principles of accounting acct 101 assignment 1

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PRINCIPLES OF ACCOUNTING
ACCT 101
ASSIGNMENT 1
Last Date for Submission 19th Sep 2015
You are required to work in this assignment individually. Any suspicious
activities or cheating will result zero grade in this assignment.
Essay Questions
Q1.Identify the users and uses of accounting information.
Accounting is often called the language of business because its main purpose is to provide financial
information about the organization economic activities to interested users who can be divided into two
main groups: External users and Internal users. Each user group has special information needs
depending on the type of decisions to be made.
The following Table illustrate the two types of user groups and the uses of information for each group.
User
Group
External
Internal
Examples
of Users
Lenders
Shareholders
Government
External auditor
Customers
R&D Manager
Purchasing Manager
Human recourses
Marketing Manager
Budget officers
Controllers
Uses
of information
To assess whether an organization likely to repay its loans
To decide whether to buy, hold or sell stocks
To assess the amount of taxes
To verify that financial statement are prepared according to GAAP
To assess the staying power of potential suppliers
To Know the proposed Costs and revenues of any product.
To determine What, when and how much to purchase.
To Know amounts of payroll, Benefit, Compensation.
To set prices target customers and monitor customer needs
To set up budget
To forecast cash inflow and cash outflow
1
Q2.Identify the two main groups involved in establishing generally accepted accounting principles in the
U.S.
In the united states the securities and exchange commission (SEC) has the legal authority to set
generally accepted accounting principles. The SEC has largely delegated the task of setting U.S GAAP to
the financial Accounting Standard board (FASB), Which is a private sector group that sets both board
and specific principles.
Q3.Identify and describe the four basic financial statements.
The four basic financial statement and their purpose are
1. Income statement:
Describes a company’s revenues and expenses along with the resulting net income or loss over a
period of time due to earnings activities.
2. Statement of Retained Earnings
Explains changes in retained earnings from net income or loss and from any dividends over a
period of time.
3. Balance sheet.
Describe a company’s financial position at point in time which includes assets, liabilities and
equity.
4. Statement of Cash flow
Identifies cash inflow and cash outflow over a period of time.
Q4.A company purchased $7,000 of supplies and testing equipment on credit. Enter the appropriate
amounts that reflect this transaction into the accounting equation format shown below.
Assets =
Liabilities +
+ $7,000
+ $7,000
2
Equity
Q5. Flora Accounting Services completed these transactions in February:
a. Purchased office supplies on account, $300
b. Completed work for a client on credit, $500
c. Paid cash for the office supplies purchased in (a)
d. Completed work for a client and received $800 cash
e. Received $500 cash for the work described in (b).
Prepare journal entries to record the above transactions.
Date
A
B
C
D
E
Explanation
Dr.
$300
Supplies
Accounts Payable
Accounts Receivable
Services Revenue
Accounts Payable
Cash
Cash
Services Revenue
Cash
Accounts Receivable
Cr.
$300
500
500
300
300
800
800
500
500
3
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