Solution Manual For Financial Accounting, Canadian Edition, 1st edition Robert Kemp, Jeffrey Waybright, Liang-Hsuan Chen, Sandra Daga Chapter 1-12With Appendix
Chapter 1: Business, Accounting, and You Discussion Questions: Key Points 1.
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The economic events that affect a business are communicated through the accounting function. Language helps us to make sense of the world around us. If we don’t know the language, we will be limited in our ability to operate effectively in the business environment. Valid arguments can be made on both sides of this question. Without technical knowledge an accountant will not be able to provide much value. Without ethics, however, an accountant can be dangerous. Accounting exists because of a need for an objective account of the economic events that affect an entity. Financial statements seek to provide information about events that have already occurred. For example, the cost principle may be used to carry assets on the books. It is up to the user to make projections as to how past transactions are likely to affect future events. Reasons why—reliability, verifiability. Disadvantages—relevance, usefulness for making decisions. Financial statement uses discussed in the text: allow investors and creditors to make investment decisions, enable suppliers and customers to determine the financial condition of a business, and report to regulatory agencies. It is a separate legal entity from its owners. Factors—liability of owners for business activities, taxation, distribution of income. A = L + SE. Assets—things of value a company has. Liabilities—amount a business owes to third parties. Shareholder’s equity— the amount of assets that is owned by the shareholders. The transactions would have the following effects: a. A+, SE+ b. A+, L+ c. A+, SE+ d. A+, A− Statement of Earnings, Statement of Changes in Equity, Statement of Financial Position, Statement of Cash Flows. The financial statements articulate (join together). The statement of earnings needs to be prepared in order to produce the net income amount that is reported on the statement of changes in equity. The ending balance in the statement of changes in equity is needed in order to prepare the statement of financial position. The ending balance in cash on the statement of financial position and other information are needed for the statement of cash flows.
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Financial Accounting Ce
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