Concepts of Accounting
•What is the primary purpose of accounting?
To provide accurate and comprehensive financial information to help in decision-making
•Why do businesses need to know if they are making a profit?
Because making a profit is the main reason for engaging in business activity.
•What is the primary task of bookkeeping?
Recording financial information, particularly transactions, in a systematic way.
•Who is considered an internal stakeholder because they have invested personal savings in the business?
The owner.
•Which external stakeholders rely on the business to provide goods they need?
Customers.
•What does accounting involve in terms of financial information?
Recording, classifying, and summarizing financial transactions.
•Why is it important for businesses to have enough money to pay their commitments on time?
To ensure the business can continue operating without financial disruptions.
•True or False: Bookkeeping involves interpreting financial data.
False (Bookkeeping involves recording, not interpreting data).
•What internal stakeholder is concerned with identifying business weaknesses?
The manager.
•What external stakeholders are concerned with timely payment for the goods they supply?
Suppliers.
•True or False: Accounting is only concerned with the financial information of businesses.
False (It applies to both individuals and organizations).
•How does accounting help businesses make the best use of invested funds?
By providing accurate financial information to assess performance and plan future activities.
•What is the relationship between bookkeeping and accounting?
Bookkeeping provides the detailed records that accounting uses to classify, summarize, and interpret financial data.
•Which internal stakeholders are dependent on the business’s success for their wages or salary?
The employees.
•Which external stakeholder is interested in whether loan repayments will be made with interest?
The bank.
•What aspect of accounting is often called bookkeeping?
The systematic recording of all financial transactions.
•Why is systematic recording of financial transactions important?
It allows for the correct information to be provided to users for decision-making.
•Why is it important to record financial transactions systematically?
To ensure that financial information is accurate and comprehensive for decision-making.
•What are the three main internal stakeholders mentioned in the provided material?
The owner, manager, and employees.
•Who are external stakeholders concerned with the risk of investing in a business?
Potential investors.
•What is necessary for providing comprehensive financial information in accounting?
All financial transactions must be recorded systematically, classified, and summarized.
•What is one of the key outputs of the accounting process that helps manage a business effectively?
The preparation of financial statements.
•How does bookkeeping contribute to the preparation of financial statements?
It provides the detailed records that are classified and summarized in financial statements.
•How does financial information help internal stakeholders manage the business?
It allows them to assess performance, identify weaknesses, and plan improvements.
•Which external stakeholder is concerned about the impact of the business on the local environment?
The local community