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(solution) Business Decisions and the Accounting Function Question 1:


Business Decisions and the Accounting Function

  1. Question 1:

    1. Proficient-level:
    • Identify and describe the three basic forms of business organizations.
    • What are the advantages and disadvantages of each form of ownership?
  • Distinguished-level:
    • Business entities can also be categorized by the type of business activities they perform. Identify and describe the three types. What do all three types have in common?

  1. Question 2:

    1. Proficient-level:
    • Identify the primary objectives of every business.
    • What are the four basic financial statements that measure the primary objectives of every business?
    • Describe what information each statement presents and which of the primary objective(s) can be met through the information presented on the statement.
  • Distinguished-level:
    • Describe the difference between an asset, liability, and equity on a company's balance sheet.

  1. Question 3:

    1. Proficient-level:
    • Identify the framework for the entire accounting process and describe its components and how they fit together to form this framework.
  • Distinguished-level:
    • Define the nature of an accounting transaction and provide multiple examples of these transactions.

  1. Question 4:

    1. Proficient-level:
    • To allow the accounting process to run smoothly, accountants must rely on a set of underlying concepts or assumptions. Identify and describe each of the five concepts or assumptions.
  • Distinguished-level:
    • Match each of the concepts or assumptions to one or more of the financial statements that it applies to.

  1. Question 5:

    1. Proficient-level:
    • Many accounting transactions will apply to one or more of the financial statements. In the case of the balance sheet, multiple account types can be affected. For each of the following items, provide an example of a transaction that would have the following effects on the items in a firm's financial statements. Provide five correct responses:
      • Increase an asset; decrease some other asset.
      • Increase an asset; increase a liability.
      • Decrease retained earnings; decrease an asset.
      • Increase an asset; increase retained earnings.
      • Decrease an asset; decrease a liability.
      • Increase a liability; decrease retained earnings.
  • Distinguished-level:
    • Correctly provide an example for all of the effects on the items in a firm's financial statements.

  1. Question 6:

    1. Proficient-level:
    • Consider this scenario. James Stevens was taking an accounting course at State University. Also, he was helping companies find accounting systems that would fit their information needs. He advised one of his clients to acquire a software computer package that could record business transactions and prepare financial statements. The licensing agreement with the software company specified that the basic charge for one site was USD 4,000 and that USD 1,000 must be paid for each additional site where the software was used. James was pleased that his recommendation to acquire the software was followed. However, he was upset that management wanted him to install the software at eight other sites in the company and did not intend to pay the extra USD 8,000 due the software company. A member of management stated, "The software company will never know the difference and, besides, everyone else seems to be pirating software. If they do find out, we will pay the extra fee at that time. Our expenses are high enough without paying these unnecessary costs." James believed he might lose this client if he did not do as management instructed. Discuss whether you believe this is an ethical violation.
  • Distinguished-level:
    • Identify any laws that may have been broken as a result of this issue.

Business Decisions and the Accounting Function

 

Question 1:

 

Proficient-level:

 

Identify and describe the three basic forms of business organizations.

 

Sole Proprietorship, Partnership and Corporations...

 


Solution details:

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Sep 13, 2020

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