Financial Accounting 6th Canadian Edition Solution Manual

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Financial Accounting, 6ce,Libby, Libby, Short, Kanaan,Sterling1-1Chapter 1Financial Statements and Business DecisionsRevised:October 21, 2016ANSWERS TO QUESTIONS1.Accounting is a system that collects and processes (analyzes, measures, and records)financial information about an organization and reports that information to decisionmakers.2.Financial accounting involves preparation of the basic financial statements and relateddisclosures for external decision makers. Reporting is generally on a quarterly and annualbasis. Managerial accounting involves the preparation of detailed plans, budgets, forecasts,and performance reports for internal decision makers. Reporting is on an ongoing basis.3.Financial reports are used by both internal and external groups and individuals. Theinternal users are the various managers of the entity, e.g. marketing, credit andpurchasing. The external groups include the owners, investors, creditors, governmentalagencies, other interested parties, and the public at large.4.Investors purchase all or part of a business and hope to gain by receiving part of what thecompany earns and/or selling their share of the company in the future at a higher pricethan they paid. Creditors lend money to a company for a specific length of time and hopeto gain by charging interest on the loan.5.An accounting entity is the organization for which financial data are to be collected. Typicalaccounting entities are a business, a church, a governmental unit, a university and othernonprofit organizations such as a hospital. A business is defined and treated as a separateentity because the owners, creditors, investors, and other interested parties need toevaluate its performance and its potential separately from other entities and from itsowners.6.The heading of each of the four required financial statements should include the following:(a)Name of the entity(b)Title of the statement(c)Specific date or period of the statement, or the period of time it covers(d)Unit of measure7.(a)The purpose of the statement of earnings is to present information about therevenues, expenses, and the net earnings of the entity for a specified period of time,in order to help assess its financial performance during that period.

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