Exam 1: Introduction to Accounting

Distinguish managerial accounting from financial accounting. Your answer should include a brief discussion of differences in the types of information provided to users as well as differences in the identity of users of financial and managerial accounting information.

For the individual, accounting has at least three functions. They are:

The economic consequences of accounting information are limited to the compensation schemes paid to managers.

The balance sheet is an example of a management accounting report.

Where an Accounting Standard exists, accounting policies must comply with the Accounting Standard.

What is meant by the term economic consequences of accounting policy choice?

Doug Murphy, a newly hired accountant, wanted to impress his boss, so he stayed late one night to analyse the office supplies expense. He determined the cost by month, for the past 12 months, of each of the following: computer paper, copy paper, fax paper, pencils and pens, note pads, postage, corrections supplies, stationery, and miscellaneous items. Why do entities, such as companies, not include information of this nature in published (general purpose) financial statements?

What is the role of accounting information in business?