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Accounting 1 Assignment 1
Accounting 1 Assignment 1
Accounting 1 Assignment 1
6. What is an asset?
In accounting, an asset is regarded as being a resource acquired by an
entity
as a result of a past event and that will result in a future economic benefit
for the entity. For example, the purchase of plant and machinery will
provide a benefit over very many years and thereby help the entity generate
income in those years.
7. What economic event happened in the United Kingdom during the
eighteenth century?
Industrial Revolution
8. What happened to the ownership and management of businesses during the
nineteenth century?
In nineteenth century, the owner was found to need more information in
financial purposes, but the management need information on costing
purposes. As a result of the different information needs of owners and
managers, separate accounting systems were developed. There are financial
accounting and cost accounting.
9. Why did managers in nineteenth-century industrial entities require more
detailed information?
Because wit the more detailed information on cost purposes, managers can
could work out the cost of making individual products and so that they can
price these products appropriately. The information required needed to be
in much more detail and prepared much more frequently.
10. List three user groups of accounting information.
Internal users, external users, and government
11. What are the six main branches of accounting?
Financial accounting Auditing
Management accounting Financial management
Insolvency Taxation
12. Of which main branch of accounting does cost accounting form a part?
Management accounting
The manufacturing sector, the trading sector and the service sector.
18. Name real businesses which belong to these different subdivisions
The manufacturing sector
Examples of manufacturing enterprises include Rolls-Royce, Shell,
Airbus and any other well-known UK companies in the chemicals,
glass, iron and steel and textile industries.
The trading sector
The sector includes entities such as builders’ merchants, shops and
supermarkets, for example, Tesco, Marks & Spencer and Amazon.
The service sector
The example, Channel 4 (a TV channel), WPP (one of the biggest
advertising agencies) or Deloitte (an accountancy and professional
services firm). There are some exceptions: the hotel and restaurant
trade
(such as Hilton or Pizza Hut), for example, is normally classed as part
of the service sector even though it provides major tangible services
such as accommodation, food and drink.
19. What is meant by ‘limited liability’?
The term ‘limited liability’ means that the owners of such companies are
required to finance the business only up to an agreed amount. Once they
have contributed that amount, they cannot be called on to contribute any
more, even if the company gets into financial difficulties.
20. Name one quasi-governmental body.
The British Broadcasting Corporation (BBC)
21. Complete the following sentences:
a. The word account in everyday language means an explanation or a
report.
b. Traders in the fifteenth century began to adopt a system of double-entry
bookkeeping to record information.
c. The owners of a business want to know how much profit a business has
made.
d. An entity is a term used to describe any type of organization.
22. State whether each of the following statements is true or false:
a. An auditor’s job is to find out whether a fraud has taken place. False
b. Management accounts are required by law. False
c. Tax avoidance is lawful. True
d. A statement of financial position is a list of assets and liabilities. True
e. Companies have to go into liquidation if they get into financial
difficulties. False.
e. News Story Quiz
Remember the news story at the beginning of this chapter? Go back to that
story and re-read it before answering the following questions.
Questions
1. Are you surprised by the findings of the report into the background of
Britain’s top companies CEOs (Chief Executive Officers)? What do you
expect is the required experience and background of a CEO of a big
business?
I’m not surprised so much. Because finance is the most important in a
company, especially for CEO (Chief Executive Officer), who manage all of
the company duties. The CEO must know about cash flow, their tax,
investation, and so on.
2. Why do you think it is important for a CEO of a big business to have a
sound understanding of finance and accounting?
The CEO must know the data and consider the potential consequences of
their management decisions on profits, cash flow and on the financial
condition of the company. The activities of every aspect of a business have
an impact on the company's financial performance and must be evaluated
and controlled by the business owner.
3. Do you think the same applies for those CEO’s who work for small-and
medium-sized businesses?
Of course yes, because the difference between small, medium-sized and
big business are about size and scope, but how to run business is still same.
f. Tutorial Quiz
The answers to questions marked with an asterisk can be found in Appendix 4.
1. ‘Accountants stifle managerial initiative and enterprise.’ Discuss.
No, because of accountant performs financial functions related to the
collection, accuracy, recording, analysis and presentation of a business,
organization or company's financial operations. In some conditions,
accountant also can take part in some decision but can’t stifle
managerial initiative and enterprise.
2. Do you think that auditors should be responsible for detecting fraud?
No. The public often believe that the job of an auditor is to discover
whether any fraud has taken place. This is not so.
3. The following statement was made by a student: ‘I cannot understand why
accountants have such a high status and why they have so much influence.’
How would you respond to such assertions?
Because they have important role in the company. Their job isn’t just
write down the data but also review are this business run smoothly or
not.
4. ‘It is necessary for non-accountants to know about accounting.’ Discuss.
The information that is collected can help non-accountants to do their
job more effectively because it provides them with better guidance on
which to make decisions. Any eventual decision is theirs and it would
often be based on accounting information presented to them by the
accountants. Furthermore, all managers must be aware of the statutory
accounting obligations to which their organization has to adhere if they
are to avoid committing unlawful acts.
5. Describe two main purposes of accounting.
Answer