ACG 5026 EXAM 1 QUESTION AND ANSWERS
What is Accounting? - Answers - The process of recording, summarizing, and analyzing
financial transactions
Characteristics of Financial Accounting - Answers - General purpose reports for users
outside the organization.
Must conform to GAAP
Historic in nature
Summarized information
Characteristics of Managerial Accounting - Answers - Information for managers inside
the organization to use
Can be creative (no GAAP)
Future oriented information
Highly detailed information
Generation depends upon the benefit exceeding the cost of the information
Financial Accounting Decision Makers? - Answers - Investors and analysts
Creditors
Suppliers and customers
Managerial Accounting Decision Makers? - Answers - Top management
Marketing teams
Production and operations
What Decisions are Made? (Financial Accounting) - Answers - Buy or sell stock?
Lend or not?
Purchase/sell goods or not?
What Decisions are Made? (Managerial Accounting) - Answers - Develop new strategy?
,Launch a new product or not?
Manage operations
What Information is Needed? (Financial Accounting) - Answers - Sales and costs
Cash in and cash out
Assets and liabilities
What Information is Needed? (Managerial Accounting) - Answers - Product sales and
costs
Department performance
Budgets and quality reports
Three forms of Business Ownership - Answers - Corporation
Sole Proprietorship
Partnership
What is a corporation? - Answers - A legal entity with A large number of owners or
shareholders not involved in managing day-to-day operations of the company
Corporate Advantages - Answers - Limited liability
Ability to raise capital
Ability to separate ownership from management
Ease of transferability of ownership
Corporate Disadvantages - Answers - Double taxation (corporate profits and
dividends/capital gains
Paperwork and formalities
The shareholders of large companies... - Answers - Provide resources such as cash to
a corporation in exchange for stock ownership
Not involved in day-to-day business operations
Rely on financial statement information
, Shareholders rely on financial statement information to... - Answers - Evaluate
management performance
Assess the company's financial condition
Predict future success
Management stock benefits - Answers - Compensation often linked to financial
performance through bonuses, stock options, and other incentive compensation
Board of Directors - Answers - Elected by shareholders to represent shareholder
interest and oversee management
Required by law for publicly traded companies
Uses financial accounting to review the results of operations, evaluate future strategy,
and assess management performance
Four Business Activities - Answers - Planning
Financing
Investing
Engaging
Business Activities - Answers - A business plans activities, finances those activities,
invests resources into those activities, and then engages in operating activities.
Operating Activities - Answers - The production, promotion, and selling of products and
services
Inventory
Salaries
Materials
Logistics (Input Markets) - Answers - Generate operating expenses
Customers (Output Markets) - Answers - Generate operating revenues and some
operating expenses (marketing and distribution)
Investing Activities - Answers - Activities that consist of acquiring and disposing of
resources (assets) that a company uses to produce and sell its products or provide its
services
What is Accounting? - Answers - The process of recording, summarizing, and analyzing
financial transactions
Characteristics of Financial Accounting - Answers - General purpose reports for users
outside the organization.
Must conform to GAAP
Historic in nature
Summarized information
Characteristics of Managerial Accounting - Answers - Information for managers inside
the organization to use
Can be creative (no GAAP)
Future oriented information
Highly detailed information
Generation depends upon the benefit exceeding the cost of the information
Financial Accounting Decision Makers? - Answers - Investors and analysts
Creditors
Suppliers and customers
Managerial Accounting Decision Makers? - Answers - Top management
Marketing teams
Production and operations
What Decisions are Made? (Financial Accounting) - Answers - Buy or sell stock?
Lend or not?
Purchase/sell goods or not?
What Decisions are Made? (Managerial Accounting) - Answers - Develop new strategy?
,Launch a new product or not?
Manage operations
What Information is Needed? (Financial Accounting) - Answers - Sales and costs
Cash in and cash out
Assets and liabilities
What Information is Needed? (Managerial Accounting) - Answers - Product sales and
costs
Department performance
Budgets and quality reports
Three forms of Business Ownership - Answers - Corporation
Sole Proprietorship
Partnership
What is a corporation? - Answers - A legal entity with A large number of owners or
shareholders not involved in managing day-to-day operations of the company
Corporate Advantages - Answers - Limited liability
Ability to raise capital
Ability to separate ownership from management
Ease of transferability of ownership
Corporate Disadvantages - Answers - Double taxation (corporate profits and
dividends/capital gains
Paperwork and formalities
The shareholders of large companies... - Answers - Provide resources such as cash to
a corporation in exchange for stock ownership
Not involved in day-to-day business operations
Rely on financial statement information
, Shareholders rely on financial statement information to... - Answers - Evaluate
management performance
Assess the company's financial condition
Predict future success
Management stock benefits - Answers - Compensation often linked to financial
performance through bonuses, stock options, and other incentive compensation
Board of Directors - Answers - Elected by shareholders to represent shareholder
interest and oversee management
Required by law for publicly traded companies
Uses financial accounting to review the results of operations, evaluate future strategy,
and assess management performance
Four Business Activities - Answers - Planning
Financing
Investing
Engaging
Business Activities - Answers - A business plans activities, finances those activities,
invests resources into those activities, and then engages in operating activities.
Operating Activities - Answers - The production, promotion, and selling of products and
services
Inventory
Salaries
Materials
Logistics (Input Markets) - Answers - Generate operating expenses
Customers (Output Markets) - Answers - Generate operating revenues and some
operating expenses (marketing and distribution)
Investing Activities - Answers - Activities that consist of acquiring and disposing of
resources (assets) that a company uses to produce and sell its products or provide its
services
