Solution Manual for Financial Accounting, 3rd Edition

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Chapter 1:Business, Accounting,and YouDiscussion Questions: Key Points1.The economic events that affect a business are communicated through the accountingfunction. Language helps us to make sense of the world around us. If we don’t know thelanguage,wewillbelimitedinourabilitytooperateeffectivelyinthebusinessenvironment.2.Valid arguments can be made on both sides of this question. Without technical knowledgean accountant will not be able to provide much value. Without ethics, however, anaccountant can be dangerous. Accounting exists because of a need for an objective accountof the economic events that affect an entity.3.Financialstatements seek toprovide informationabouttheevents thathave alreadyoccurred. For example, the cost principle is used to carry assets on the books. It is up to theuser to make projections as to how past transactions are likely to affect future events.4.Reasons why—reliability, objectivity. Disadvantages—relevance, decision-usefulness.5.Financial statement uses discussed in the text: allow investors and creditors to makeinvestment decisions, enable suppliers and customers to determine the financial condition ofa business,andreport to regulatory agencies.6.It is a separate legal entity from its owners. Factors—liability of owners for businessactivities, taxation, distribution of income.7.A = L + SE. Assets—things of value a company has. Liabilities—amount a business owes tothird parties. Stockholder’s equity—the amount of assets that is owned by the stockholders.8.The transactions would have the following effects:a.A+, SE+b.A+, L+c.A+, SE+d.A+, A-9.Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of CashFlows. The financial statements articulate (join together). The income statement needs to beprepared in order to produce the net income amount that is reported on the statement ofretained earnings. The ending balance in retained earnings isneededinorder to prepare thebalance sheet.The ending balance in cashon the balance sheetand other information isneeded for the statement of cash flows.10.The financial statements area.Balance sheetb.Statement of retained earningsc.Statement of cash flowsd.Income statement

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Chemistry

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Chemistry For Changing Times by Joh...

Solution Manual for Financial Accounting, 3rd Edition

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