Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SUMMARY OF LEARNING OBJECTIVES

1. Explain what accounting is. Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users.
2. Identify the users and uses of accounting. The major users and uses of accounting are: (a) Management uses accounting information to plan, organize, and run the business. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of accounting data. (c) Creditors (suppliers and bankers) evaluate the risks of granting credit or lending money on the basis of the accounting information. Other groups that use accounting information are taxing authorities, regulatory agencies, customers, and labor unions.
3. Understand why ethics is a fundamental business concept. Ethics are the standards of conduct by which one's actions are judged as right or wrong. Effective financial reporting depends on sound ethical behavior.
4. Explain the meaning of generally accepted accounting principles. Generally accepted accounting principles are a common set of standards used by accountants.
5. Explain the meaning of the monetary unit assumption and the economic entity assumption. The monetary unit assumption requires that companies include in the accounting records only transaction data capable of being expressed in terms of money. The economic entity assumption requires that the activities of each economic entity be kept separate from the activities of its owners and other economic ...