Accounting of Management

Assignment -1

1- Describe the primary forms of business organization?

Ans : There are three main forms of business organizations:

Sole proprietorship:

It is a form of business organization that is owned by one person.

Example: barber shop, law office, auto repair shop

Partnership:

When two or more individuals engage in enterprise as co-owner, the organization is

known as partnership.

Example: Lawyers, doctors, certified public accountant

Corporation:

A corporation is an entity recognized by law as possessing and existence separate and

distinct from its owner; that is a separate legal entity.

Example : HBL bank etc

2- Identify the users and uses of accounting information?

Ans : There are two main type of users

Internal users: These are owners, managers and employees.

External users: These are people outside the business organizations

Uses of accounting information:

It is used to prepare financial statements, report on a company’s position for a

specific period of time.

3- Explain the three principal types of business activity?

Ans : The three main types of business activates are:

1-Operating

2-Investing
3-Financing

The cash flows used and created by each of these activities are listed in the cash flow
statement. Cash flow statement is meant to be a reconciliation of net income on an
accrual basis to cash flow.

4- Describe the content and purpose of each financial statements?

Ans : Content of financial statements:

Balance sheet

Income statement

Cash flow statement

Statement of changes in owners’ equity

Purpose of financial statements:

The main purpose of financial statements is to provide information about the results
of operations, financial position and cash flow of any organization.

5- Explain the meaning of asserts, liabilities and stockholders’ equity,

and state the basic accounting equation?
Ans :
Asserts:
Asserts are the things that are resourced owned by a company and which have future
economic value that can be measured and can be expressed in money.
Liabilities:
It is defined as company’s legal financial debts that arise during the course of
business operations. It includes loans, accounts payable, mortgages, deferred
revenues, earned premiums unearned premiums and accrued expenses.
Stockholders’ equity:
It is the total amount of capital given to a company by its shareholders in exchange
for stock and it also includes any donated capital or retained earnings.
Basic accounting equation:
Asserts =liabilities + shareholders equity
 6- Show the effect of the following transactions on accounting
equation
Visa Consultancy Service was formed on January 1 , 2015 as a sole
proprietorship. During the first month of operations, the following
transactions occurred:

Asserts = Liabilities + owner equity

a 370000 0 + 370000
370000 370000
b Building +50000 0 + 0
Cash -50000
370000 370000
C 70000 70000 + 0
440000 440000
d Office supplies 30000 30000 + 0
470000 470000
e office supply+10000 0 + 0
Cash -10000
470000 470000
F -15000 -15000 + 0
455000 455000
g 1500 0 + 1500
456500 456500
h 2000 0 + 2000
458500 458500
i -20000 0 + -20000
438500 438500
j +1000 0 + 0
Cash-1000
438500 438500
k Cash +5000 0 + 15000
+10000
453500 453500
l Car +50000 0 + 0
Cash – 50000
453500 453500
m -14000 0 + -14000
439500 439500
n Fuel -2000 0 + -4000
Salaries- 2000
435500 435500
o 30000 0 + 30000
465500 465500