Question

1.	Define accounting. Who are the major users of accounting information?

2.	What are the three major business activities in which accountants play a major role? Give an example of each.

3.	What does the term GAAP mean? Briefly explain the roles of the Financial Accounting Standards Board and the Securities and Exchange Commission.

4.	What is double-entry bookkeeping? Give a brief example.

5.	List the four major financial statements. Which financial statements are permanent and which are temporary?

Answer 1

1-Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It provides profit or loss and financial position for a given period.Two major users of accounting informations are (1) various stakeholders of the company like shareholders, banks and financial institutions.

2- three major business activities in which accountant plays important role:

(1)Financial Accounting- In financial accounting recording of various financial transactions (2) Managerial Accounting- Helps in decision making on the basis data obtained from financial accounting and(3) Auditing- to check and verify that accounting information is true and fair and tranparent.

3- GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting.The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for public companies in the U.S

4- Concept of Double-entry book keeping is based on the fact that every financial transaction has equal and opposite effects in two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity for example if wages paid of 2000, in this transaction wages expense would be debited and cash would be credited.

5-Major financial statement- (1) Income statement - temporary (2) balance sheet - permanent (3) statement shareholders equity- permanent (4) cash flow statement - permanent