Chapter 1, Problem 1.2E

Accounting concepts Match each of the following statements with the appropriate accounting concept. Sonic concepts may he used more than once, while others may not be used at all. Use the notat ions shown to indicate the appropriate accounting concept. Statements 1. Assume that a business will continue forever. 2. Material litigation involving the corporation is described in a note. 3. Monthly utilities costs are reported as expenses along with the monthly revenues. 4. Personal transactions of owners are kept separate from the business. 5. This concept supports relying on an independent actuary (statistician), rather than the chief operating officer of the coq)ration, to estimate a pension liability. 6. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. 7. Land worth $800,000 is reported at its original purchase price of $220,000. 8. This concept justifies recording only transactions that are expressed in dollars. 9. If this concept was ignored, the confidence of users in the financial statements could not be maintained. 10. The changes in financial condition are reported at the end of the month.

The metrics based on financial numbers produced by the accounting system are ________. A. quantitative factors B. qualitative factors C. stakeholders D. stockholders

Enter the letter A through H for the principle or assumption in the blank space next to each numbered description that it best reflects. A. General accounting principle B. Measurement (cost) principle C. Business entity assumption D. Revenue recognition principle E. Specific accounting principle F. Expense recognition (matching) principle G. Going-concern assumption H. Full disclosure principle 1. A company reports details behind financial statements that would impact users’ decisions. 2. Financial statements reflect the assumption that the business continues operating. 3. A company records the expenses incurred to generate the revenues reported. 4. Concepts, assumptions, and guidelines for preparing financial statements. 5. Each business is accounted for separately from its owner or owners. 6. Revenue is recorded when products and services are delivered. 7. Detailed rules used in reporting events and transactions. 8. Information is based on actual costs incurred in transactions.

2. State whether the following questions is True (T) or False (F): a) Management accounting provides economic and financial information for external users such as shareholders, creditors and banks. b) Financial accounting provides information for managers and other internal users. c) Financial accounting reports past results. d) Management accounting is future oriented.

which of the following represents a form of communication through financial reporting but not through financial statements? A. balance sheet B. presidents letter C. income statement D. notes to financial statements

1. Describe the system of accounting standards and principles to utilize these in the preparation and communication of relevant financial information. 2. Apply the accrual method of accounting and the accounting cycle in preparation of financial statements 3. Prepare a balance sheet and income statement for merchandising and service organizations 4. Apply generally accepted principles when accounting for cash dividends and preparation of journal entries to record the issuance of stock. Assignment Description and Instructions Suppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandising company as a part of a work experience program. The team having been introduced to the general manager was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the company’s financial statements which are now due. As aspiring university students,…

Explain how you would interprete Financial statements to your Chief Executive Officer who is a non-Accountant with illustrations   .

For each transaction, indicate whether each account would be classified in the balance sheet as (a) an asset, (b) a liability, or (c) stockholders’ equity; in the income statement as (d) a revenue or (e) an expense; or in the statement of stockholders’ equity as (f) a dividend. Account Classifications Accounts Related Transactions 1. ____________ Utilities payable Amounts owed for utilities. 2. ____________ Cash Cash available for use. 3. ____________ Salaries expense Cost of salaries. 4. ____________ Common stock Shares of ownership sold to investors. 5. ____________ Service revenue Sale of services to customers.

Financial  statements  identify  financial  position,  performance  and  changes  in financial position  over  a  period  of  time.  The  main  financial  statements  are  statement  of  financial position, statement of comprehensive  income and statement of cash flow. These statements are prepared to show how wel I    a  company  has performed and also give an indication of the value  of  the  business.   Many  Accountants   however  are  of  the  view  that  the  financial statements are limited in their value to users. Required: 1. Identify and discuss the limitations of financial     statements                                               2. State the objectives of International Accounting Standards Board (IASB)