1. “Accounting is ingrained in our society and it is vital to our economic system.” Do you agree? Explain.
I agree because I think Accounting is part of our economic system specifically in business and we all know that in order to maintain the competitiveness of our economic system all over the world is to uplift the business society that’s why Accounting is vital to our economic system.
2. Identify and describe the steps in the accounting process. 1. Identifying the financial transaction
a business may perform several transactions. Of which, only financial transactions are recorded in accounts. In the first step of the accounting process, therefore, financial transactions are identified. Financial transactions are those which are expressed in monetary terms. 2. Recording of Financial Transactions
In the second step of accounting process, all financial transactions performed by the business are systematically recorded in the journal, and subsidiary books.
3. Classifying Financial Transactions
In the third step of accounting process, financial transactions are classified mainly into the transaction related with persons that include enterprises, persons, assets and income-expenses. Then, they are recorded in their respective ledger accounts, such as debtors' and creditors' accounts, land and building accounts; commission received accounts, and rent account.
4. Summarizing Financial Transactions
all financial transactions are summarized in this step of accounting process. They are summarized by preparing a trial balance. Preparation of trial balance helps to prepare final accounts which disclose the profit and loss and financial position.
5. Communicating the Results Of Business
In the last step of accounting process, the results of business operations such as profit or loss and the company's financial position are communicated to the users. Those users include owners, creditors and managers who need financial information for decision making purposes. 3. (a) Who are internal users of accounting data? (b) How does accounting provide relevant data to these users? (a) 1. Owners : Business ownerswant to know whether their funds are being properly used or not. Accounting information helps them them to know the profitability and the financial position of the concern in which they have invested their funds.
2. Management: Accounting information is called the eyes and ears of management.It helps a manager in appraising the performance of the subordinates.
3. Employees : Employees of the organisation can get the actual information about the financial position of their organisation with the help of financial statements prepared by the accountant. (b) Accounting is a way to provide a systematic data about any company's statements and expences. due to its consecutive and systematic entries it provides a relevant data. 4. What uses of financial accounting information are made by (a) investors and (b) creditors? (a) Investors are concerned about risk and return in relation to their investments. They require information to decide whether they should continue to invest in a business. They also need to be able to assess whether a business will be able to pay dividends, and to measure the performance of the business' management overall (b) Suppliers and trade creditors require information that helps them understand and assess the short-term liquidity of a business. Is the business able to pay short-term debt when it falls due? 5. “Bookkeeping and accounting are the same.” Do you agree? Explain. Although they both involve the process of recording the financial transactions of a business, bookkeeping and accounting are two different topics. Bookkeeping is the process of recording, in chronological order, the daily transactions of a business entity. It forms part of the accounting information system. On the other hand, Accounting is an information system – includes the process of...
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