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Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
Edition 8ISBN: 978-0078025747Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
Edition 8ISBN: 978-0078025747 Exercise 1
MBA Students
One MBA student was overheard saying to another, "Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing."
"I agree," said the other. "I worked in a rust bucket company that managed everything by the numbers and we never improved our stock price very much."
Evaluate these comments.
One MBA student was overheard saying to another, "Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing."
"I agree," said the other. "I worked in a rust bucket company that managed everything by the numbers and we never improved our stock price very much."
Evaluate these comments.
Explanation
Verified
Verified
Accounting:
Account is a developed art of recording and processing the financial data and generating useful results by presenting them in an understandable manner. Accounting starts with the very beginning of the company and continues even after the operations are completed.The comment that "Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing." Is incorrect as accounting is the backbone of any corporate entity and it benefits the managers in many ways. Also, the other statement that "I worked in a rust bucket company that managed everything by the numbers and we never improved very much". This statement also symbolizes ignoring the importance of accounting whereas in actual, accounting is Some of the benefits of accounting are:
• Accounting is objective : and is based on the generally accepted accounting principles.
• Accounting is reliable : In a well-run accounting department, data is preserved and procedures are properly in place to assure reliability of information.
• Analysis and Interpretation: One of the major advantage of accounting is that it helps in analyzing the results that are generated out of the collective effort put during the year. Major decisions are based on the interpretations that come out of the financial statements result.
Thus, the statement is false, as accounting is very important tool for the management. It could happen that share prices of the company are continuously growing and accounting has no direct relation with such changes but indirectly, it affects the decision of the stakeholders interested in the business and hence the share price. The price of share totally depends on the presentation of the accounting information and the way how an entity works. Thus, both the statements are framed in a wrong way.
Account is a developed art of recording and processing the financial data and generating useful results by presenting them in an understandable manner. Accounting starts with the very beginning of the company and continues even after the operations are completed.The comment that "Accounting is baloney. I worked for a genetic engineering company and we never looked at the accounting numbers and our stock price was always growing." Is incorrect as accounting is the backbone of any corporate entity and it benefits the managers in many ways. Also, the other statement that "I worked in a rust bucket company that managed everything by the numbers and we never improved very much". This statement also symbolizes ignoring the importance of accounting whereas in actual, accounting is Some of the benefits of accounting are:
• Accounting is objective : and is based on the generally accepted accounting principles.
• Accounting is reliable : In a well-run accounting department, data is preserved and procedures are properly in place to assure reliability of information.
• Analysis and Interpretation: One of the major advantage of accounting is that it helps in analyzing the results that are generated out of the collective effort put during the year. Major decisions are based on the interpretations that come out of the financial statements result.
Thus, the statement is false, as accounting is very important tool for the management. It could happen that share prices of the company are continuously growing and accounting has no direct relation with such changes but indirectly, it affects the decision of the stakeholders interested in the business and hence the share price. The price of share totally depends on the presentation of the accounting information and the way how an entity works. Thus, both the statements are framed in a wrong way.
Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman
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