HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
1. Whatjisjaccounting?
Accountingjisjthejinformationjsystemjthatjmeasuresjbusinessjactivities,jprocesses
thejinformationjintojreports,jandjcommunicatesjthejresultsjtojdecisionjmakers.
Accountingjisjthejlanguagejofjbusiness.
2. Brieflyjdescribejthejtwojmajorjfieldsjofjaccounting.
Financialjaccountingjprovidesjinformationjforjexternaljdecisionjmakers,jsuchjas
outsidejinvestors,j lenders,jcustomers,j andjthejfederalj government.jManagerial
accountingjfocusesjonjinformationjforjinternaljdecisionjmakers,jsuchjasjthe
company’sj managersj andj employees.
3. Describejthejvariousjtypesjofjindividualsjwhojusejaccountingjinformationjandjhowjtheyj
usejthatjinformationjtojmakejimportantjdecisions.
Individualsjusejaccountingjinformationjtojhelpjthemjmanagejtheirjmoney,jevaluateja
ajnewjjob,jandjbetterjdecidejwhetherjtheyjcanjaffordjtojmakejajnewjpurchase.
Businessjownersjusejaccountingjinformationjtojsetjgoals,jmeasurejprogressjtoward
thosejgoals,jandjmakejadjustmentsjwhenjneeded.jInvestorsjusejaccounting
informationjtojhelpjthemjdecidejwhetherjorjnotjajcompanyjisjajgoodjinvestmentjand
oncejtheyjhavejinvested,jtheyjusejajcompany’sjfinancialjstatementsjtojanalyzejhow
theirjinvestmentjisjperforming.jCreditorsjusejaccountingjinformationjtojdecide
whetherjtojlendjmoneyjtojajbusinessjandjtojevaluatejajcompany’sjabilityjtojmake
thejloanjpayments.jTaxingjauthoritiesjusejaccountingjinformationjtojcalculatejthe
amountjofjincomejtaxjthatjajcompanyjhasjtojpay.
4. Whatjarejtwojcertificationsjavailablejforjaccountants?jBrieflyjexplainjeachjcerti
fication.
CertifiedjPublicjAccountantsj(CPAs)jarejlicensedjprofessionaljaccountantsjwho
servejthejgeneraljpublic.jTheyjworkjforjpublicjaccountingjfirms,jbusinesses,
government,jorjeducationaljinstitutions.jTojbejcertifiedjtheyjmustjmeetjeducational
and/orjexperiencejrequirementsjandjpassjanjexam.jCertifiedjManagement
Accountantsj(CMAs)jspecializejinjaccountingjandjfinancialjmanagement
knowledge.jTheyjworkjforjajsinglejcompany.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej1jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
5. WhatjisjthejrolejofjthejFinancialjAccountingjStandardsjBoardj(FASB)?
ThejFASBjoverseesjthejcreationjandjgovernancejofjaccountingjstandards.jThey
workj withjgovernmentaljregulatoryj agencies,j congressionallyj createdjgroups,j and
privatejgroups.
6. ExplainjthejpurposejofjGenerallyjAcceptedjAccountingjPrinciplesj(GAAP),jincludingj
thejorganizationjcurrentlyjresponsiblejforjthejcreationjandjgovernancejofjthesejstand
ards.
ThejguidelinesjforjaccountingjinformationjarejcalledjGAAP.jItjisjthejmainjU.S.
accountingjrulejbookjandjisjcurrentlyjcreatedjandjgovernedjbyjthejFASB.jInvestors
andjlendersjmustjhavejinformationjthatjisjrelevantjandjhasjfaithfuljrepresentationjin
orderjtojmakejdecisionsjandjthejGAAPjprovidesjthejframeworkjforjthisjfinancial
reporting.
7. Describejthejsimilaritiesjandjdifferencesjamongjthejfourjdifferentjtypesjofjbusinessjentiti
esjdiscussedjinjthejchapter.
Ajsolejproprietorshipjhasjajsinglejowner,jterminatesjuponjthejowner’sjdeathjor
choice,jthejownerjhasjpersonaljliabilityjforjthejbusiness’sjdebts,jandjitjisjnotja
separatejtaxjentity.jAjpartnershipjhasjtwojorjmorejowners,jterminatesjatjpartner’s
choicejorjdeath,jthejpartnersjhavejpersonaljliability,jandjitjisjnotjajseparatejtax
entity.jAjcorporationjisjajseparatejlegaljentity,jhasjonejorjmorejowners,jhas
indefinitejlife,jthejstockholdersjarejnotjpersonallyjliablejforjthejbusiness’sjdebts,
andjitjisjajseparatejtaxjentity.jAjlimited-liabilityjcompanyjhasjonejorjmorejmembers
andjeachjisjonlyjliablejforjhisjorjherjownjactions,jhasjanjindefinitejlife,jandjisjnotja
separatejtaxjentity.
8. Ajbusinessjpurchasesjanjacrejofjlandjforj$5,000.jThejcurrentjmarketjvaluejisj$5,550jandjth
ejlandjwasjassessedjforjpropertyjtaxjpurposesjatj$5,250.jWhatjvaluejshouldjthejlandjbejrec
ordedjat,jandjwhichjaccountingjprinciplejsupportsjyourjanswer?
Thejlandjshouldjbejrecordedjatj$5,000.jThejcostjprinciplejstatesjthatjassetsjshould
bejrecordedjatjtheirjhistoricaljcost.
9. Whatjdoesjthejgoingjconcernjassumptionjmeanjforjajbusiness?
Thejgoingjconcernjassumptionjassumesjthatjthejentityjwilljremainjinjbusinessjfor
thejforeseeablejfuturejandjlongjenoughjtojusejexistingjresourcesjforjtheirjintended
purpose.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej2jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
10. Whichjconceptjstatesjthatjaccountingjinformationjshouldjbejcomplete,jneutral,jandjfreejf
romjmaterialjerror?
Thejfaithfuljrepresentationjconceptjstatesjthatjaccountingjinformationjshouldjbe
complete,jneutral,jandjfreejfromjmaterialjerror.
11. FinancialjstatementsjinjthejUnitedjStatesjarejreportedjinjU.S.jdollars.jWhatjassu
mptionjsupportsjthisjstatement?
Thejmonetaryjunitjassumptionjstatesjthatjitemsjonjthejfinancialjstatementsjshould
bejmeasuredjinjtermsjofjajmonetaryjunit.
12. ExplainjthejrolejofjthejInternationaljAccountingjStandardsjBoardj(IASB)jinjrelationjtojInt
ernationaljFinancialjReportingjStandardsj(IFRS).
ThejIASBjisjthejorganizationjthatjdevelopsjandjcreatesjIFRSjwhichjarejajsetjof
globaljaccountingjstandardsjthatjwouldjbejusedjaroundjthejworld.
13. Whatjisjthejaccountingjequation?jBrieflyjexplainjeachjofjthejthreejparts.
Assetsj=jLiabilitiesj+jEquity.jAssetsjarejeconomicjresourcesjthatjarejexpectedjto
benefitjthejbusinessjinjthejfuture.jTheyjarejthingsjofjvaluejthatjajbusinessjownsjor
hasjcontroljof.jLiabilitiesjarejdebtsjthatjarejowedjtojcreditors.j Theyjarejonejsource
ofjclaimsjagainstjassets.jEquityjisjthejotherjsourcejofjclaimsjagainstjassets.
Equityjisjthejowners’jclaimsjagainstjassetsjandjisjthejamountjofjassetsjthatjis
leftjoverjafterjthejcompanyjhasjpaidjitsjliabilities.jItjrepresentsjthejnetjworthjofjthe
business.
14. Whatjarejthejtwojwaysjthatjequityjincreases?jWh
atjarejthejtwojwaysjthatjequityjdecreases?
Equityj increasesj withj owner’sj contributionsj andj revenue.
Equityjdecreasesj withj expensesj andj owner’sj withdrawals.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej3jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
15. Howjisjnetjincomejcalculated?jDefinejrevenuesjandjexpenses.
Revenuesj–jExpensesj=jNetjIncome.jRevenuesj arejearningsjresultingjfrom
deliveringjgoodsjorjservicesjtojcustomers.jExpensesjarejthejcostjofjsellingjgoods
orjservice.
16. Whatjarejthejstepsjusedjwhenjanalyzingjajbusinessjtransaction?
Stepj1:jIdentifyjthejaccountsjandjthejaccountjtype.jStepj2:jDecidejifjeachjaccount
increasesjorjdecreases.jStepj3:jDeterminejifjthejaccountingjequationjisjinjbalance.
17. Listjthejfourjfinancialjstatements.jBrieflyjdescribejeachjstatement.
IncomejStatementj–jShowsjthejdifferencejbetweenjanj entity’sjrevenuesjand
expensesjandjreportsjthejnetjincomejorjnetjlossjforjajspecificjperiod.
StatementjofjOwner'sjEquityj–jShowsjthejchangesjinjowner'sjcapitaljforja
specificjperiodjincludingjnetjincomej(loss)jandjwithdrawals.
BalancejSheetj–jShowsjthejassets,jliabilities,jandjowners’jequityjofjthe
businessjasjofjajspecificjdate.
StatementjofjCashjFlowsj–jShowsjajbusiness’sjcashjreceiptsjandjcashjpayments
forjajspecificjperiod.
18. Whatjisjthejcalculationjforjreturnjonjassetsj(ROA)?jExplainjwhatjROAjmeasures.
ReturnjonjAssetsj=jNetjincomej/jAveragejtotaljassets.jROAjmeasuresjhow
profitablyjajcompanyjusesj itsjassets.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej4jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
1. Whatjisjaccounting?
Accountingjisjthejinformationjsystemjthatjmeasuresjbusinessjactivities,jprocesses
thejinformationjintojreports,jandjcommunicatesjthejresultsjtojdecisionjmakers.
Accountingjisjthejlanguagejofjbusiness.
2. Brieflyjdescribejthejtwojmajorjfieldsjofjaccounting.
Financialjaccountingjprovidesjinformationjforjexternaljdecisionjmakers,jsuchjas
outsidejinvestors,j lenders,jcustomers,j andjthejfederalj government.jManagerial
accountingjfocusesjonjinformationjforjinternaljdecisionjmakers,jsuchjasjthe
company’sj managersj andj employees.
3. Describejthejvariousjtypesjofjindividualsjwhojusejaccountingjinformationjandjhowjtheyj
usejthatjinformationjtojmakejimportantjdecisions.
Individualsjusejaccountingjinformationjtojhelpjthemjmanagejtheirjmoney,jevaluateja
ajnewjjob,jandjbetterjdecidejwhetherjtheyjcanjaffordjtojmakejajnewjpurchase.
Businessjownersjusejaccountingjinformationjtojsetjgoals,jmeasurejprogressjtoward
thosejgoals,jandjmakejadjustmentsjwhenjneeded.jInvestorsjusejaccounting
informationjtojhelpjthemjdecidejwhetherjorjnotjajcompanyjisjajgoodjinvestmentjand
oncejtheyjhavejinvested,jtheyjusejajcompany’sjfinancialjstatementsjtojanalyzejhow
theirjinvestmentjisjperforming.jCreditorsjusejaccountingjinformationjtojdecide
whetherjtojlendjmoneyjtojajbusinessjandjtojevaluatejajcompany’sjabilityjtojmake
thejloanjpayments.jTaxingjauthoritiesjusejaccountingjinformationjtojcalculatejthe
amountjofjincomejtaxjthatjajcompanyjhasjtojpay.
4. Whatjarejtwojcertificationsjavailablejforjaccountants?jBrieflyjexplainjeachjcerti
fication.
CertifiedjPublicjAccountantsj(CPAs)jarejlicensedjprofessionaljaccountantsjwho
servejthejgeneraljpublic.jTheyjworkjforjpublicjaccountingjfirms,jbusinesses,
government,jorjeducationaljinstitutions.jTojbejcertifiedjtheyjmustjmeetjeducational
and/orjexperiencejrequirementsjandjpassjanjexam.jCertifiedjManagement
Accountantsj(CMAs)jspecializejinjaccountingjandjfinancialjmanagement
knowledge.jTheyjworkjforjajsinglejcompany.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej1jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
5. WhatjisjthejrolejofjthejFinancialjAccountingjStandardsjBoardj(FASB)?
ThejFASBjoverseesjthejcreationjandjgovernancejofjaccountingjstandards.jThey
workj withjgovernmentaljregulatoryj agencies,j congressionallyj createdjgroups,j and
privatejgroups.
6. ExplainjthejpurposejofjGenerallyjAcceptedjAccountingjPrinciplesj(GAAP),jincludingj
thejorganizationjcurrentlyjresponsiblejforjthejcreationjandjgovernancejofjthesejstand
ards.
ThejguidelinesjforjaccountingjinformationjarejcalledjGAAP.jItjisjthejmainjU.S.
accountingjrulejbookjandjisjcurrentlyjcreatedjandjgovernedjbyjthejFASB.jInvestors
andjlendersjmustjhavejinformationjthatjisjrelevantjandjhasjfaithfuljrepresentationjin
orderjtojmakejdecisionsjandjthejGAAPjprovidesjthejframeworkjforjthisjfinancial
reporting.
7. Describejthejsimilaritiesjandjdifferencesjamongjthejfourjdifferentjtypesjofjbusinessjentiti
esjdiscussedjinjthejchapter.
Ajsolejproprietorshipjhasjajsinglejowner,jterminatesjuponjthejowner’sjdeathjor
choice,jthejownerjhasjpersonaljliabilityjforjthejbusiness’sjdebts,jandjitjisjnotja
separatejtaxjentity.jAjpartnershipjhasjtwojorjmorejowners,jterminatesjatjpartner’s
choicejorjdeath,jthejpartnersjhavejpersonaljliability,jandjitjisjnotjajseparatejtax
entity.jAjcorporationjisjajseparatejlegaljentity,jhasjonejorjmorejowners,jhas
indefinitejlife,jthejstockholdersjarejnotjpersonallyjliablejforjthejbusiness’sjdebts,
andjitjisjajseparatejtaxjentity.jAjlimited-liabilityjcompanyjhasjonejorjmorejmembers
andjeachjisjonlyjliablejforjhisjorjherjownjactions,jhasjanjindefinitejlife,jandjisjnotja
separatejtaxjentity.
8. Ajbusinessjpurchasesjanjacrejofjlandjforj$5,000.jThejcurrentjmarketjvaluejisj$5,550jandjth
ejlandjwasjassessedjforjpropertyjtaxjpurposesjatj$5,250.jWhatjvaluejshouldjthejlandjbejrec
ordedjat,jandjwhichjaccountingjprinciplejsupportsjyourjanswer?
Thejlandjshouldjbejrecordedjatj$5,000.jThejcostjprinciplejstatesjthatjassetsjshould
bejrecordedjatjtheirjhistoricaljcost.
9. Whatjdoesjthejgoingjconcernjassumptionjmeanjforjajbusiness?
Thejgoingjconcernjassumptionjassumesjthatjthejentityjwilljremainjinjbusinessjfor
thejforeseeablejfuturejandjlongjenoughjtojusejexistingjresourcesjforjtheirjintended
purpose.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej2jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
10. Whichjconceptjstatesjthatjaccountingjinformationjshouldjbejcomplete,jneutral,jandjfreejf
romjmaterialjerror?
Thejfaithfuljrepresentationjconceptjstatesjthatjaccountingjinformationjshouldjbe
complete,jneutral,jandjfreejfromjmaterialjerror.
11. FinancialjstatementsjinjthejUnitedjStatesjarejreportedjinjU.S.jdollars.jWhatjassu
mptionjsupportsjthisjstatement?
Thejmonetaryjunitjassumptionjstatesjthatjitemsjonjthejfinancialjstatementsjshould
bejmeasuredjinjtermsjofjajmonetaryjunit.
12. ExplainjthejrolejofjthejInternationaljAccountingjStandardsjBoardj(IASB)jinjrelationjtojInt
ernationaljFinancialjReportingjStandardsj(IFRS).
ThejIASBjisjthejorganizationjthatjdevelopsjandjcreatesjIFRSjwhichjarejajsetjof
globaljaccountingjstandardsjthatjwouldjbejusedjaroundjthejworld.
13. Whatjisjthejaccountingjequation?jBrieflyjexplainjeachjofjthejthreejparts.
Assetsj=jLiabilitiesj+jEquity.jAssetsjarejeconomicjresourcesjthatjarejexpectedjto
benefitjthejbusinessjinjthejfuture.jTheyjarejthingsjofjvaluejthatjajbusinessjownsjor
hasjcontroljof.jLiabilitiesjarejdebtsjthatjarejowedjtojcreditors.j Theyjarejonejsource
ofjclaimsjagainstjassets.jEquityjisjthejotherjsourcejofjclaimsjagainstjassets.
Equityjisjthejowners’jclaimsjagainstjassetsjandjisjthejamountjofjassetsjthatjis
leftjoverjafterjthejcompanyjhasjpaidjitsjliabilities.jItjrepresentsjthejnetjworthjofjthe
business.
14. Whatjarejthejtwojwaysjthatjequityjincreases?jWh
atjarejthejtwojwaysjthatjequityjdecreases?
Equityj increasesj withj owner’sj contributionsj andj revenue.
Equityjdecreasesj withj expensesj andj owner’sj withdrawals.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej3jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
, HORNGREN'Sj ACCOUNTINGj -j Eleventhj Edition SolutionsjManual
15. Howjisjnetjincomejcalculated?jDefinejrevenuesjandjexpenses.
Revenuesj–jExpensesj=jNetjIncome.jRevenuesj arejearningsjresultingjfrom
deliveringjgoodsjorjservicesjtojcustomers.jExpensesjarejthejcostjofjsellingjgoods
orjservice.
16. Whatjarejthejstepsjusedjwhenjanalyzingjajbusinessjtransaction?
Stepj1:jIdentifyjthejaccountsjandjthejaccountjtype.jStepj2:jDecidejifjeachjaccount
increasesjorjdecreases.jStepj3:jDeterminejifjthejaccountingjequationjisjinjbalance.
17. Listjthejfourjfinancialjstatements.jBrieflyjdescribejeachjstatement.
IncomejStatementj–jShowsjthejdifferencejbetweenjanj entity’sjrevenuesjand
expensesjandjreportsjthejnetjincomejorjnetjlossjforjajspecificjperiod.
StatementjofjOwner'sjEquityj–jShowsjthejchangesjinjowner'sjcapitaljforja
specificjperiodjincludingjnetjincomej(loss)jandjwithdrawals.
BalancejSheetj–jShowsjthejassets,jliabilities,jandjowners’jequityjofjthe
businessjasjofjajspecificjdate.
StatementjofjCashjFlowsj–jShowsjajbusiness’sjcashjreceiptsjandjcashjpayments
forjajspecificjperiod.
18. Whatjisjthejcalculationjforjreturnjonjassetsj(ROA)?jExplainjwhatjROAjmeasures.
ReturnjonjAssetsj=jNetjincomej/jAveragejtotaljassets.jROAjmeasuresjhow
profitablyjajcompanyjusesj itsjassets.
Chapterj1:jAccoutingjandjthejBusinessjEnvironment Pagej4jofj80
Fulljfilejatjhttps://testbanku.eu/Solution-Manual-for-Horngrens-Accounting-11th-Edition-by-Miller-Nobles
