chapter f1
INTRODUCTION TO ACCOUNTING
AND BUSINESS
CLASS discussion questions
1.
The objective of most businesses is to maximize profits. Profit is the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide those goods or services.
2.
The stakeholders of a business normally include owners, managers, employees, customers, creditors, and the government.
3.
Simply put, the role of accounting is to provide information for managers to use in operating the business. In addition, accounting provides information to other stakeholders to use in assessing the economic performance and condition of the business.
4.
Three sound principles that form the foundation for ethical behavior are (1) avoid small ethical lapses, (2) focus on your long-term reputation, and (3) be willing to suffer adverse personal consequences for holding to an ethical position.
5.
Accountants serving a business firm, governmental agency, not-for-profit organization, etc., as an employee are engaged in private accounting. Accountants who provide accounting services to clients on a fee basis are engaged in public accounting.
6.
FASB stands for the Financial Accounting Standards Board. The FASB sets generally accepted accounting principles by first identifying specific issues in financial accounting. As these issues arise, the FASB conducts extensive research to identify the primary concerns involved and possible solutions. Generally, after issuing discussion memoranda and preliminary proposals and evaluating comments from interested parties, the Board issues Statements of Financial Accounting Standards. These standards become part of generally accepted accounting principles. To explain, clarify, or elaborate on existing standards, the Board also issues Interpretations, which have the same authority as the Standards.
7.
No. The business entity concept limits the recording of economic data to transactions directly affecting the activities of the business. The payment of the interest of $3,500 is a personal transaction of Lynda Lyons and should not be recorded by Fast Delivery Service.
8.
The land should be recorded at its cost of $97,500 to Neece Repair Service. This is consistent with the cost concept.
9.
a.
No. The offer of $400,000 and the increase in the assessed value should not be recognized in the accounting records.
b.
Cash would increase by $400,000, land would decrease by $350,000, and owner’s equity would increase by $50,000.
10.
The two principal rights to the properties of a business are liabilities (the rights of creditors) and owner's equity (the rights of the owner).
11.
The three elements of the accounting equation are assets, liabilities, and owner's equity.
12.
An account receivable is a claim against a customer for goods or services sold. An account payable is an amount owed to a creditor for goods or services purchased. Therefore, an account receivable in the records of the seller is...
