Solution Manual for Financial Accounting Tools For Business
Decision Making, 10th Edition, Paul D. Kimmel, Jerry J.
Weygandt
What is Accounting - ANSWER:Accounting is an information system that identifies,
records, and communicates the economic events that happen within an organization
to interested users. Whether they were internal or external
The accounting process consists of - ANSWER:Identification > Recording >
Communication
Who uses accounting data? - ANSWER:1. Internal - Managers, supervisors, finance
directors and company officers
2. External - Investors, creditors, tax authorities, regulatory agencies, labor unions,
customers
Financial Accounting - ANSWER:designed primarily for decision makers outside of the
company
Managerial Accounting - ANSWER:designed primarily for decision makers inside the
company
Accounting Standards - ANSWER:Practices, policies, and procedures that define the
basis of financial reporting. Issued by standard setting bodies to ensure that financial
statements are prepared with high quality
Accounting Standards (Simple) - ANSWER:Rules that accountants must follow when
preparing financial statements
The two primary standard-setting bodies for accounting - ANSWER:1. The
International Accounting Standard Board (IASB) which determines International
Financial Reporting Standards (IFRS).
2. The Financial Accounting Standards Board (FASB) which determines Generally
Accepted Accounting Principles (GAAP).
What are the accounting principles? - ANSWER:1. The historical cost principle
2. The fair value principle
3. Revenue principle
4. Matching principle
5. Full disclosure principle
The goal of accounting principles - ANSWER:To ensure that a company's financial
statements are complete, consistent and comparable
The historical cost principle - ANSWER:Assets must be recorded at their cost
, The fair value principle - ANSWER:Assets & liabilities should be recorded at fair value
(the price received to sell an asset or settle a liability)
Revenue recognition principle - ANSWER:Recognizes revenue when earned, and in
the accounting period in which the performance obligation is satisfied, regardless of
when the company receives cash
Expense recognition principle or matching principle - ANSWER:Recognizes expense
when incurred or used, not when paid and in the same period as the revenue that
they helped to produce
Full disclosure principle - ANSWER:Requires accounting information to be recorded it
it will make a difference to financial statement users. Also known as materiality
What are accounting assumptions? - ANSWER:1. Monetary unit
2. Separate entity
3. Time period
4. Going concern
Monetary unit assumption - ANSWER:Only transactions that are expressed in
monetary terms to be included in accounting records
Separate entity assumption - ANSWER:The activities of the entity to be kept separate
& distinct from the activity of its owner
Time period assumption - ANSWER:Life of a business can be divided into time
periods and reports should be prepared covering those periods
Going concern assumption - ANSWER:Assumes the business will remain in operation
for the foreseeable future. If the company is not a going concern the financial
statements must be reevaluated to the expected value
The accounting equation - ANSWER:Assets = Liabilities + Owner's Equity
Asset - ANSWER:Is something controlled by the company that has future economic
benefit. It includes: cash, equipment, inventory, land, buildings, copyrights, patents,
and accounts receivable
Liability - ANSWER:Obligations that the company must meet or pay in the future. It
includes: accounts payable, unearned revenue, salaries payable, taxes payable,
warranty obligations, mortgage payable, and bonds payable
Equity - ANSWER:A measure of the company's wealth. If the company converts all its
assets to cash and pay out the liabilities, what will remain is the owner's equity.
Equity is formed by: - ANSWER:1. Contributed Capital
Decision Making, 10th Edition, Paul D. Kimmel, Jerry J.
Weygandt
What is Accounting - ANSWER:Accounting is an information system that identifies,
records, and communicates the economic events that happen within an organization
to interested users. Whether they were internal or external
The accounting process consists of - ANSWER:Identification > Recording >
Communication
Who uses accounting data? - ANSWER:1. Internal - Managers, supervisors, finance
directors and company officers
2. External - Investors, creditors, tax authorities, regulatory agencies, labor unions,
customers
Financial Accounting - ANSWER:designed primarily for decision makers outside of the
company
Managerial Accounting - ANSWER:designed primarily for decision makers inside the
company
Accounting Standards - ANSWER:Practices, policies, and procedures that define the
basis of financial reporting. Issued by standard setting bodies to ensure that financial
statements are prepared with high quality
Accounting Standards (Simple) - ANSWER:Rules that accountants must follow when
preparing financial statements
The two primary standard-setting bodies for accounting - ANSWER:1. The
International Accounting Standard Board (IASB) which determines International
Financial Reporting Standards (IFRS).
2. The Financial Accounting Standards Board (FASB) which determines Generally
Accepted Accounting Principles (GAAP).
What are the accounting principles? - ANSWER:1. The historical cost principle
2. The fair value principle
3. Revenue principle
4. Matching principle
5. Full disclosure principle
The goal of accounting principles - ANSWER:To ensure that a company's financial
statements are complete, consistent and comparable
The historical cost principle - ANSWER:Assets must be recorded at their cost
, The fair value principle - ANSWER:Assets & liabilities should be recorded at fair value
(the price received to sell an asset or settle a liability)
Revenue recognition principle - ANSWER:Recognizes revenue when earned, and in
the accounting period in which the performance obligation is satisfied, regardless of
when the company receives cash
Expense recognition principle or matching principle - ANSWER:Recognizes expense
when incurred or used, not when paid and in the same period as the revenue that
they helped to produce
Full disclosure principle - ANSWER:Requires accounting information to be recorded it
it will make a difference to financial statement users. Also known as materiality
What are accounting assumptions? - ANSWER:1. Monetary unit
2. Separate entity
3. Time period
4. Going concern
Monetary unit assumption - ANSWER:Only transactions that are expressed in
monetary terms to be included in accounting records
Separate entity assumption - ANSWER:The activities of the entity to be kept separate
& distinct from the activity of its owner
Time period assumption - ANSWER:Life of a business can be divided into time
periods and reports should be prepared covering those periods
Going concern assumption - ANSWER:Assumes the business will remain in operation
for the foreseeable future. If the company is not a going concern the financial
statements must be reevaluated to the expected value
The accounting equation - ANSWER:Assets = Liabilities + Owner's Equity
Asset - ANSWER:Is something controlled by the company that has future economic
benefit. It includes: cash, equipment, inventory, land, buildings, copyrights, patents,
and accounts receivable
Liability - ANSWER:Obligations that the company must meet or pay in the future. It
includes: accounts payable, unearned revenue, salaries payable, taxes payable,
warranty obligations, mortgage payable, and bonds payable
Equity - ANSWER:A measure of the company's wealth. If the company converts all its
assets to cash and pay out the liabilities, what will remain is the owner's equity.
Equity is formed by: - ANSWER:1. Contributed Capital
