KCQ’s

KEY CONCEPTS & QUESTIONS ACCT11059

STEP 1:

• What determines the value of a firm?  Assets & liabilities determine that value of a firm. “Changes in value” in chapter one explains that firms are never standing still, and the value of the firm is forever changing. 
  Due to business activities such as changes in the markets in which it operates and in the world around it. The realities of business are always
  shifting and changing and affecting the value of a firm (and the value of the interests of its equity investors) at
  different points in time. The value of a firm is determined and measured by a firm’s assets and liabilities.

• What are the key/keys underlying accounting that is important to understand?  Journals & ledgers, proprietorship, accounting equations are all vital in understanding accounting. Chapter 1, “Two Sides to Everything” section 1.3 defines all above as concepts that require understanding. Not just memorised and reproduced but to be fully understood as they underpin accounting.
• When do a firms accounts provide guidance and an insight into the business activities?   Chapter 1 – 1.2 Keeping Records. Discusses the importance of keeping records and states once the figures are first recorded and somewhat entered into an accounting system that is the point they will then give guidance understanding about economies and the business reality.
• There is a variety of people interested in the firms accounts? True. Chapter 2 study guide states that many people are interested in how a firm performs for a variety of reasons. Although some access is restricted to outside parties. 
• GAAP stands for?  GAAP. Generally accepted accounting principles (GAAP) are the rules of the game that accountants need to follow when preparing financial statements. They can vary from country to country and only apply when we are preparing financial statements to go to certain outside parties. They do not apply to accounting information used within a firm (management accounting). However, as we mentioned earlier, these rules will often be followed by accountants preparing accounting.

• Which best describes accrual accounting? An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged
• How many general-purpose financial statements are firms required to provide? There are four general-purpose financial statements that business is required to provide. They include balance sheet, income statement, statement of change in equity and statement of cash flow. 
• All financial statements and reports must follow strict guidelines as to there layout?  Within reason companies are free to change the layout and names of financial statements. 
• The firm’s annual report is considered to be a marketing document? Yes, a firms annual report is used as a form of marketing as it represents the performance of a company. Management of a firms are looking at ways to tell a story about there firm.