Test Bank for Survey of Accounting, 7th Edition by Edmonds & Olds, ISBN: 9781264442973, All 16 Chapters Covered, Verified Latest Edition

,ACCESS Test Bank for Survey of Accounting 7th Edition Edmonds
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Survey17e1–1Chapter111–1Solutions1Manual

SOLUTIONS TO QUESTIONS - CHAPTER 1
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1. Stakeholders are the parties that use accounting information.1 1 1 1 1 1 1




Stakeholders with a direct interest include owners, managers, creditors
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, suppliers, and employees. These individuals are directlyaffected by w
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hat happens to the business.
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Stakeholders with an indirect interest include financial analysts, brok
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ers, attorneys, government regulators, and news reporters. These ind
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ividuals use information in the financial reports to adviseand influenc
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e their clients.
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Students may give many different answers under the above categorie
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s depending on their level of experience in business.
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All students are direct users of accounting information related totuition
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and fees, financial aid, and account balances.
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2. Accounting provides information that is useful in making decisionsb
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y all participants in the market for resource goods and services, bot
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h profit-
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oriented and nonprofit oriented. Because accounting’srole is so imp
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ortant, it is often called the language of business.
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3. The primary mechanism used to allocate resources in the U.S. isc
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ompetition for resources in the open market. 1 1 1 1 1 1




4. A market is a group of people or organizations that come togetherf
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or the purpose of exchanging items of value.
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5. The market for business resources involves three distinct participa
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nts: consumers, conversion agents, and resource owners.See Exhib
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it 1-1


1 that illustrates how market trilogy is involved in resource allocat
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ion.




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Survey17e1–1Chapter111–1Solutions1Manual

6. Financial Resource: money 1 1




Physical Resource: natural resources (i.e. land, forests, mine ore, petrol
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eum, etc.), buildings, machinery and equipment, furniture andfixtures
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Labor Resource: includes both intellectual and physical labor; i.e.emplo
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yees

7. Investors expect a distribution of the business’s profits as a returno
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n their financial investment (capital allocation).
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Creditors lend financial resources to businesses and receive interestas
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a return or profit on the loan.
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8. Financial accounting provides information that is useful to externalr
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esource providers. 1




Managerial accounting provides information that is useful to1 1 1 1 1 1 1 1


managers in operating an organization (i.e., internal users).
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9. Not-for-
profit or nonprofit entities provide goods or services to consumers fo
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r humanitarian or special reasons rather than to earn aprofit for owne
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rs. For example, certain not-for-
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profit entities allocate resources to provide for research of disease
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s or social/environmental welfare; others allocate resources to prom
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otethe arts and provide education.
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10. The U.S. rules of accounting information measurement are called
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generally accepted accounting principles (GAAP). 1 1 1 1




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Survey17e1–1Chapter111–1Solutions1Manual

11. Careers in public accounting consist of providing services to the gene
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ral public from a public accounting firm. These services includeauditi
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ng, tax, and consulting services. Careers in private accountingusually
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1consist of working for a specific company (which would be aclient of
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the public accounting firm) providing a wide variety of services to the
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1company including recording transactions, preparingfinancial state
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ments, internal auditing, and others.
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12. The three elements of the accounting equation are:
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1. Assets
2. Liabilities
3. Stockholders’ Equity 1




Accounts are specific items or subclassifications of the elements.
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Examples of accounts include cash, land, and accounts payable.
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13. Assets, the economic resources of a business, are used to producee
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arnings.

14. The assets of a business belong to that business entity and there
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may be claims on the assets. Claims on the assets belong to resou
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rce providers.
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15. Creditors are individuals and/or institutions that have provided goods
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or services to the business which are not yet paid for, or loaned mone
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y to the business. These parties have first claim to the assets of the bu
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siness, and the owners have a residual interest in theassets.
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16. The term “liabilities” is used to describe creditors' claims on the
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assets of a business. 1 1 1




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