Solution Manual for Financial Managerial Accounting, 4th edition

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Chapter01–Introducing Accounting in Business1-1Chapter 1Introducing Accounting in BusinessQUESTIONS1.The purpose of accounting is to provide decision makers with relevant and reliableinformation to help them make better decisions. Examples include information forpeople making investments, loans, and business plans.2.Technology reduces the time, effort, and cost of recordkeeping. There is still ademand for people who can design accounting systems, supervise their operation,analyze complex transactions, and interpret reports. Demand also exists for peoplewho can effectively use computers to prepare and analyze accounting reports.Technology will never substitute for qualified people with abilities to prepare, use,analyze, and interpret accounting information.3.External users and their uses of accounting information include: (a) lenders, tomeasure the risk and return of loans; (b) shareholders, to assess whether to buy,sell, or hold their shares; (c) directors, to oversee their interests in the organization;(d) employees and labor unions, to judge the fairness of wages and assess futureemployment opportunities; and (e) regulators, to determine whether the organizationiscomplyingwithregulations.Otherusersarevoters,legislators,governmentofficials, contributors to nonprofits, suppliers and customers.4.Businessownersandmanagersuseaccountinginformationtohelpanswerquestions such as: What resources does an organization own? What debts areowed? How much income is earned? Are expenses reasonable for the level ofsales? Are customers’ accounts being promptly collected?5.Service businesses include:Standard and Poor’s, Dun & Bradstreet, Merrill Lynch,Southwest Airlines, CitiCorp, Humana, Charles Schwab, and Prudential.Businessesoffering products include Nike, Reebok, Gap, Apple Computer, Ford Motor Co.,Philip Morris, Coca-Cola, Best Buy, and Circuit City.6.The internal role of accounting is to serve the organization’s internal operatingfunctions.Itdoesthisbyprovidingusefulinformationforinternalusersincompleting their tasks more effectively and efficiently. By providing this information,accounting helps the organization reach its overall goals.7.Accountingprofessionalsoffermanyservicesincludingauditing,managementadvice, tax planning, business valuation, and money management.

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