What is the primary objective about accounting? - answersto provide information that is
useful for decision-making purposes
Why is accounting a means to an end? - answersprimary role is to make decisions in
the business, and the end is used to determine the availability of accounting
information.
What is accounting information? - answersMeans by which we measure and
communicate economic events.
, Why is financial accounting often called "General-purpose" accounting information? -
answersBecause it's used for so many different purposes in the business
Why do managers use management accounting information? - answersSo that they
can:
1. Set the overall goals of the company,
2. Evaluate how well the department and individuals are doing,
3. Decide if it is necessary to introduce a new line of production, and
4. make all types of management decisions.
What do businesses do in regards to accounting? - answersProvide information useful
in making credit decisions, like assessing the amount, timing, and uncertainty of future
cash flows. Also learn about the the enterprise's economic resources, claims to
resources, and changes to claims in resources.
What are most important characteristics of external financial accounting? - answers1.
Means to an end,
2. Historical in nature
3. Results in approximate measures of activity (good judgment required),
4. Based on a general-purpose assumption- useful for multiple user groups),
5. Financial statements are sub points of financial reports,
6. Usefulness enhanced via explanation- inexact numbers used to report the accounting
information
What characteristic do the information systems have in common? - answersMeet the
organization's needs for accounting information in a timely manner.
What are the 5 elements of internal control? - answers1. Control environment- sets the
overall tone of an organization, and is the foundation for all of the other elements of
internal control,
2. Risk assessment-
a. Identifying,
b. analyzing, and
c. managing risks that pose a threat to the organization
3. Control activities- policies and procedures the managers put in place in order to
address the risks involved in the risk assessment process,
4. Information and communication- developing information systems to
inform/communicate operational, financial, and compliant-info needed to run the
business
5. Monitoring activities- this allows the company to assess the effectiveness of the
system of internal control over time
Why is accounting valuable to the enterprise? - answers1. Achieving goals,
2. Achieving objectives,
3. Achieving mission
4. Testing past performance and future decisions,
Decision Making
Why is accounting the language of business? - answersit is widely used to describe all
types of business activity, like costs
What role does accounting information play in making economic decisions? - answers1.
Economic activities describing the accounting process,
2. Assumptions and measurement techniques used to portray accounting information,
and
3. Reported results most relevant in making decisions.
see p. 5 in the book for how the accounting process works. - answers...
financial accoutning - answersinformation that describes
1. financial resources,
2. priorities, and
3. economic entities (something existing by itself) primarily used by external decision
makers, such as investors and creditors.
management accounting - answersaccounting information used to
1. assist managers in operating the business
What is the objective in financial and managerial accounting? - answersprovide
individuals who use and prepare accounting with a basic understanding of financial and
managerial accounting
What are 3 similarities between management accounting information and financial
accounting information? - answers1. Use of judgment required,
2. Info prepared should be subject to the system of internal control, and
3. both are related to tax accounting
What is the primary objective about accounting? - answersto provide information that is
useful for decision-making purposes
Why is accounting a means to an end? - answersprimary role is to make decisions in
the business, and the end is used to determine the availability of accounting
information.
What is accounting information? - answersMeans by which we measure and
communicate economic events.
, Why is financial accounting often called "General-purpose" accounting information? -
answersBecause it's used for so many different purposes in the business
Why do managers use management accounting information? - answersSo that they
can:
1. Set the overall goals of the company,
2. Evaluate how well the department and individuals are doing,
3. Decide if it is necessary to introduce a new line of production, and
4. make all types of management decisions.
What do businesses do in regards to accounting? - answersProvide information useful
in making credit decisions, like assessing the amount, timing, and uncertainty of future
cash flows. Also learn about the the enterprise's economic resources, claims to
resources, and changes to claims in resources.
What are most important characteristics of external financial accounting? - answers1.
Means to an end,
2. Historical in nature
3. Results in approximate measures of activity (good judgment required),
4. Based on a general-purpose assumption- useful for multiple user groups),
5. Financial statements are sub points of financial reports,
6. Usefulness enhanced via explanation- inexact numbers used to report the accounting
information
What characteristic do the information systems have in common? - answersMeet the
organization's needs for accounting information in a timely manner.
What are the 5 elements of internal control? - answers1. Control environment- sets the
overall tone of an organization, and is the foundation for all of the other elements of
internal control,
2. Risk assessment-
a. Identifying,
b. analyzing, and
c. managing risks that pose a threat to the organization
3. Control activities- policies and procedures the managers put in place in order to
address the risks involved in the risk assessment process,
4. Information and communication- developing information systems to
inform/communicate operational, financial, and compliant-info needed to run the
business
5. Monitoring activities- this allows the company to assess the effectiveness of the
system of internal control over time
Why is accounting valuable to the enterprise? - answers1. Achieving goals,
2. Achieving objectives,
3. Achieving mission
4. Testing past performance and future decisions,
