Quiz 1: Introductionto Accountingand Business


Accounting equation: Accounting equation refers total assets equals to total liabilities and total stock holders' equity that is, increase in assets results to decrease in assets or corresponding increase in liabilities or stock holders' equity to match the same. The relationship can be understood by the following formula. img 1. No, C is not carrying on a professional manner, by omitting portion of the financial statements. It is professional misconduct and dishonesty practice. She is misguiding the bank by not unveiling all related financial statement. 2. a. The owner's will be willing to provide all favorable information, which can influence the bank's choice to authorize the loan. Information which is terrible financial status of the company is given to the bank. b. Bank will take chance to get all critical information of the business, which can influence the bank's choice to sanction the loan. This information may incorporate the company's financial statement and past financial data to check credit standing and worthiness. c. Common interests shared by the business owner and bank are that loan is sanctioned in time and the repayment is made as per give time period and net growth to the both.

1. Effect of each transaction-: img In the end Assets = Liabilities + Owner's equity 2. Determination of Net Income-: img Notes -: • Supplies would form part of balance sheet and expenses related to it shall form part of income statement. 3. Statement of Owner's equity img 4. Balance Sheet for PS Music img

Accounting is defined as an information system which reports financial performance of a business to the users. The process of reporting accounting information involves the following steps: 1) Identify the users. 2) Assess user's information needs. 3) Design the accounting information system to meet the user's needs. 4) Record economic data about business activities and events. 5) Prepare accounting reports for users. Users of accounting information can be divided into two groups such as internal and external users. Internal users of the accounting information are defined as users who are directly involved in the management and operations of the business for the purpose of decision making needs. Such information is sensitive and is not distributed to the outsiders. Internal users of accounting information are managers, employees and company executives. Examples of accounting information include information about customers, prices and plans to expand the business. External users of the accounting information are defined as users who are not involved in the managing and operating the business. External users include investors, creditors, customers, government.